More Bad News for GM

CNBC is reporting this morning that General Motors (GM) and the UAW are in a standoff regarding the renegotiations of labor contracts. The implication of this is that the UAW is unwilling to give GM the same concessions that they were given to Ford (F) last Wednesday.

Looking at GM here, a bunch of headlines crossing. The Journal saying the UAW deal with Ford that everyone said would be the deal that GM copied and Chrysler copied isn’t going to work for GM…Not good news. They’re looking to cookie cutter the thing to not keep going into endless negotiations. Not a particularly good headline for General Motors.

Everyone had speculated that once a deal was reached with one of the big three, the others would just get the same deal. Details about where the talks broke down are sparse at this point, but the delay could either mean that the UAW is unsatisfied with the amount of concessions offered to Ford or that GM needs a greater amount of help from the unions. Either way, the longer this drags out could potentially be detrimental to GM that is losing cash at a very quick pace.

The Wall Street Journal is also reporting that GM CEO Rick Wagoner said today that bankruptcy filing could work, but is risky and would cost more money presumably from the government. Even as the talks have slowed down for the time being with the unions, Wagoner is confident that “99% of GM’s problems” could be resolved outside of filing.

More Bad News for GM

Comments

[Kman58:]

Thadeus,

I believe Cobra has posed a valid question.

If I can paraphrase the essense of his question mostly right then I believe he has rightly asked basically:

Why should the rest of Americans, who are not employed by GM, give GM $60,000,000,000 ?

I would be interested in your opinion on this specific point, sans the usual cheap tactics such as the accusations, denials, and changing of the topic, pretending and presuming to know another's life history and such.

Care to comment?


On Mar 18 08:20 AM Thadeus Thornton III wrote:

> Just a thought. To me it sounds as though this "Cobra " person got
> refused a small business loan or something along the line and is
> now bitter about any large business getting help from CREATED financial
> failings not of their own dealing. You want an "intellectual " answer?
> People have been giving them, but you are too closed minded to hear
> it.
> I also have to wonder a few other things. You seem to have an awful
> lot of time to post on this site and who knows where else. Who is
> doing all the work for you at the company? Do they know you spend
> so much time grinding the ax on GM for no benefit of theirs? Also,
> what happened to the other companies you started/worked for? Did
> the employees there get left in the lurch when the business failed
> and you just went out and got another small business loan on the
> governments (public) dole? And if you ever did accept a small business
> loan, how is that different from GM getting a L O A N to keep things
> running in a credit freeze situation? I am thinking by your fervor,
> you are really afraid or concerned about how this financial mess
> will affect your own business. If that's the case, GM has nothing
> to do with that.

Mar 18 07:35 PM

[Auto Employee:]

Cobra 1 - What is your logic! So you speak on behalf of America do you. The government LOAN is necessary to help GM get through this difficult time, a time that is a result of the horrific and downright criminal behaviour of AIG, banks and investors. The union, workers and company have made many concessions to bring about change. The credit freeze is not a result of something GM did but it's recovery is essential to their recovery! The downfall of GM would have a devastating ripple effect on communities around the country which they can ill afford. People like you just don't get it, who do you think is going to be paying out the unemployment, health costs and welfare to all of these .individuals!!! Instead of trying to ride this storm, get through it the best we can and hopefully emerge with a successful GM (a result of the many changes which simply have not had time to fully take effect). The economy is not going to improve if people like you keep spreading your poison, you honestly think letting GM fail is going to help, give your head a shake, the President sees how important it is for them to survive, oh but I guess you would know better obviously. Oh by the way, why don't you enlighten us as to what you do for a living.

Mar 18 07:42 PM

[Kman58:]

Thadeus,

I think you also asked an interesting question. That being basically how a loan to GM is different than a loan to an different company that is a small business.

I think that there are two striking differences.

One, is that a bank will only make that small business loan if it believes that, in its assessment, that business will become a profit generating thing. Contrast this with GM, where, recognizing that all parties within GM "feel" that they have given up enough, and yet GM in total has not made enough cuts to show that it will become a "profit generating thing".

The second difference is that small businesses, taken on whole, create American jobs. They have proven to do so over the long term. This, compared to GM, leaves GM trailing in that while GM creates jobs in China, it has done differently in America (The US) by losing approximately 500,000 union jobs over the last several decades.

I believe they used to employ over 600,000 (hourly) Americans, and, due to their own loss of market share of auto customers, they now can afford less than 100,000 (hourly).

They have contracted to the UAW to pay their workers, on average, so much, that in so many cases they have determined that it is cheaper to buy a high-tech FANUC robot - even eith all of its high tech controls and programming and maintenance, than to put up with and pay, and have to fight sometimes daily with, another spoiled UAW worker.

Mar 18 08:08 PM

[Kman58:]

Thadeus,

In short, with GM, it is not a loan because we can recognize in advance when it will not be paid back.

Think of it kind of like the "Loan" that you might give to your drunk uncle, so to speak.

That is basically why it is different from a loan given to a small business, in my opinion.

Mar 18 08:12 PM

[Kman58:]

Here is, I hope, a somewhat fresh question for specifically for those who are employed by GM, Ford, and Chrysler.

OK here goes. If it came down to brass tacks, and on lets say the final day of all negotiation (wink) , XXXXXX ( enter your company's name) comes to you - and you are negotiating on behalf of all US auto workers - well that would be the UAW so - so that is it then - you are basically in Ron Gettelfinger's (hope I did not misspell) position. They say that the man with their bankrupcy papers is right outside the door, and let's for a moment presume that you believe them this time, so the last thing they can offer you is that every worker will be paid $23 per hour, have a 401K with a 2% match up to 6% of contribution, and short term and long term disability ins, and 100k life insurance, and health dental and vision where you pay $150 per month for a whole family, 2 weeks vacation and five days of sick pay, and that that is all of the benefits you get, then what would your final answere be if you had to either check the block that indicated "Yes", or the one that indicated "No".

OK now one additional question. Why?

Mar 18 08:29 PM

[303820:]

Kman :
What you're advocating is a race to the bottom...a true businessman...$23hr to day and co-pay...$18hr tomorrow and bigger co-pays...$15hr and bigger yet co-pays...it is your mentality that's destroying the American buying power, lowering workers wages in not the solution to the current problem...you, Toyota republicans are the biggest hypocrites in the land...you want to give the American workers a $600 a year tax cut and then turn around and cut their wages in half...I don't know what business you're in but when the American people don't have buying power , eventually your business will fail with the rest of the country!

Mar 18 10:33 PM

[303820:]

Kman and the rest of the business owners...there has been a popular practice in the small business community and it works like this.....the owner takes the profits of the business, invests it in the market for mega profits and then borrow what ever is needed to make payroll..now... the low interest loans come at the expenses of the taxpayers since they are most of the time government programs...would this practice be considered a bail-out or a rip-off of taxpayer's money?

Mar 18 10:59 PM

[Kman58:]

So what would be your answere then? To agree to $23 an hour or to say no and let the company fail, recognizing that in this case, most often when the company reorganizes and will not tolerate a union, even if they have to go to the lengths of shuttering 19 out of 21 US plants just like Delphi has done - to get away from the UAW.

I also disagree with your statement about a race to the bottom. I believe that the that the lower point, for the current workers involved, will be reached if the UAW "draws a line in the sand" at too high of a level of pay. Too high being defined not by what the UAW thinks is the proper level, rather, too high defined by the amount that will make GM non-profitable, independent of who is pissed off and thinks that they have already done enough.

There are actual real economics involved, dollars that are on the left side of the balance sheet and dollars that are on the right. If in the end, that company, GM, can not show a profit then after the government and taxpayers get sick of adding the necessary funds to make up the difference, something will happen.

As far as wages, if you want to make a good wage after GM has run its course then you will have to compete in the market and earn it like the rest of us.

I think we will continue to give you bailout money, and then at some point we will decide to no longer do that.

Mar 18 11:13 PM

[Kman58:]

In response to your comment below, there is also a popular practice in a company called General Motors.

That is to pay tens of thousands of workers lavish pay packages and then have them make mediocre cars of mediocre quality and then charge the customer a higher than normal market price for them. If the customer starts to wake up and complains, then they attempt to remedy this by repremanding them that they should "buy American" regardless of features, quality and price.

In the mean-time, this company, General Motors is so genuinely American, that they continue to cut workers by the tens of thousands here in the United States of America, and at the same time General Motors Corporation hires workers by the thousands in China to handle their growing operation there. Oh right, and then they claim that since their US operation is losing money, they need us Americans to actually come to their rescue and give them several billion dollars, monthly.

If the Chinese want to be patriotic, then they should support GM as the company is hiring pretty consistently there. If you are born in China the GM is the best thing this side of the Yang-Tse River.





On Mar 18 10:59 PM 303820 wrote:

> Kman and the rest of the business owners...there has been a popular
> practice in the small business community and it works like this.....the
> owner takes the profits of the business, invests it in the market
> for mega profits and then borrow what ever is needed to make payroll..now...
> the low interest loans come at the expenses of the taxpayers since
> they are most of the time government programs...would this practice
> be considered a bail-out or a rip-off of taxpayer's money?

Mar 18 11:26 PM

[Kman58:]

Check it out on Wikipedia, GM employs more workers outside of North America (which even includes Mexico and Canada) than inside North America. As of September of 2008, they employ, worldwide, 252,000 workers. Only 123,000 of those are North American workers. North America of course includes their Mexican workers.

So arguably based solely on the workers that make up the company, not only are they a less American than an "American Company", they are also less of a North American than a "North American Company".

Mar 18 11:48 PM

[Kman58:]

In response to your insulting post, I wish to point out to you that if you are part of the UAW, then you have in fact decided to screw over all future generations of your union brothers by keeping your wage nearly the same with a small cut percentage wise, and bringing them in at just under $15 dollars per hour.

I have begun to comment on this GM situation only after GM's business has been so run in to the ground that it came to us Americans who have nothing to do with them, and they asked for, and got - and keep asking and getting billions of dollars per month without any definitive end in site.

I think that if they cut enough to be a profit generating company, without "faking the funk" with the numbers, then we should give them loans to be paid back. Likewise, if they do not cut and make the necessary adjustments, then we should not give them money.

Anything else?

How about actual discussion about GM or the industry instead of insults.

Mar 19 12:07 AM

[Paul Killinger:]

I was fascinated by the retired GM engineer's comment that the company was too big to manage efficiently.

So here's a radical idea. Why not break the company up voluntarily and let the individual divisions COMPETE with one another as well as other companies?

Why not? After all, what do they have left to lose?

Mar 19 07:37 AM

[303820:]

Kman:
You and I both know that worker's wage is not the problem...legacy cost is. are you telling me that we should take 1.2 million retirees and throw them in the streets? let me also remind you that those retirees paychecks support a lot of business.

What's destroying the American manufacturing industry is the fact that we're the only country in the industrialized world without nationalized health care...Instead of COMPLAINING how good those of us that make good money have it...why don't we COMPLAIN about those that struggle with wal mart wages every day!

Mar 19 09:04 AM

[Thadeus Tho...:]

Just an interesting note. It seems that GM has unseated Lexus as the #1 vehicle in the US for quality and reliability according to owners. Now, when GM vehicles are in the top 10 of JD Power vehicle studies, some people just disregard them. Now that Buick is #1 how are they going to ignore that? Where's the argument about "poor quality, dependability, American BRAND cars are sub standard"? I'm sure someone will nit pick.

www.reuters.com/articl...

GM has also recently indicated it did not need the $2 billion of it's government L O A N for the moth of March. Wages are not an issue, health insurance is a decreasing issue. With decreasing real wages and benefits, where will the incentive for any business be to pay a far days wages for a fair days work? Even $18 an hour for a family of 4 puts people in the "working poor" category in many areas of the country. How is a worker supposed to provide any measure of well being for his/her family, fund a 401K ( that gets robbed of any gains periodically), pay high health insurance co-pays all on $ 36K - $38K a year? And the BIG3 will be paying people less than that. In many areas of the country, rent alone would eat up a half of monthly income, unless people expect others to raise their families in squalor or the ghetto. We seem to be going backwards very, very fast. All due to the finance guru's greed, jealousy over decent wages and benefits, and misinformation or out right misrepresentation of auto workers compensation and work ethics.

Mar 19 11:31 AM

[Kman58:]

Alright, user 303820 and Thadues, about the wage issue. The heart of the disagreement between my outlook, and what I perceive yours to be from your posts, is that I beleive that GM may possibly go bankrupt, and I get the impression that the both of you have not actually considered it a possibility that GM may actually go b/r.

The reason that I say this is that "y'all" seem to say that GM's workers have given up enough, and should not give up any more.

Well that is "fine" so to speak but what if the level of compensation that currently exists, even after everything you have "given up", ends up being a figure that GM can not afford to pay, given what money it takes in by selling cars?

The figures involved are not small, with regard to compensation. So to say that cutting pay will have a negligable effect is incorrect in my opinion. I will quickly show how I arrived at that conclusion. I used straight forward old-fashioned math.

I believe that GM currently has roughly 60,000 hourly employees and maybe 25,000 salaried in the US. I am pretty sure about the hourly number and not as exactly certain about the salaried figure so please let me know how far off I am. For illustrative purposes though lets look at the effect of that scenario. I am going to figure that the average salaried job gets the same cost of pay and benefit package as an average hourly person. Some may get more. I think it is probably close. Moving on, 85,000 employees in total, times $70 per hour for pay and benefits equals 5,950,000.

That is basically six million dollars per hour.

That times 40 hours per week equals two hundred and thirty eight million per week.

That, times four weeks in a month equals $1,000,000,000 (one billion dollars) per month in pay. Again, the conclusion is that even with zero overtime, the company must pay out One Billion Dollars per month in pay and benefits.

So if the majority of those in the UAW, and also the management of GM agree to not adjust pay and benefits down any further, then that is that. And if they keep paying one billion dollars a month in compensation, then they better hope that they have enough revenue from the sale of cars. If they do have the revenue, then fine, no problemo. The problem is that they do not in fact have it.

So if they run out of assets to pay their liabilities then after non-GM employees tire of bailing them out then, well they fail to pay their liabilities, and even worse; the kitty is then dry.

The amount of money you can possibly be paid, per hour, over the long term is largly limited by how much GM can earn. You can negotiate a larger figure in the short run, and this will only cause your company to accelerate towards failure.

Good luck with this, as it is only a problem I have to deal with until a few million more Americans get sick of giving GM a few billion every month.

Mar 19 06:15 PM

[a. palmer jr.:]

My wife saw on tv that it was Jaguar, not GM, that unseated Lexus as the number 1 car for quality and reliability. It didn't sound reasonable, because Jags always were needing worked on. I'll have to do some more research.

Mar 19 09:24 PM

[Auto Employee:]

Aw Kman I must have really hurt your feeling you had my post removed. The truth must have hurt too much. You have absolutely no problem running down GM workers but no one should dare speak their mind about you, grow up.


On Mar 19 12:07 AM Kman58 wrote:

> In response to your insulting post, I wish to point out to you that
> if you are part of the UAW, then you have in fact decided to screw
> over all future generations of your union brothers by keeping your
> wage nearly the same with a small cut percentage wise, and bringing
> them in at just under $15 dollars per hour.
>
> I have begun to comment on this GM situation only after GM's business
> has been so run in to the ground that it came to us Americans who
> have nothing to do with them, and they asked for, and got - and keep
> asking and getting billions of dollars per month without any definitive
> end in site.
>
> I think that if they cut enough to be a profit generating company,
> without "faking the funk" with the numbers, then we should give them
> loans to be paid back. Likewise, if they do not cut and make the
> necessary adjustments, then we should not give them money.
>
> And, yes, I also will tell you that typing in caps tends to make
> you appear ignorant.
>
> Anything else?
>
> How about actual discussion about GM or the industry instead of insults.
>

Mar 19 10:03 PM

[Kman58:]

As far as the quality of GM products, I checked JDPower.com and noticed that for the top quality in one of about 10 or so different classes of vehicles, Buik a branch of GM tied another car company for firstplace. Lexus, a branch of Toyota, took second, and the Toyota brand themselves, took third.

In other classes, some Hondas took first place for Quality. For one of the sport-luxury classes the Mercedes-Benz CLK took the top award for quality.

Congratulations to those that designed, engineered, tested and manufactured that line of Buiks. Hats off, well done.

Now why can't GM do this a couple more times. To quote Reverend Manning "Now come On". To claim that GM's quality is very good because after decades of almost never winning even one of ten car classes per year when during these decades they had all the resources of the biggest car company in the world by volume of cars produced.

They did win this one though, and hopefully it is the beginning of a trend.

Mar 20 06:28 PM

[Kman58:]

Sorry, what a maroon, I mis-spelled Buick in the pervious post. Again, good job guys.

Mar 20 06:30 PM

[User 357469:]

I will agree that the US is the only country in the industrialized world which does not have nationalized health care but that is not what is destroying American manufacturing. Unionized labor is. Due to our high labor costs we can no longer compete.

On Mar 19 09:04 AM 303820 wrote:

> Kman:
> You and I both know that worker's wage is not the problem...legacy
> cost is. are you telling me that we should take 1.2 million retirees
> and throw them in the streets? let me also remind you that those
> retirees paychecks support a lot of business.
>
> What's destroying the American manufacturing industry is the fact
> that we're the only country in the industrialized world without nationalized
> health care...Instead of COMPLAINING how good those of us that make
> good money have it...why don't we COMPLAIN about those that struggle
> with wal mart wages every day!

Mar 21 10:14 AM