GM Bailout Would Be Agony for Taxpayers 73 comments
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Talk in the marketplace about Detroit and Washington has been percolating about giving General Motors (GM) and the auto industry in general a bailout a la the TARP for the banking industry. GM is on the verge of running out of money. Cash received from auto sales, down dramatically from last year, will not cover the cost of running its business. GM has a monthly cash burn rate of $2 billion or more per month and only $16 billion in cash left on its latest quarterly balance some of which needs to be held in reserve.
GM blames the current economic environment on its woes. Year-over-year sales at month end October saw a 45% decrease, worse than almost all of its competitors. Toyota (TM) for instance, which will soon overtake GM’s market share in the space, saw sales decline a significant but less severe 23% over the same period. But GM’s execs are not being genuine. GM has never been a great business.
Warren Buffett in 1991 gave a speech to Notre Dame students and faculty. In it he compared two businesses - Company Agony and Company Ecstacy. Company Agony lost its investors more money than virtually any business in the world while the other, Company Ecstasy, did nothing but make money.
The difference in the two businesses was Company Agony, which in Buffett’s story was American Telephone and Telegraph, had all kinds of employee benefit programs, stock options, pensions, the works. The business operated under heavy regulation, was heavily unionized and extremely capital-intensive. In fact, shareholders had to continually reinvest in the company simply to keep it going.
Company Ecstasy on the other hand, Thompson Newspapers, didn’t have elaborate compensation programs and never needed to reinvest in the company. It simply wrote a story and produced it by putting ink to paper. Thompson was able to raise prices, which raised earnings, and there was nothing to do with the money except to return it to shareholders or purchase more profitable businesses.
In advising his audience about which kind of businesses to work for, an Ecstacy non-capital intensive business or an Agony capital-intensive business, Buffett said:
One is a marvelous, absolutely sensational business, the other one is a terrible business. If you have a choice between going to work for a wonderful business (Ecstasy) that is not capital intensive, and one that is capital intensive (Agony), I suggest that you look at the one that is not capital intensive.
The same can be said for investing in capital intensive businesses. Investment in a capital intensive, Agony business like GM where market share [chart below] is eroding, which began well before an economic recession, labor costs are the highest in the industry at $73 per hour [$30 higher per hour than Toyota’s], the workforce is heavily unionized and it makes products consumers don’t want (i.e. gas-guzzling SUVs), doesn’t seem like a smart move to me. If an investment in GM never made money in the past, what would be different now? I venture to say, nothing.
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This article has 73 comments:
I was scratching my head minutes earlier when I read a seekingalpha article which says Japan pay rates for auto workers are actually higher than Detroits' - I have to thank Benjamin for pointing out that Detroit's usd73/hr is actually more than double Toyota's usd30/hr.
If you want to make cuts, one cut managements salaries and stock options and two, cut workers pay down to the $17.00 an hour rate that the so called foreign companies are paying their workers now.
Richard
1. Replace the CEO of GM. He has lost $80 Billion in the last 10 years.
2. Move ahead the UAW contract to start 2009 (that would have kicked in in 2010)
3. Change the health benefit and per hour pay for the UAW to be in line with Toyota, Nissan in the US, immediately.
4. Force the shutdown of plants in the next 90 days to align with capacity.
5. No executive bonuses for 2009 and 2010.
6 Chrysler balance sheet must be transparent, if it wants a bailout.
I am so sick and tired of hearing that GM's labor force makes $70 per hour, that is such a load of crap, and you know it.
I got another clue for you, GM was building what the consumer wanted...everybody and his brother wanted an SUV or a truck as their second or third vehicle, and GM made millions of them for them. It was not GM's fault that gas went to $4.00 plus and all of a sudden all those people that wanted that SUV coudn't afford to drive it anymore.
The UAW has already agreed to a 50% cut in wages for new employees , and the UAW will be taking over the retiree health care, so GM's labor and legacy costs have already been addressed.
Unions helped create the middle class in this country, which is disappearing just as fast as the Bank Bail-out money is.
When all those autoworkers are making $14.00 per hour, thats all the less that they will be able to spend where all you labor and union bashers work.
All this talk of "don't bailout GM" or "where is it all going to end" is nothing but a not so veiled attack on the workers and the unions in this country.
The Republicans are so bitter about losing the election, that they are going to take it out on labor unions, by blocking a GM bailout.
Toyota has sut down its $2 Billion assembly plant where they assemble Tundra pick-ups. The new Lexus SUV's sales are down 50%. Seen the new Toyota Sequoia SUV? Me neither.
Now, there is even talk about Toyota dropping plans to assemble the Prius in the US. But, Benjamin says, Toyota is smart and GM is dumb.
Remember, Benjamin, GM employs more people in the US than all the imports combined.
If GM's labor costs are $73/hour, that's because they are paying the pensions and health care for 700,000 retirees and their families. GM's and Toyota's individual workers are paid approximately the same.
If you would prefer, cancel the pensions, and let them be funded by the Federal Pension Guarantee Corporation, which itself is $50 Billion underfunded to handle its present obligations.
I hope that Benjamin never needs a loan to pay for his house or car or to help his parents with their retirement or health care expenses.
.
PS GM MUST be selling the vehicles that people want to buy.
No manufacturer (Ford or Chrysler) or assembler (Toyota, Honda, Nissan, Hyundai, Mercedes, BMW, Mazda, Mitsubishi) sells more vehicles than GM each year.
Taking money from the productive sector and channeling it into a business that has a proven track record of failure is a sure way to perpetuate a recession/depression and sustain the downward trend in America's standard of living.
www.gm.com/experience/.../#
We were told that tax payers money was being provided to these financial institutions to "increase the flow of liquidity". That was the "spin" put on the bailout. Now look at what the financial institutions are doing with the tax payers money. They are sitting on the sidelines waiting for companies to fail, then they swoop in and purchase those companies at fire sale prices. They are not using the tax payers money to increase the flow of liquidity, they are using the tax payers money as a financial windfall to purchase other companies. The Fed lowered the prime rate. How much of that rate decrease "trickled down" to JOE TAXPAYER? It kind of puts the phrase "October surprise" into perspective. A final fleecing of the American Tax Payer is in progress.
If you want to see what a financial burden on tax payers looks like, let the automotive manufactures go bankrupt. Check out what happens to tax revenues across this country as all of the jobs associated with the United States automotive industry are lost. Check out how many jobs in your city are lost because the US automotive dealerships and secondary parts suppliers go bankrupt.
Where do you think you are going to service your US vehicle? What do you think your US vehicles new car warranty is worth? Where do you think the cities and states are going to get the revenues needed to run our schools, public health, and police services? If you are in the market for a new car, would you purchase a $20,000 plus vehicle who's warranty is backed by a company that is in bankruptcy? What do you think the State and Cities are going to have to do to make up for the tax revenue loss associated with the loss of all those payrolls?
Do a little research next time, bro.
On Nov 16 12:41 PM sportsmadness78 wrote:
> Mister Jimmy you are right they cannot haul stuff in a Prius, but
> Toyota's trucks get similar gas mileage and are just as rugged. But
> their company has a better reliability rating. You dont see Toyota
> stock at $3 do you? Your arguement is simply weak.
Its Losers like you that have screwed this country - yeah the bankers too - but especially pro-union losers. Thats why we will never be competitive - thats why we have DINOSAUR industries in this country. Shame on you SHAME ON US. How about NO BULL*HIT Bailouts for anyone. Time to let markets do what they are designed to do - FLUSH EXCESS AND inefficiency down the toilet - and if its takes down the whole country in the process TFB. I'm a free market capitalist - not a union socialist loser who relies on handouts. This country was built on the former and will be screwed by the entitled rights of the latter. Enjoy what YOU and people who think like YOU have done to America.
On Nov 16 10:43 AM lazaris wrote:
> What you are saying Benjamin, is that "company Ecstacy" paid there
> employees very little, gave them no benefits, basically treated them
> like crap, and made loads of money on the backs of their hard working
> employees, and you are saying that is a good thing?
> I am so sick and tired of hearing that GM's labor force makes $70
> per hour, that is such a load of crap, and you know it.
> I got another clue for you, GM was building what the consumer wanted...everybody
> and his brother wanted an SUV or a truck as their second or third
> vehicle, and GM made millions of them for them. It was not GM's fault
> that gas went to $4.00 plus and all of a sudden all those people
> that wanted that SUV coudn't afford to drive it anymore.
> The UAW has already agreed to a 50% cut in wages for new employees
> , and the UAW will be taking over the retiree health care, so GM's
> labor and legacy costs have already been addressed.
> Unions helped create the middle class in this country, which is disappearing
> just as fast as the Bank Bail-out money is.
> When all those autoworkers are making $14.00 per hour, thats all
> the less that they will be able to spend where all you labor and
> union bashers work.
> All this talk of "don't bailout GM" or "where is it all going to
> end" is nothing but a not so veiled attack on the workers and the
> unions in this country.
> The Republicans are so bitter about losing the election, that they
> are going to take it out on labor unions, by blocking a GM bailout.
On Nov 16 12:36 PM sportsmadness78 wrote:
> I once had a GM product but it was unreliable and became the EXXON
> Valdez when leaking oil. Since then for over 8 years, I have owned
> a Toyota Camry. I will never buy domestic again. The Toyota has been
> trouble free and when I take it in for maintenance, I never get the
> run around like I did when I owned a GM product. GM is inferior in
> quality and the big three have had 30 years since the 70's to get
> this right. They deserve a good ole spanking for not giving the consumere
> a good product. The only way I know how to make my arguement that
> I can control is not to buy GM and stick with my Toyota until Detroit
> changes its toon. Anything under 30mpg is a disgrace.
How many miles per gallon does the Tundra get or one of Toyotas SUV's? WHAT A DISGRACE!!!!! Get you facts straight, Toyota makes gas guzzlers also because people were buying them when gas was cheep and they wanted their piece of the pie. Or are you one of the people in the United States that forgot what the Japanese did to us in WW2, maybe once they control all of our manufacturing they can build our tanks and fighter jets and sell them to us at a discount at a time of war, WAKE UP PEOPLE!!!
> Mister Jimmy you are right they cannot haul stuff in a Prius, but
> Toyota's trucks get similar gas mileage and are just as rugged. But
> their company has a better reliability rating. You dont see Toyota
> stock at $3 do you? Your arguement is simply weak.
I see Toyota got their truck pulled from Consumer Reports, was that for their great reliability? Have you seen the quality reports published in the last few years for GM, Ford, and Chrysler?
Also by the way, how did the free Market allow the OIL companies to rape us ????? I assure you that the Unions of this country have done no where near the Damage your"Free Market OIl "companies have done.
I used to think like you and I supported the Republican party,(like General Motors Management has). But guess what I am so sick the BOGUS gas, and Oil shortages, I am going to try and have the government take them over like in Mexico. SO much for your Free Market BS. Losing GM will put this country into a tailspin and it will crash.
Nice thought 29920. People like you are why we are in this mess to begin with. Are you another selfish Billionaire that is getting Bailout money???? You sound like it.
On Nov 16 01:06 PM User 299220 wrote:
> Hey Lazaris,
> Its Losers like you that have screwed this country - yeah the bankers
> too - but especially pro-union losers. Thats why we will never be
> competitive - thats why we have DINOSAUR industries in this country.
> Shame on you SHAME ON US. How about NO BULL*HIT Bailouts for anyone.
> Time to let markets do what they are designed to do - FLUSH EXCESS
> AND inefficiency down the toilet - and if its takes down the whole
> country in the process TFB. I'm a free market capitalist - not a
> union socialist loser who relies on handouts. This country was built
> on the former and will be screwed by the entitled rights of the latter.
> Enjoy what YOU and people who think like YOU have done to America.
>
>
On Nov 16 12:41 PM Bob Lunn wrote:
> How is the burden on the tax payers for a twenty five billion dollar
> bridging loan to US automotive manufactures greater than the financial
> burden of SEVEN HUNDRED billion dollars being provided to the financial
> institutions. The very same financial institutions who's irresponsible
> behaviour was a major causal factor in the creation of the current
> financial meltdown. The very same institutions that took advantage
> of the recklessly irresponsible behaviour of the government that
> removed regulatory controls on those financial institutions, and
> who is currently bailing them out.
>
> We were told that tax payers money was being provided to these financial
> institutions to "increase the flow of liquidity". That was the "spin"
> put on the bailout. Now look at what the financial institutions are
> doing with the tax payers money. They are sitting on the sidelines
> waiting for companies to fail, then they swoop in and purchase those
> companies at fire sale prices. They are not using the tax payers
> money to increase the flow of liquidity, they are using the tax payers
> money as a financial windfall to purchase other companies. The Fed
> lowered the prime rate. How much of that rate decrease "trickled
> down" to JOE TAXPAYER? It kind of puts the phrase "October surprise"
> into perspective. A final fleecing of the American Tax Payer is in
> progress.
>
> If you want to see what a financial burden on tax payers looks like,
> let the automotive manufactures go bankrupt. Check out what happens
> to tax revenues across this country as all of the jobs associated
> with the United States automotive industry are lost. Check out how
> many jobs in your city are lost because the US automotive dealerships
> and secondary parts suppliers go bankrupt.
>
> Where do you think you are going to service your US vehicle? What
> do you think your US vehicles new car warranty is worth? Where do
> you think the cities and states are going to get the revenues needed
> to run our schools, public health, and police services? If you are
> in the market for a new car, would you purchase a $20,000 plus vehicle
> who's warranty is backed by a company that is in bankruptcy? What
> do you think the State and Cities are going to have to do to make
> up for the tax revenue loss associated with the loss of all those
> payrolls?
Let me get this straight: the UAW pushes up wages for their members, fights against right-to-work laws, wants a weaker dollar, tarriffs and other trade barriers to hinder the import of foreign cars. All resulting in higher costs for the cars that the rest of us Americans buy. And this has been going on for decades. Now, when the whole scam stops working, you want the rest of us to bail you out? And you have the nerve to claim that your union wages have somehow helped us all? Does believing that twisted logic help you sleep at night?
Thanks, but I can't afford any more of your help.
Hey John,
Do you think that after the UAW takes over the retiree health care, the wages go down to $14.00, and some benefits are taken away, that the price of that vehicle will go down one dime? Do you really think that a penny of all that cost savings is going to be passed on to the consumer? Dream on, all that cost savings will just go to more CEO pay and bonuses to management and to shareholders.
But you will sure be happy to see those autoworkers take that huge pay cut won't you?
On Nov 16 02:18 PM JohnL wrote:
> Hey lazaris,
>
> Let me get this straight: the UAW pushes up wages for their members,
> fights against right-to-work laws, wants a weaker dollar, tarriffs
> and other trade barriers to hinder the import of foreign cars. All
> resulting in higher costs for the cars that the rest of us Americans
> buy. And this has been going on for decades. Now, when the whole
> scam stops working, you want the rest of us to bail you out? And
> you have the nerve to claim that your union wages have somehow helped
> us all? Does believing that twisted logic help you sleep at night?
>
>
> Thanks, but I can't afford any more of your help.
But, they've proven themselves not economically feasible. This is not a new problem, they have been bleeding billions per year for half of this decade. GM hasn't made money since 04, and for Ford, since 05.
The markets will correct, no government policy can stop that. Eventually, the eventual will happen. The cost structure for these businesses are just too high. The unions have killed these companies.
There was a time in American history when unions were needed - when kids were mining 15 hours a day for 10 cents an hour, when people were losing limbs in meatpacking factories, when monopolies ran rampant and killed all competition.
But this is 2008. Unions aren't for workers rights anymore, they're for the union bosses to bleed cash out of their employers and turn good businesses into bad ones. The workers, primarily, are unskilled laborers. In a globalized world, you just cant pay the kind of wages that the Big 3 employees make and expect to do well. You face too much competition.
I don't want to hear about the layoffs and the job losses like these people will not find new work. Manufacturing, in a lot of sectors in the US has been killed, but those job losses have been replaced by newer high paying ones. We may lose the unskilled laborer, but we replace them will the technological, engineering, scientific, or financial worker. Not to mention, with the Big 3 gone, who's to say no new auto company will start up, now that nearly 1 trillion in revenue is up for grabs? That's how capitalism works.
I'm not unsympathetic to the employee who will be laid off. Ford, put all the horse and buggy manufacturers and employees, which was a big industry employing a lot of people, out of business at the turn of the 20th century. But markets adapt, and people get new work. The employees will have solid experience they can take to work with Boeing, 3M, United Technologies, Toyota, Nissan, etc.
With the financial bailouts, the capital went to profitable companies who are experiencing a once in a century type problem, with every reason to believe that they investment will be a good one, and the taxpayers will get their money back and then some. Lending to the Big 3, companies who haven't made money since early 2000's, would be a big - and obvious - mistake.
I totally agree that the UAW leadership had accomplices. Senior management was truly incompetent and the board and investors were asleep at the wheel to pay the execs for such poor performance. The three groups must share responsibility for this sorry state of affairs and all three should share in the consequences. The current shareholders should get zero. The senior executives should be fired. And the auto industry that emerges will not pay so much for executives or workers. The old model clearly was not viable.
But I am part of a fourth group: the nearly 300 million americans that never benefitted from, or had any say in, the industry's stupidity, yet are being told we will help the other three groups out of their jam. Believe me: I truly empathize with the financial pain about to be endured by many auto workers and retirees, but this country cannot be allowed to descend into a socialist hell where the competent have to constanty bail-out the incompetent. If we do that, you can kiss more than the Big 3 good-bye; you can do that to this entire country.
On Nov 16 04:33 PM Lazaris wrote:
>
> Hey John,
> Do you think that after the UAW takes over the retiree health care,
> the wages go down to $14.00, and some benefits are taken away, that
> the price of that vehicle will go down one dime? Do you really think
> that a penny of all that cost savings is going to be passed on to
> the consumer? Dream on, all that cost savings will just go to more
> CEO pay and bonuses to management and to shareholders.
> But you will sure be happy to see those autoworkers take that huge
> pay cut won't you?
>
> On Nov 16 02:18 PM JohnL wrote:
The loss of GM or al of the big three presents no systemic risk whatsoever. It will confine the problems to Michigan and a few other states with support industries (parts). This will in no way cause a systemic crisis.
Looking at your comments (currently 11), they are all on the topic of saving GM. Are you an unfortunate stock holder or an unfortunate employee? If you're an employee, don't worry you'll still have a job in the end. It will probably be with Toyota, Nissan or another auto manufacturer with a clue as to how to run a business.
GM should fail. The sooner GM enters bankruptcy, the sooner someone can step up to offer debtor in possession financing and get a new management team to do something about GM's problems. Until then, GM should not get a penny of taxpayer money. They will waste it like they have for the last 30 years.
On Nov 16 10:19 AM John D wrote:
> Burden on taxpayers?? If the auto industry does not get the same
> relief that the financials are getting - there is no use in bailing
> the financials out - In very simple terms - people need to have a
> JOB in order to make some MONEY to pay the TAXES to bail out the
> financials as well - if you bail out one and not the other - WHO
> is going to pay the TAXES to bail out just the financial sector??
> therefore it would be usless to do only one. It's not just GM - Ford
> & Chrysler that are in financial trouble - it's the WHOLE country
> - they are just caught in it the same as everyone else - this is
> not the time to say the Big 3 don't run their businesses efficiently
> - look at the stocks - they are definatley not alone - EVERYONE in
> North America needs help now - and it's OUR job to pull together
> and do that - not to lay blame - Trillions on WAR in Iraq but not
> a few billion to FEED your OWN ?
If Gas had not gone up to $5.00 a gallon, Toyota would not be so well thought of.
www.toyotaproblems.com...
By voting to close GM, you vote against your investment in your own community and to allow foriegn interests to entrench deeper in your back yards. I agree that GM needs to redo their business plan because there are lots of mixed signals and this is why congress is taking their time to sort all this out. But to destroy any community in this country as a lesson to unions and poor management would be like cutting off your nose to spite your face. I don't look at this so much a bailout, but as a loan to help out a nieghbor who's fallen to an unfreindly economy. Hell, we're pumping 10 billion into Iraq every month. Just helping a nieghbor out right? Let's help our own with 2 just months of Iraq compensation.
But demand a business plan, that emphasizes that our communities come before retention bonuses, golden parachutes, foriegn investment and global aspirations. Demand union accountability - stem absenteeism, tighten work restrictions, better review family medical leave abuse, throw out appointed position slackers and eliminate job entitlement attitudes.
In turn we should expect work coming back to our communities, which should energize our economy, which hopefully will return the big three to profitability, and in a year or two create a robust return for the taxpayer.
If we don't start to come together soon, we will surely fall apart.
We just have to put politics aside and demand accountability. Please
save the U.S.A.. Don't ask for it, Don't argue about it. Demand it!
Reply |Report abuse
I do not buy GM vehicles. I will never buy a GM vehicle.
I do not buy Ford vehicles. I will never buy a Ford vehicle.
I do not buy Chrysler vehicles. I will never buy a Chrysler vehicle.
So, unless someone can show me where I can opt-out of being stuck indirectly paying for a GM, Ford or Chrysler, I would like to choose NOT to.
I do not feel that it is my responsibility to keep a failing company afloat.
If people wanted to buy these vehicles, they would. Since they're not buying them, I can only presume that they don't want to. That being the case, prolonging the inevitable failure of these businesses makes no sense. Yes, they are loans, but if (when) these companies fail, those IOUs are worthless. Sure, the gov't could do what they did in 1978 and take stock warrants, but if they fail, those warrants are also useless. The best case scenario for the Gov't (and taxpayers, ultimately) would be that they're "First in Line" to get any funds resulting from the inevitable liquidation that would follow, but those value of those assets would certainly be deprecated with the sudden glut of them when these companies fail, so it is entirely uncertain that we could recoup our investment.
So, yes, let us let "market forces" dictate what happens. And for everyone that will boo-hoo this by talking about the financial sector bailout (Bear Stearns/AIG/etc...), I wasn't in favor of those either. If these banks NEEDED to fail, they should have been allowed to do so. And people that took out mortgages that they could not afford STILL took out mortgages that they have a legal and moral obligation to pay, even if they were suckered into a "bad" mortgage. They signed the papers, they are responsible for it, period. If they didn't understand (or chose not to) what they were signing, then they should NOT have signed it. A few minutes of due diligence and a 50-cent pocket calculator (along w/ math no more complex than multiplication and division) should have told them that what they could afford. Blindness (intentional or not) to these basic calculation is not an excuse. If you signed something you shouldn't have, guess what? You signed it.
On Nov 16 12:36 PM sportsmadness78 wrote:
> I once had a GM product but it was unreliable and became the EXXON
> Valdez when leaking oil. Since then for over 8 years, I have owned
> a Toyota Camry. I will never buy domestic again. The Toyota has been
> trouble free and when I take it in for maintenance, I never get the
> run around like I did when I owned a GM product. GM is inferior in
> quality and the big three have had 30 years since the 70's to get
> this right. They deserve a good ole spanking for not giving the consumere
> a good product. The only way I know how to make my arguement that
> I can control is not to buy GM and stick with my Toyota until Detroit
> changes its toon. Anything under 30mpg is a disgrace.
can drag the whole country into it.
Now, expect all foreign countries to levy taxes against the car made by big three for the bailout plan. It is ironic that it is the US who asserted the policy of no government subsidy and Now it is the US who will get backlash for its own old policy if it goes to bailout big three.
It is ironic that US is now in the receiving ends for this so called "anti-dumping duty" or "unfair trade taxes".
And what about that new Tundra pickup? $2 billion invested in the plant, way over budget. The poor Japanes manager who brought the Tundra to market 8 months late was fired back to Japan in disgrace. Then, they had three recalls on it in the first six months, including--like in the 70's--blown engines. Then, they had to slap $6000 rebates on them to get people to buy it. Now they have completely shut the plant down for 4 months because no one wants to buy the ugly thing.
Is this what you mean by Toyota efficiency? Or is it their plant in Indiana that is operating at 40% capacity because no one wants their minivan ot Highlander?
Your love for this really average company seems to not be based on facts.
On Nov 16 12:46 PM sportsmadness78 wrote:
> IXLR8 you dont have a case comparing Toyota with GM assembly and
> work ethics. GM does not even hold a candle to the efficiency of
> Toyota when it comes to auto assembly. GM has mis-managed its way
> to eventual shutdown and I dont give a damn. They caused their own
> misery. Remember the 70's. They produced Vega, Chevette, Monza ....
> cmon the company has no clue what the consumer wants when it comes
> to quality. Since the 70's Toyota still has the Corolla and Honda
> the Civic. So you see somebody has kept improving while the other
> became more ignorant.
On Nov 16 04:33 PM Lazaris wrote:
>
> Hey John,
> Do you think that after the UAW takes over the retiree health care,
> the wages go down to $14.00, and some benefits are taken away, that
> the price of that vehicle will go down one dime? Do you really think
> that a penny of all that cost savings is going to be passed on to
> the consumer? Dream on, all that cost savings will just go to more
> CEO pay and bonuses to management and to shareholders.
> But you will sure be happy to see those autoworkers take that huge
> pay cut won't you?
>
> On Nov 16 02:18 PM JohnL wrote:
First requirement would be to apply it to native auto companies only. I don't actually know how this would be accomplished, but Chrysler, Ford, and GM only. Lawyers get paid big bucks to figure this sort of stuff out.
Second requirement would be to spread it around so that people all over the country would get in on it.
Third requirement would be to encourage fuel efficiency, to reduce our dependency on imported oil.
So! The idea is to craft a government rebate on auto purchases of Big Three vehicles only; with the amount being related to the rated fuel economy. Perhaps it could be $100 for each highway mpg, with the minimum eligibility being 25. Therefore a car getting 30 mpg would earn a rebate of $3000. Other formulas might be construed, but this example is easy to understand.
Detroit would sell more cars. People all over the country would get to buy them cheaper, thus participating in the bailout. Local dealers would get the sales business. People keep their employment. CAFE would be increased, thus reducing our overall oil demand.
On Nov 16 10:28 PM usanowGMelect wrote:
GM pays more taxes back to
> the Governments of this country than all the foriegn automakers combined.
GM pays taxes on its banking businesses -- GMAC and Dietech. Before that, they made money / paid taxes on GM Hughes (which they bought and nearly destroyed) and on the former Perot Systems (which they did destroy). And they make money by selling (really leasing) their clunky cars to captive car rental subsidiaries (Hertz, Avis, etc) -- but again, that is really a financing business -- they dump the unsold cars at cost, and make money by renting the cars out (multiple short term leases).
The auto manufacturing business itself hasn't made money in decades
My point of view is simply this at the beginning of the crisis: NO BAILOUTS FOR ANYBODY. That would have exposed the failures in leadership in Washington straight and to the point along with failed management at corporate beurocracies. That said, moral hazard is raging all about as government picks it's winners and losers but the real outrage by the public is the coddling of management and investor dividends/bonuses. When I see government cleaning house in management as a string for forcing the U.S. taxpayer to provide loans or direct investment into any organization then I will be very comfortable making investments into the financial sector or U.S. automotive sector. Until then, plenty of good buys elsewhere.
On Nov 16 01:18 PM ex GM emp wrote:
> With all due respect, Mr. Taylor, your credentials leave you far
> away from the manufacturing world. I doubt you ever set foot in any
> facility that produces real goods, except maybe a candy shop. Dear
> Sir, try another line of work other than spouting your neo-con, greedy,
> heartless, self important, vacuuous tripe printed herein. IMHO, you
> are another one who mistakes his income for his value to society.
Source - Morningstar.com
On Nov 17 04:01 PM gramps2 wrote:
> Free markets work:
>
> GM pays taxes on its banking businesses -- GMAC and Dietech. Before
> that, they made money / paid taxes on GM Hughes (which they bought
> and nearly destroyed) and on the former Perot Systems (which they
> did destroy). And they make money by selling (really leasing)
> their clunky cars to captive car rental subsidiaries (Hertz, Avis,
> etc) -- but again, that is really a financing business -- they dump
> the unsold cars at cost, and make money by renting the cars out (multiple
> short term leases).
>
> The auto manufacturing business itself hasn't made money in decades
GM had a chance at a golden future. Remember the EV1? (see the movie "Who killed the electric car") The electric car GM built. The electric car who's lease owners begged GM to allow them to buy as GM arrogantly sent all the EV1 to the crusher?
Ignoring their customers plea's!
GM unplugged their own future! I say let them sink or swim on their own Accord, pun intended.
GM had a chance at a golden future. Remember the EV1? (see the movie "Who killed the electric car") The electric car GM built. The electric car who's lease owners begged GM to allow them to buy as GM arrogantly sent all the EV1 to the crusher?
Ignoring their customers plea's!
GM unplugged their own future! I say let them sink or swim on their own Accord, pun intended.
A portion of that 25 billion should go to electric car companies such as Tesla Motors. Heck they are only asking for 100 million. With the increases in air and solar electric generating power, this provides the energy that would be needed for more electric cars in our big cities and towns.
Put money into good investments, and see huge benefits in the long run, or putting money in a bad investment to temporarily fix an old way of doing things that needs to change. that is the choice we face today.
On Nov 16 10:19 AM John D wrote:
> Burden on taxpayers?? If the auto industry does not get the same
> relief that the financials are getting - there is no use in bailing
> the financials out - In very simple terms - people need to have a
> JOB in order to make some MONEY to pay the TAXES to bail out the
> financials as well - if you bail out one and not the other - WHO
> is going to pay the TAXES to bail out just the financial sector??
> therefore it would be usless to do only one. It's not just GM - Ford
> & Chrysler that are in financial trouble - it's the WHOLE country
> - they are just caught in it the same as everyone else - this is
> not the time to say the Big 3 don't run their businesses efficiently
> - look at the stocks - they are definatley not alone - EVERYONE in
> North America needs help now - and it's OUR job to pull together
> and do that - not to lay blame - Trillions on WAR in Iraq but not
> a few billion to FEED your OWN ?
American car industry are so behind!!!!!!
Government should not proceed with the bailout, they should let foreign industries to establish business in the US an change consumers perceptive about energy efficient cars.
On Nov 16 10:43 AM lazaris wrote:
> What you are saying Benjamin, is that "company Ecstacy" paid there
> employees very little, gave them no benefits, basically treated them
> like crap, and made loads of money on the backs of their hard working
> employees, and you are saying that is a good thing?
> I am so sick and tired of hearing that GM's labor force makes $70
> per hour, that is such a load of crap, and you know it.
> I got another clue for you, GM was building what the consumer wanted...everybody
> and his brother wanted an SUV or a truck as their second or third
> vehicle, and GM made millions of them for them. It was not GM's fault
> that gas went to $4.00 plus and all of a sudden all those people
> that wanted that SUV coudn't afford to drive it anymore.
> The UAW has already agreed to a 50% cut in wages for new employees
> , and the UAW will be taking over the retiree health care, so GM's
> labor and legacy costs have already been addressed.
> Unions helped create the middle class in this country, which is disappearing
> just as fast as the Bank Bail-out money is.
> When all those autoworkers are making $14.00 per hour, thats all
> the less that they will be able to spend where all you labor and
> union bashers work.
> All this talk of "don't bailout GM" or "where is it all going to
> end" is nothing but a not so veiled attack on the workers and the
> unions in this country.
> The Republicans are so bitter about losing the election, that they
> are going to take it out on labor unions, by blocking a GM bailout.
I agree with you 100%.... We need to fix our economy that is the the solution we need to find!!!!!
On Nov 16 10:19 AM John D wrote:
> Burden on taxpayers?? If the auto industry does not get the same
> relief that the financials are getting - there is no use in bailing
> the financials out - In very simple terms - people need to have a
> JOB in order to make some MONEY to pay the TAXES to bail out the
> financials as well - if you bail out one and not the other - WHO
> is going to pay the TAXES to bail out just the financial sector??
> therefore it would be usless to do only one. It's not just GM - Ford
> & Chrysler that are in financial trouble - it's the WHOLE country
> - they are just caught in it the same as everyone else - this is
> not the time to say the Big 3 don't run their businesses efficiently
> - look at the stocks - they are definatley not alone - EVERYONE in
> North America needs help now - and it's OUR job to pull together
> and do that - not to lay blame - Trillions on WAR in Iraq but not
> a few billion to FEED your OWN ?
1. It would be one in many decisive step toward putting America on the forefront of the Green revolution -- "Do we really want to depend on Japan, Korea, and Germany (and soon China) for the future of our cars and related technology or do we want it grown here in the USA?" for our generation the new Green Energy revolution will be equivalent to the space race of the 60s. Whoever gets there first will be a power player in the world economy. And guess what the American Auto Industry got there first and will be able to regain that spot if we help them through this difficult time. By 2010 the GM Volt will roll off the assembly line. This will be the first fully electric production vehicle produced. Talk about Toyota all you want, the truth of the matter is that Toyota’s answer to the Volt is a plug in Prius. That vehicle will be able to travel 7 miles on a charge vs. the Chevy Volt’s 40 miles on a charge. That vehicle will be gas base vs. the Volt being a true electric car. Beside that US auto manufactures are working on Plug in hybrid, Clean diesels and hydrogen vehicles.
2. They do produce cars that American want to drive –.Just a short time ago that was the SUVs. The American appetite for the SUVs did not change until gas prices became unbearable for most consumer. That did not happen until price where well over 2.50 per gallon. And that happened in 2007. US auto companies change gear to pick-up the production of their smaller car lines in 2008. And in 2009, dealer showrooms will boast about 140 models with highway fuel economy ratings of more than 30 miles per gallon. That's an increase of 25 percent over the number of 30 mpg products offered in 2008. Model year 2009 vehicles will include 25 hybrid and eight clean diesel models, as well as autos employing fuel-efficient technologies like continuously variable transmissions and cylinder deactivation. By 2010 the GM Volt will roll off the assembly line. This will be the first fully electric production vehicle produced. Soon to be followed by plug in hybrids and on the horizon hydrogen vehicles (which are already being driven by selected consumers around the country).
3. We are Americans and if we are going to succeed in this global economy we need to stick together – Ask yourself in these hard economic times would Japan allow Toyota to fail, would Germany allow Volkswagen? More importantly given the lessons of the financial meltdown, we need to return our economy to one that’s based on producing real products not financial paper pushing. Sure, we should have bailed out textiles before it all went overseas. We should have slowed the loss of electronics. But because we didn't save those industries doesn't mean we shouldn't now save the American auto industry--particularly given the lesson of the financial collapse. We need to save the auto industry because cars are one of the few things we make anymore--and we need to focus our economic recovery on the things we make rather than on the bubbles we finance.
4. They Saved Us not to very long ago – We owe the Auto Industry some help. They helped save this country in World War II. If we loose our leading Manufacturing base do you really want to rely on Japan and Germany to make our tanks and planes. I’m sure this would be wonderful news for Toyota and Volkswagen but I’m not so sure I would want my country’s security dependent on their good will toward us.
5. It is very likely that our country will make money by helping the US auto industry- In 1980 we guaranteed $1.5 billion of private loans to Chrysler. Chrysler paid back the loans with interest and the US government made $400 million on the deal.
6. If they went under, the job losses would touch every State in the union -- Nearly 3 million jobs would be lost in the first year alone – with another 2.5 million to follow over the next two years. 1 out of every 10 people employed in America today is tired to services that is related to the U.S. auto industry. These people would see job cuts as well.
7. American Standard of living would be adversely affected -- Personal income in the United States would drop by more than $150.7 billion in the first year. “To put GM failing into perspective, in 1998 during a GM strike that lasted for 3 months, the aggregate US GDP dropped by 1/3rd”. Think about that, one company being on strike for only 3 month cut our Gross Domestic Product by a third. The government standing back helped cause the Great Depression. Did we not learn the lessons so painfully taught to our grandparents.
8. The US tax base would see substantial erosion -- The cost to local, state, and federal governments could reach $156.4 billion over three years in lost taxes, and unemployment and health care assistance. This affects every American not just those tied to the auto industry. Meanwhile the most of the profits of foreign-brand cars assembled or imported in the United States go back to their home countries. Yes, foreign companies pay tax’s on their operation here in the USA, the bulk of there operations feed their country’s tax base not ours.
9. Domestic automobile production would more than likely fall to zero – even by international producers, due to supplier bankruptcies -- “If GM goes down, it will take down companies like Lear and Johnson Controls,” That will shut Ford down, and it would shut down production at Toyota and Honda,” John Wolkonowicz, an analyst for Global Insight, told Automotive News. “They would go down like dominoes.”
10. “We're lending $120 billion to an insurance company. There's $700 billion set aside for banks and others whose leaders enriched themselves while ruining their companies and our economy. The leaders in the US auto industry have made their mistakes--plenty of them--but they didn't enrich themselves beyond decency as those other executives did. Today's economic problems, brought on by subprime mortgages, credit default swaps, a credit freeze and a stock market collapse, were caused by those other folks not the US auto industry”.
Betrayed and sacrificial auto retirees and workers....
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The Japanese government has been "bailing out" companies like Toyota Honda Nissan for 60 years.
And our own US government has been rigging the US market against our own US companies like GM FORD Chrysler etc... how .. by letting Japan keep our products out of their market while selling products in the US more than freely. They are not even paying US taxes giving them a $3000 per car tax advantage alone over our own US companies.
If our government had been doing their job we would not have to help our companies now.
Level the playing field and our companies will not need help. It's totally wrong that a Chevy Cobalt costs $45,000 in Japan while a imported Japanese or built car is sold in the US without even paying US taxes.
What the factory workers get is nothing compared to government workers who still get cost of living plus raises on top of that. Most of us get a 3% raise they get cost of living plus the 3 or 4%.
We are forced to pay Kindergarden teachers $94,000 plus benefits no GM auto worker ever got. But we go after a super competitive industries who have to actually make something.
Where is the competition for government workers who make up over 42% of our work force?
If government would do its job and level the playing field for our own US companies they would not need help now.
On Nov 18 01:25 PM F. Scott Keyboard wrote:
> I drive a 15 year old Ford. It has a failed clutch for the second
> time. It gets a poor mileage rating. I am stuck with it. Why? A new
> one costs way more than I can afford. I may be able to save the $700
> for a new clutch, again, but now it just sits. The American auto
> industry has failed me. Why, in any measure of good faith, should
> one cent of my meager taxed income be spent to support them, when
> they would not give me the leftovers from a lunchbox? Even if it
> hurts our economy, they need to do what every other U.S. manufacturer
> needs to do. Build a product that is not based on Henry Ford's "planned
> obsolescence"!
On Nov 16 10:32 AM Nelson wrote:
> I am all for a $25 Billion bridge loan. Here are my conditions.<br/>
>
> 1. Replace the CEO of GM. He has lost $80 Billion in the last 10
> years.
> 2. Move ahead the UAW contract to start 2009 (that would have kicked
> in in 2010)
> 3. Change the health benefit and per hour pay for the UAW to be in
> line with Toyota, Nissan in the US, immediately.
> 4. Force the shutdown of plants in the next 90 days to align with
> capacity.
> 5. No executive bonuses for 2009 and 2010.
> 6 Chrysler balance sheet must be transparent, if it wants a bailout.
On Nov 16 10:00 AM investor88 wrote:
> Benjamin has good logic ie should not pour good money after bad into
> GM. However Obama and all the politicians are champions for bailing
> out GM and many others plus massive stimulus packages this and that
> to prevent deleveraging. By all means stimulate but after deleveraging
> not before. Well the world is far from perfect so we just have to
> sit back and watch whether we like it or not, nothing the individual
> can do about it. Let nature take its course.
>
> I was scratching my head minutes earlier when I read a seekingalpha
> article which says Japan pay rates for auto workers are actually
> higher than Detroits' - I have to thank Benjamin for pointing out
> that Detroit's usd73/hr is actually more than double Toyota's usd30/hr.
Sorry to get technical, but clutches fail because of drivers. Learn to drive a stickshift.
Does anyone realize that just about EVERy car made today is of much better quality than they used to be. I just bought a 1999 Lincoln LS 2 years ago - that's right, 10 years old, and I don't think it's ever had any major work done to it. Working in auto repair, I can assure you that many,many cars since the late 90's are still ticking, good as new.
The problem is our economical obsession with GROWTH. GM agreed to pension plans etc that only work if your sales keep going up. They never even toyed with the idea that maybe, just maybe, they would lose marklet share. and once you sign the paperwork, you're done. Why are these companies so spend happy- to the point where their yearly budgets build in growth! then, when it doesn't come, they're running a deficit.
Look at a simple statement: 2% growth per year. Steady, right? WRONG 2% is EXPONENTIAL.
In fact, a growing economy isn't necessarily good. With the buzzword of the century being "sustainable", maybe we will stop and realize that the first key to a sustainable country is a sustainable economy with negligible inflation. Inflation is not sustainable.
Larry Burns, GM Vice President of Research & Development, wrote that
"The solution lies in sharing the public/private risks and rewards –
possibly creating a partnership between the U.S. government, auto
manufacturers and suppliers, the energy and infrastructure industries,
and other key stakeholders focused on transforming the automobile."
Perhaps GM should consider a new model for public-private partnerships
beyond the bailout.
As the Federal Government issues billions in bailout packages, local
municipalities compete for manufacturing jobs with individual firms
receiving customized tax packages. Large corporations such as GM have
armies of tax advisors, strategists, consultants and attorneys to
their disposal. Smaller municipalities may not have these resources,
but must pick up where a corporation leaves off. For example, the
town of Vance, Alabama and associated local government agencies
offered Mercedes–Benz 362 million USD in subsidizes to attract
foreign direct investment into the town. The factory builds
automobiles and thus increase the town's share of Gross Domestic
Product and the advanced technology that the company brings will
increase productivity.
This is a common practice in the United States where cities and
states compete for corporate investment. Part of the package came in
the form of tax breaks against future earnings. Others, such as the
construction of new roads, was an advance investment by the city.
Thus the city made a trade off between building a road for the company
verses building a school or hiring more police. The government
justifies the expense because of expected future returns in tax
revenues form the factory and employment for the local workers. This
is also therefore an attempt by the government to shift the
unemployment. General Motors is also accustomed to receiving generous
government support, such as $200 million from Canada in March 2005 and
subsequent closing of multiple fatalities in Canada. What is the
result of these subsidies? Do auto manufactures build a commitment to
a community and stay in the long-term? Or do these corporations plan
to simply leave for the next best opportunity where another
municipality will offer even better subsidizes?
Dennis Rondinelli and William Burpitt of the Kenan-Flagler Business
School, University of North Carolina, Chapel Hill hold that incentives
are not a primary factor for executives considering investing in North
Carolina. In Do government incentives attract and retain
international investment? A study of foreign-owned firms in North
Carolina shows that "In an era of strong global competition, national,
state, and local governments are vying to attract and retain
investment by international firms by increasing the range and value of
public
incentives for businesses to invest in their jurisdictions. A survey
of executives in 118 internationally-owned firms in North Carolina
reveals that they rank state incentives low in a list of factors that
they believe attract foreign-owned companies and retain them in the
state. Labor force, trans-transportation, quality of life, and overall
business climate factors are consistently ranked highest by business
executives, and state tax, finance, plant services, and marketing
assistance are consistently ranked low. (Rondinelli and Burpitt,
Policy Sciences, June 2000).
In a similar way, Dafna Schwartz, Joseph Pelzman, and Michael Keren at
Ben Gurion University of the Negev, George Washington University, and
Hebrew University of Jerusalem, respectively, show that incentives do
not contribute to long-term economic development in The
Ineffectiveness of Location Incentive Programs. "Many countries use
location incentives programs to attract investment into a recipient
country as a whole or to priority regions, with the goal of promoting
growth....In both cases (Israel and Puerto Rico), the programs led to
increased employment in the short run but did not alter the
fundamental economic problems of these areas.... there is a
governmental failure in their operation of location-related incentives
programs and that these governments find it difficult to discontinue
incentive programs once they have been introduced. Schwartz, Pelzman
and Keren, Economic Development Quarterly, Vol. 22, No. 2, 167-179
2008)
Mr. Burns, General Motors has asked for billions in special support
from taxpayers. With respect to sharing the public-private risk, the
history of auto manufactures such as GM, the risk is primarily on the
side of governments, with the sharing of benefits is primarily on the
side of the manufacturers. What is your commitment to the public? To
put the issue in perspective; what would the financial services
subsidiary of General Motors, GMAC, do to a customer who stopped
making monthly payments with twenty thousand Dollars in debt? How
long would GMAC wait until reposing the auto? The customer may be
given some time, but eventually the car would be repossessed. The US
Government is not in the business of manufacturing automobiles. If GM
is unable to to find capital or debt on the free market, it should be
liquidated. In a healthy free market, some companies fail, their
useful parts are reorganized, and the sector consolidates or takes a
new direction. Creditors and shareholders may loose money, but that
was a risk that they knowingly took upon lending and investing in the
company. Let bad management pay its price. Perhaps other firms or
entrepreneurs will be able to turn some of GM's business lines towards
profitability. Let he genius engineers and designers find quality
companies to work for.
The auto manufactures may cry that the domino effect of a company such
as GM closing down will spread to relating industries. Closing GM
will lead to the closing of supporting businesses who are not able to
adapt. Should the public support funding for a horse and buggy
industry because firms producing accessories such as buggy wheels and
decorations? The interlinking of supply chains within the industry
and related relationships has significant knock-on effects. For some
industries this domino effect is stronger, such as the finance sector.
This domino effect is not evident in the auto industry, where
consumers have been voting for other firms for years. Let Let GM rest
in peace. Let Darwinism do its work.
Joseph Sherman
Joseph Sherman
World Mediterranean MBA
Euromed-Marseille, France
Larry Burns, GM Vice President of Research & Development, wrote that
"The solution lies in sharing the public/private risks and rewards –
possibly creating a partnership between the U.S. government, auto
manufacturers and suppliers, the energy and infrastructure industries,
and other key stakeholders focused on transforming the automobile."
Perhaps GM should consider a new model for public-private partnerships
beyond the bailout.
As the Federal Government issues billions in bailout packages, local
municipalities compete for manufacturing jobs with individual firms
receiving customized tax packages. Large corporations such as GM have
armies of tax advisors, strategists, consultants and attorneys to
their disposal. Smaller municipalities may not have these resources,
but must pick up where a corporation leaves off. For example, the
town of Vance, Alabama and associated local government agencies
offered Mercedes–Benz 362 million USD in subsidizes to attract
foreign direct investment into the town. The factory builds
automobiles and thus increase the town's share of Gross Domestic
Product and the advanced technology that the company brings will
increase productivity.
This is a common practice in the United States where cities and
states compete for corporate investment. Part of the package came in
the form of tax breaks against future earnings. Others, such as the
construction of new roads, was an advance investment by the city.
Thus the city made a trade off between building a road for the company
verses building a school or hiring more police. The government
justifies the expense because of expected future returns in tax
revenues form the factory and employment for the local workers. This
is also therefore an attempt by the government to shift the
unemployment. General Motors is also accustomed to receiving generous
government support, such as $200 million from Canada in March 2005 and
subsequent closing of multiple fatalities in Canada. What is the
result of these subsidies? Do auto manufactures build a commitment to
a community and stay in the long-term? Or do these corporations plan
to simply leave for the next best opportunity where another
municipality will offer even better subsidizes?
Dennis Rondinelli and William Burpitt of the Kenan-Flagler Business
School, University of North Carolina, Chapel Hill hold that incentives
are not a primary factor for executives considering investing in North
Carolina. In Do government incentives attract and retain
international investment? A study of foreign-owned firms in North
Carolina shows that "In an era of strong global competition, national,
state, and local governments are vying to attract and retain
investment by international firms by increasing the range and value of
public
incentives for businesses to invest in their jurisdictions. A survey
of executives in 118 internationally-owned firms in North Carolina
reveals that they rank state incentives low in a list of factors that
they believe attract foreign-owned companies and retain them in the
state. Labor force, trans-transportation, quality of life, and overall
business climate factors are consistently ranked highest by business
executives, and state tax, finance, plant services, and marketing
assistance are consistently ranked low. (Rondinelli and Burpitt,
Policy Sciences, June 2000).
In a similar way, Dafna Schwartz, Joseph Pelzman, and Michael Keren at
Ben Gurion University of the Negev, George Washington University, and
Hebrew University of Jerusalem, respectively, show that incentives do
not contribute to long-term economic development in The
Ineffectiveness of Location Incentive Programs. "Many countries use
location incentives programs to attract investment into a recipient
country as a whole or to priority regions, with the goal of promoting
growth....In both cases (Israel and Puerto Rico), the programs led to
increased employment in the short run but did not alter the
fundamental economic problems of these areas.... there is a
governmental failure in their operation of location-related incentives
programs and that these governments find it difficult to discontinue
incentive programs once they have been introduced. Schwartz, Pelzman
and Keren, Economic Development Quarterly, Vol. 22, No. 2, 167-179
2008)
Mr. Burns, General Motors has asked for billions in special support
from taxpayers. With respect to sharing the public-private risk, the
history of auto manufactures such as GM, the risk is primarily on the
side of governments, with the sharing of benefits is primarily on the
side of the manufacturers. What is your commitment to the public? To
put the issue in perspective; what would the financial services
subsidiary of General Motors, GMAC, do to a customer who stopped
making monthly payments with twenty thousand Dollars in debt? How
long would GMAC wait until reposing the auto? The customer may be
given some time, but eventually the car would be repossessed. The US
Government is not in the business of manufacturing automobiles. If GM
is unable to to find capital or debt on the free market, it should be
liquidated. In a healthy free market, some companies fail, their
useful parts are reorganized, and the sector consolidates or takes a
new direction. Creditors and shareholders may loose money, but that
was a risk that they knowingly took upon lending and investing in the
company. Let bad management pay its price. Perhaps other firms or
entrepreneurs will be able to turn some of GM's business lines towards
profitability. Let he genius engineers and designers find quality
companies to work for.
The auto manufactures may cry that the domino effect of a company such
as GM closing down will spread to relating industries. Closing GM
will lead to the closing of supporting businesses who are not able to
adapt. Should the public support funding for a horse and buggy
industry because firms producing accessories such as buggy wheels and
decorations? The interlinking of supply chains within the industry
and related relationships has significant knock-on effects. For some
industries this domino effect is stronger, such as the finance sector.
This domino effect is not evident in the auto industry, where
consumers have been voting for other firms for years. Let Let GM rest
in peace. Let Darwinism do its work.
Joseph Sherman
Anjan Chhetry
World Mediterranean MBA
Euromed-Marseille, France
Thanks for your reply.
Norm