GM

[Urbane Guerrilla]

If there's a real difference in principle between a five-dollar lemonade stand and a five billion dollar auto company, I've yet to hear of it. What effect could scale have upon principles?

Somebody will doubtless tell me enlarged scale would afford "more opportunities" to game the system. But does it really, and is there any difference in principle thereby?

[classicman]

The impact of pension accounting on companies' financial statements

[gvidas]

This American Life #403: NUMMI

A car plant in Fremont California that might have saved the U.S. car industry. In 1984, General Motors and Toyota opened NUMMI as a joint venture. Toyota showed GM the secrets of its production system: how it made cars of much higher quality and much lower cost than GM achieved. Frank Langfitt explains why GM didn't learn the lessons – until it was too late

Listening to it now.

[Undertoad]

That's the plot of Gung Ho.

[xoxoxoBruce]

Originally Posted by classicman

It was a yes or no question. From your answer, I'm forced to assume a yes answer. However, I find it very difficult to believe.

It's a qualified yes. GM did the same thing with the pension fund, that the Federal Government did with the Social Security Fund.

The deal was, that part of the huge profits they were making would go into the pension fund, and that would pay the pensions as they came due, with no drain on GM. But like the Feds, they stole the fucking money, so now it does impact GM.

[ZenGum]

Originally Posted by Urbane Guerrilla

If there's a real difference in principle between a five-dollar lemonade stand and a five billion dollar auto company, I've yet to hear of it. What effect could scale have upon principles?

I almost put this in my first post, but I aim for shorter posts. They're more likely to get read.

If we keep things "in principle" or "in theory" then we are at risk of considering a spherical cow. That is, we have abstracted so far from reality that our findings are of little use. A lot of economic theory does this.

Is there a difference in principle between a lemonade stand and a car company? Well, true, much the same principles apply: supply, demand, costs, pricing, margin, return customers, etc etc.

In reality, if a lemonade stand is selling poor quality lemonade, any ambitious kid with $5 can start a competitor. Standard competition applies.
If a car company is selling poor quality cars, what happens? Start-up competitors? Hardly ever. People buy other cars. The company struggles, and either reforms, folds or gets taken over. Option A is status quo, B and C tend towards reduced competition.

The problem in a nutshell: in theory, there is no difference between theory and practice, but in practice, there often is.

It's an empirical question. Does a free market enhance competition? With respect to lemonade stands, probably yes. With respect to car companies, probably no. Look at car companies today. It is far too complicated for me to trace out, but most brands have been taken over by other companies. How many car companies does the US have today?

[Urbane Guerrilla]

Three, and the ones that aren't around any more weren't always merged, but simply closed shop.

Not necessarily the case for truck manufacture -- see the variegated history of White Motor Company, for one.

How old is Kia Motors? Wiki says its earliest incarnation was 1944 as a tubing and bike parts manufacturer. It set up shop in the US in 1992. How about Daewoo? Twenty-three years younger. And making cars for GM now... since 2001. Seems an example of capacity going on the market and being bought up.

All this hooraw and going through changes looks like free markets to me, particularly Daewoo's collapse as a conglomerate and its rebirths as sundry spinoff companies still doing what they started out as. This kind of thing goes on in free markets when a government makes a point of not muddying the waters. I'm not seeing a "reduction of competition" here. I get the feeling globalization is making such "reduction" an impossibility, as any entrepreneur can hurl himself at any market, anywhere on the globe these days.

Lemonade stands and auto manufacturing still obey the laws of economics.

[classicman]

The Lessons of the GM Bankruptcy

Today is the first anniversary of one of this country's less-than-crowning milestones: the bankruptcy of General Motors, once the largest and richest company in the country, and indeed the world.

Keeping GM alive, albeit in shrunken form, was an expensive undertaking for America's taxpayers: about $65 billion in all, if one counts government aid to the company's former financial arm, formerly GMAC, now renamed Ally Bank. For all that money we, as a country, should take away some lessons from the experience. The following get my vote for the three most important:

• Problems denied and solutions delayed will result in a painful and costly day of reckoning.
• In corporate governance, the right people count more than the right structure.
• Appearances can be deceiving.

GM's current board—appointed by the company's controlling shareholder, the U.S. government—has a handful of holdovers from the prior board. Maybe they aren't bad people, but they surely showed judgment that was beyond bad. As the new GM prepares for an initial public offering of stock—so that the government can recoup the taxpayer investment—it will need credibility at the board level. The holdover directors should resign.

As for appearances versus facts, the GM bailout—along with the similar exercise at Chrysler—offers ample evidence. The understandable objection to bailouts is that they foster moral hazard, the willingness to act recklessly without fear of consequences. Yet the bailouts of these two companies had painful consequences aplenty for the major actors.

Shareholders of both companies got wiped out. Creditors took major hits, including those who held secured debt at Chrysler. (Their loans to the company were reckless, the equivalent of subprime mortgage loans, but they did recover more than they would have in a Chrysler liquidation.) Many workers and executives lost their jobs. Many dealers lost franchises. The Jobs Bank was abolished, albeit belatedly. So was no-cost health insurance.

All this seems plenty of pain to discourage future moral hazard. Letting the companies liquidate would have produced far more pain, of course, but much of it would have fallen on innocent bystanders—the ordinary citizens who participate in an economy that was on its knees last spring. The Obama administration, to its credit, tried to walk a fine line: doing enough for Detroit to protect the economy, but not doing so much to foster future irresponsible behavior.

Nobody on any point of America's political spectrum really liked this bailout. But having paid for it, let's hope that we as a nation are willing to learn from it.

Link
This guy takes some major shots at Ford as well.

[TheMercenary]

So why is Government Motors investing big in Canada? Shouldn't their charity start at home? We bail them out with tax dollars and they take the tax dollars to Canada? What gives...

http://www.buffalonews.com/2010/06/0...atharines.html

[Spexxvet]

Originally Posted by TheMercenary

So why is Government Motors investing big in Canada? Shouldn't their charity start at home? We bail them out with tax dollars and they take the tax dollars to Canada? What gives...

http://www.buffalonews.com/2010/06/0...atharines.html

They are whores, who will do anything to put more dollars in their own pockets. Capitalism at its finest.

[TheMercenary]

And the beat goes on....

TORONTO — General Motors Canada is expanding a southern Ontario parts plant for the second time in a month and suggesting more growth is on the way as the formerly bankrupt auto giant recovers and introduces new vehicles to the market.

The $245 million committed to build new transmissions at GM's St. Catharines, Ont., plant reflects a brighter future for the company and Canadians should "stay tuned" for further announcements, said new company president Kevin Williams.

"As we bring new vehicles and new technologies to the marketplace, certainly Canada will play a very important role in the future success of General Motors in that regard, and while I can't announce any (specifics) I would say, 'Stay tuned,"' Williams said in an interview.

"Going forward we do believe in the workforce. We have a great relationship with our unions here and we have some of the best, most efficient plants in the world."

Earlier Tuesday, the automaker said it will build a new line of fuel-efficient six-speed transmissions at its St. Catharines plant beginning in 2012. The investment will secure 400 existing jobs at the company's operations in the industrial city in the Niagara Region.

The announcement follows on the heels of another major investment in late April that will see the company build a new generation of V8 engines at the same plant beginning in 2013. In total, GM has announced $480 million in new spending on the factory, securing about 800 jobs.

GM's Canadian operations used to employ tens of thousands of workers before a series of cuts over the last decade or so pared the workforce significantly. The automaker shut down its truck plant in Oshawa, Ont., last year, shedding about 2,600 jobs, and will close its transmission plant in Windsor, Ont., in July, putting about 1,000 more people out of work.

"While those were difficult decisions I'm really happy that we're able to demonstrate the ability to reinvest in the business where it's meaningful," said Williams, who took over as GM Canada's new president in March, succeeding Arturo Elias.

Analysts said the most likely future investment GM Canada will make would be to expand vehicle production at its major assembly complex in Oshawa, where it builds the Chevrolet Camaro and Impala and will begin building a Chevrolet convertible and the Buick Regal next year.

http://autos.ctv.ca/CTVNews/Autos/20.../?s_name=Autos

[spudcon]

After reading this entire post, I was wondering how long it would take someone to notice GM was following the New Deal Ponzi scheme the government calls Social Security. Good call Bruce. Now, when talking about corporate big wigs making millions more than the workers, does no one notice Presidents, Senators and Congressmen make millions more than those who are doing the work? Where's the outrage there? Letting Obama run GM is just putting an unexperienced bunch of bean counters in charge. (It's also illegal.)
Carry on, I've had my rant.

[TheMercenary]

Originally Posted by spudcon

After reading this entire post, I was wondering how long it would take someone to notice GM was following the New Deal Ponzi scheme the government calls Social Security. Good call Bruce. Now, when talking about corporate big wigs making millions more than the workers, does no one notice Presidents, Senators and Congressmen make millions more than those who are doing the work? Where's the outrage there? Letting Obama run GM is just putting an unexperienced bunch of bean counters in charge. (It's also illegal.)
Carry on, I've had my rant.

Expect few responses in support of that notion...

[Clodfobble]

Originally Posted by spudcon

Now, when talking about corporate big wigs making millions more than the workers, does no one notice Presidents, Senators and Congressmen make millions more than those who are doing the work?

Admittedly, it's hard to notice things that aren't true. Current salary for Congressmen: $174,000 per year. Current salary of the President: $400,000 per year.

Some politicians are certainly millionaires, and a few even multimillionaires, but they accomplished that through other ventures, not their politician's pay.

[Spexxvet]

Originally Posted by Clodfobble

Admittedly, it's hard to notice things that aren't true. Current salary for Congressmen: $174,000 per year. Current salary of the President: $400,000 per year.

Some politicians are certainly millionaires, and a few even multimillionaires, but they accomplished that through other ventures, not their politician's pay.

You're in for it now, Clod. Be prepared for this, starting with post #40.