Obama Just Pulled a 'Reagan' on the Automakers 27 comments
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Could it be that President Obama has just pulled a “Reagan”?
On August 5th 1981, President Reagan fired 11,345 air traffic controllers who were illegally on strike. By this extraordinary action, he showed everybody that, with the nation in peril, he meant business and the US government would not be used and abused.
President Obama is facing an even worse crisis. The US auto industry is technically bankrupt while the financial system is falling apart. Both industries have received but still desperately need government financial assistance at enormous cost to the taxpayer. Yet, some of these company managements and boards continue to act arrogantly, playing smart and not-so-smart politics in the hope of saving their jobs even if it mortgages the country’s future for generations to come.
Monday morning, President Obama said: “Enough! The nation is in peril and time has come to show who is in charge here!”.
GM is the ultimate example of how not to manage a company. Over more than 30 years, this company has accumulated more management mistakes and strategy blunders that can be printed in a business case textbook. Management teams after management teams have been oblivious to the real world and thoroughly mismanaged this company with the continuous blind and miserable blessing of the board of directors. Now that they come, again, begging for more money to cover their failures, with a business plan aimed and designed essentially for congressional eyes, they finally meet their Reagan or, shall we now say, their Obama.
We are in the eye of the storm and things must change, now! It is time to show who is in charge. It is time to show that the US government will no longer be used and abused by companies “too big to fail”. The United States is too big and too strong to fail and Obama’s administration will see to it!
President Obama planned this perfectly. Last week, he summoned banks' executives to a private meeting. This week, he flatly rejected GM’s and Chrysler’s “business recovery plan”, fired GM’s CEO, and showed creditors and the UAW that they better be serious in negotiations because he is. Obviously, this is also meant to prove to bankers that he was serious last week and that he will not hesitate to act decisively and forcefully if banks do not behave like they should when the nation is in peril. Banks need to lend and be serious about it. Banks need to give a break to mortgage holders and be serious about it. Banks need to cleanse their balance sheets and be serious about it.
It is also not a simple coincidence that this is happening just before the G20 meeting. President Obama is showing the world that he is firmly in charge of his country and that the United States will not be used and abused. He means business, tough business if need be.
Seems like a potential watershed event to me.
Stock position: None.
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now do you suppose the u.s gummint will be willing to stand up to the masters of the universe on wall st.?
> jack
So many thousands of jobs both directly and indirectly will be affected by a failure of the automakers. And yet chapter 11 and a major restructuring is really the only solution especially as unions have started to dig in their heals and management behaves as though we are still in a good economy. That lack of flexibility alone would signal the end of these companies at this juncture. We are in a deflating economy. It is a good and necessary event. Long overdue too. What goes up must come down. In this case that means wages at all stages of the supply chain.
Tata of India has recently announced a new car that will cost only about 2000 dollars stripped down. We live in a global world and our Auto makers have not caught on that we need to start to compete against countries where wage earners overseas do not get in a day what our UAW and CAW earn in an hour (much less than that actually). And while I am not suggesting that GM or Chrysler pay their workers a dollar an hour I am saying that there are a lot of hungry people out there who will happily get the job done for a fraction of current pay levels. And it is no idle thinking to suggest that all of the Big 3 may eventually have to migrate operations overseas or to Mexico to survive.
So send them into Chapter 11. Cancel the collective agreements, extinguish the pension liabilities, end the debates and arguments and bitching and recriminations. Start fresh. The current course of action simply cannot continue without the eventual and complete failure of all three North American car manufacturers. And the numbers show it is just a matter of time.
It may be difficult but we are going through a period of global income re-balancing. That means fewer real dollars here at home and more in the pockets of people and business in developing countries. Even Africa, the worlds economic basket-case is finally starting to get in the action. Ethiopia of all places was predicting growth above 9% for the most recent fiscal year as manufacturers from China moved textile and other manufacturing operations there. Why? Cheap labor of course. Cheaper than Asian labor by a long shot. Yes,..even Chinese companies are seeking lower cost jurisdictions in which to manufacture goods and countries where environmental standards and labor regulations are low to nonexistent. Places that used to look risky for business are suddenly appealing because there is a global blind-spot to these regions and some of the more distasteful business practices can be carried on without oversight. And my God, what person in their right mind would deny Ethiopia jobs and incomes anyway!
So what do Africa and India and China have to do with North American auto manufacturing? Everything of course. My answer to that question is this. If these companies cannot resolve their cost structures and business models to become competitive globally then they will become extinct or their surviving operations will be forced to shift operations abroad and into competition with the real world. The very future of GM and Chrysler now depends on a planned and strategic bankruptcy and restructuring.
Bailouts will not save them.
Cam
When gas was close to $4 a gallon, how many times did we see news clips of people filling up their tanks at the station, wanly complaining, "well, what're ya gonna do?" There was plenty we should have done as consumers. Not wait for gas to spike and then pull the chain on the lightbulb over our heads, saying "Doh! Maybe if I traded this monster in for something smaller and more economical I might not have to pay so much for gas!" Markets respond to consumer preferences, and they gave us just what we wanted. Now we turn on them when we see the long-term (and it's not even THAT long term) result of being stupid consumers. They got cushy with their assumptions, and we were lazy and self-indulgent. Now everybody's hurting.
"A fish, stinks from the head"
Since Detroit has failed to build a world class four cylinder powerplant in the last 40 years, I'd be loath to place the industry's demise on the simple minded principle that "The Unions done it"
On Apr 01 08:45 AM BookValue wrote:
> The Obama/Reagan comparison is a load of crap.
>
> If it were Reagan, he would have fired all the UAW employees for
> the mess they had caused.
There have been many players in this sad tale of political and corporate greed. There is blame enough for all. The american people love to listen to people who play to their egos more than they listen to what their minds would tell them is common sense.
Time for americans to grow up and take responsibility for the mess we are all in. President O is leading the way.
If Obama really had nuts, he would pull an Andrew Jackson, issue Greenbacks and state we don't need the Central Banking model any longer. The depression would be god awful for three years but we would be free of those chains (at least for a few decades). There are always alternative methods if during a Fascist period to pay sovereign debt holders which would be a tricky part of a Jackson strategy and be acting on behalf of the American citizen interests.
On Apr 01 08:45 AM BookValue wrote:
> The Obama/Reagan comparison is a load of crap.
>
> If it were Reagan, he would have fired all the UAW employees for
> the mess they had caused.
From the article: "On August 5th 1981, President Reagan fired 11,345 air traffic controllers who were illegally on strike."
Key word: Illegally.
The president had power with the ATC's because they were under the government's jurisdiction and were ipso-facto- breaking the law.
We are supposed to be a nation of law. Obama can act when constitutional laws are violated, or he can give the automakers "strings attached" bailouts and then pull the strings, but that is about it.
It also is why so many banks were in a desperate race to give the money back.
On Apr 01 12:39 PM Swell220 wrote:
>
> "A fish, stinks from the head"
>
> Since Detroit has failed to build a world class four cylinder powerplant
> in the last 40 years, I'd be loath to place the industry's demise
> on the simple minded principle that "The Unions done it"
>
Obama fired the CEO of General Motors, and apparently is about to name a new board of directors, while directing them in what kind of cars to build.
The entire article is just dripping with sugary syrup from the
"We Love All Things Obama" crowd.
i can't completely agree with you.
the chevy II 4-banger of 1962-63 (2.5 litre) was a pretty solid little engine.
one of my friends from michigan tuned one to the teeth (hot cam, pair of dual throat webers, tuned extractor exhaust) and installed it in a lotus 23B chassis, ran it in class D modified against all the 3-litre ferraris etc., don't expect he won any races but he was having lots of fun with his detroit iron.
> jack