Let's Hope the Auto Bailout Has Failed for Good 81 comments
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Let's hope that the auto bailout has failed for good. The fact that U.S. auto companies (more specifically, employees) weren't willing to reach parity with the wages of their Japanese competitors by 2009 was outrageous. For this stalwart, it is a relief that this bailout did not pass, and I find the markets' negative reaction to the result very short sighted. (This of course presupposes that the U.S. and world markets' drop was indeed a reaction to the auto bailout news, as financial media ascribe. Nevertheless, assuming that markets did fall in reaction to the news, then their reaction is very misguided.)
Rewarding and sustaining value-destroying companies is not good for markets, whatever the apparent near term jobs loss. Overpaid workers for companies which lose money are not value creating for an economy. Reallocating workers into positions which earn a profit for their companies is.
One crucial point widely ignored in all the talk of U.S. auto industry collapse is that in the current situation we're actually just talking about the collapse of the current major US auto companies, in their current form, and not necessarily the industry.
Here's a shocker - Might the demise of the old actually leave room for the new? We might actually have new, leaner, efficient U.S. auto companies emerge out of all of this, whether as restructured companies based on the old or perhaps even (and this would be very exciting) brand new companies. It was a pretty crowded space for a new U.S. automaker to appear previously, especially with the fear of getting snagged by onerous employee contracts.
What if a new company could pick and choose the assets it wanted from the old dying companies, and employ the best U.S. autoworkers available with a salary system far less parasitic than the current UAW backed system?
There is definitely room for at least one major U.S. home-branded automaker in the American popular psyche. Just marry a truly American branding with efficient operations, good design, and strong marketing, and then perhaps you have a business. If the U.S. can make iPods, semiconductors, and passenger jets, there's no reason why cars competitive vs. the Japanese are some sort of insurmountable task. Or maybe in the end, U.S. companies have better businesses to pursue than auto manufacturing. This no one can predict for sure.
But I see no reason why the bankruptcy of the current U.S. automakers' corporate entities spells the demise of the U.S. auto industry. And in fact, it could actually spur a renaissance in U.S. auto leadership once the field for U.S. branded cars gets less crowded - provided automaking is a profitable worthwhile business on par with other opportunities for US investment. From this perspective, I feel then the failure of the auto bailout is actually positive, rather than negative, for the U.S. economy, and in turn U.S. and global markets.
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On Dec 12 07:14 AM EC48 wrote:
> Yes I'm sure that's exactly what will happen, Then once all the parts
> suppliers go bankrupt we can pick and chose and take the best. Same
> goes for all the dealerships, ad firms, etc. just like the tooth
> fairy and santa claus.
www.fordvehicles.com/t.../
When there is talk of starting from the ground up, what about the retirees and surviving spouses? What happens in 20 years when Toytota has a significant number of retirees? Will states be inducing China to build factories and will we then tell Toyota you must restructure because you have legacy costs and have them kick their retirees to the curb? I am for capitalism, but not this type.
It's bad enough that there isn't any transparency with the Trillions of dollars that are being poured into (someone's pockets) America... what are we supposed to do now... let the rest of America keep struggling just so the employees of the big 3 can continue to work for amazingly high dollars? Yeah, whatever. If they cannot take a decrease in pay, screw them - let them eat bread and draw unemployment like the rest of us.
I couldn't agree more with this article. Let them fail and as capitalism works, someone else will pick up the pieces and create a manufacturer that competitive and creates worthwhile autos.
On Dec 12 07:37 AM EC48 wrote:
> pctecguy, if this were a different time, say two years ago, I would
> agree as the econmy could bear it, in todays econmic environment,
> the fallout will be crippling. It's not GM or the UAW I care about,
> it's me.
On Dec 12 08:08 AM John D wrote:
> It's really hard to believe that so many that want to see the North
> American economy fail so much that they are blind as to what the
> consequences are going to be - 1st the financial crisis - 2nd the
> credit crisis and strike 3 - failure to give the industry help to
> keep the economy rolling - Is it the company - the union or the government
> ....Hmmmm. Lets back up now if all of the high priced help in the
> government with all of their expertise could not see the financial
> crisis was going to hit the industrials - THEY LET THE USA DOWN -
> not to mention the tsunami that is rippling around the globe. They
> would rather see 3 million American families without a way to support
> their families (which is now 12 million Americans - 4 per family)
> instead of sucking it up - do the math and fix that which should
> never have gotten started in the 1st place - were there no flags
> or warnings that this was coming or did they just ignore it long
> enough to head to higher ground in Washington with their pensions
> and investments intact. Hmmmm??? It was not the fault of the employees
> and their families they were just trying to make a living, I guess
> the term "casualties of WAR" comes into place - TRILLIONs spent to
> protect the country from others and ZERO to protect it from itself.
The UAW make avg $48,000. (Toyota around $43,000)The $70,000 figure is for loading the legacy costs of pensions health care etc etc etc on the current much smaller workforce.
New employees are hired at around 60% of that. Wage parity with foreign owned plants is only a couple of years off the problem is legacy costs.
On Dec 12 07:47 AM Big Dumb GUy wrote:
> I cannot believe that anyone considers $70,000.00 a year in salary
> non-negotiable. What the heck has everything come to? I cannot believe
> that tax payers want to actually support these failing companies
> by the BILLIONS of tax payer dollars. What happened to the rise of
> capitalism? Obviously it has been reduced to socialism on the way
> down.
>
> It's bad enough that there isn't any transparency with the Trillions
> of dollars that are being poured into (someone's pockets) America...
> what are we supposed to do now... let the rest of America keep struggling
> just so the employees of the big 3 can continue to work for amazingly
> high dollars? Yeah, whatever. If they cannot take a decrease in
> pay, screw them - let them eat bread and draw unemployment like the
> rest of us.
>
> I couldn't agree more with this article. Let them fail and as capitalism
> works, someone else will pick up the pieces and create a manufacturer
> that competitive and creates worthwhile autos.
Bonuses? Gone. Salaries for the CEO? $1 under the new plan. Options? Nope. Jets? Gone.
On Dec 12 08:15 AM jam221 wrote:
> hmmm, how about cuttin the fat from the top down, do they all need
> a half dozen private jets, how about the upper managements huge bonuses,
> when their companies are in the crapper, should these idiots at the
> top still get hundreds of thousands of dollars worth of stock and
> options, and instead of making millons of dollars a year for driving
> their companies into the dirt, maybe their wadges shouldnt be any
> higher than 25 percent above their top paid hourly workers, i mean
> really its not like management builds anything or even adds anything
> to the autos, Stop running car adds every few mins on all the tv
> channels, heck just doing that would get them back in the black,
> then maybe a car wouldnt have to sell for 30 grand, and the working
> man could afford to buy 1, maybe even pay his mortgage also if an
> auto didnt cost as much as a house
And the financial market collapses????? Investors actually want a 3 month bandaid --vs-- a real solution??????? I don't think so, but with the help of the hysterical financial media, some very cheap shares of FORD will be bought today by savvy investors with long pants!!!!!!!!
IMHO
"One crucial point widely ignored in all the talk of U.S. auto industry collapse is that in the current situation we're actually just talking about the collapse of the current major US auto companies, in their current form, and not necessarily the industry."
Really? Apparently these guys need to learn a little about how intertwined the industry really is and how slim the margins are for most of the suppliers out there. What happens when those suppliers (currently debtors to GM, F, & C) are forced to take cents on the dollar as payment? How many of THEM will collapse? I'm going with Mark Zandi's view of things being cataclysmic in the event of a bankruptcy.
We can once and for all end dirty and noisy maufacturing in America and focus on retraining the auto and supplier workers for clean high tech jobs or as medical technicians. We can use the bailout money to build mass transit so the retrained workers can travel responsibly to those proper jobs. We can get all those big scary trucks and SUVs off the roads. Foreign automakers will provide the smaller clean fuel efficient hybrids that Americans should be driving.
I think I can already smell the daisies - or is it the air freshener in the bathroom.