Two part blog entry on GM

[Pioneer]

Last case in point; Kia hasn't been hurt (beyond their very limited brand value here), though their 10-year warranties are basically a charade.

 

Because the Korean government doesn't allow competition in their country, and they dump all their excess capacity here. Just like the Japanese.

[jpd80]

Goes to the point of the blog:

 

The bailout is not necessarily to save a broken GM, it's to prevent a massive social collapse in the rust belt followed by outmigration and strained social support structures coast to coast.

 

It's not a question of supporting failed management, it's a question of protecting 'innocent bystanders' so to speak.

 

Consequences on innocent public should outweigh any thoughts of punishing GM or its CEO.

Consequences could still happen so regardless, any funding should be considered a shock absorber.

Edited November 14, 2008 by jpd80

[LSFan00]

Alright, since this is all about protecting "innocent bystanders" then the questions should be how to doll out benefits to those in need. Ah, socialism.

 

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

 

If ever the market has rendered a just verdict, it is the one rendered on G.M. and Chrysler. These companies are not innocent victims of this crisis. To read the expert literature on these companies is to read a long litany of miscalculation. Some experts mention the management blunders, some the union contracts and the legacy costs, some the years of poor car design and some the entrenched corporate cultures.

 

There seems to be no one who believes the companies are viable without radical change. A federal cash infusion will not infuse wisdom into management.

NY Times, now in favor of capitalism?

Again, just put all of those workers, and maybe some of their dependents, on a CCC-style highway project. At least for our money, we'll get some new roads built.

 

(from above article;)

 

This is an excruciatingly hard call. A case could be made for keeping the Big Three afloat as a jobs program until the economy gets better and then letting them go bankrupt. But the most persuasive experts argue that bankruptcy is the least horrible option. Airline, steel and retail companies have gone through bankruptcy proceedings and adjusted. It would be a less politically tainted process. Government could use that $50 billion — and more — to help the workers who are going to be displaced no matter what.

 

If the politicians really want to "help" then they could provide the bridge funding during bankruptcy if this is such a critical problem (which I haven't noted discussed elsewhere).

 

This whole thing seems like monumentally bad timing but it's not; the rank free market capitalism that built this industry has always been important to it's success (along with the Post WWII rubble-state of all of Detroit's natural competitors), and to abandon such is to march down the road to economic poverty.

 

(Also, for the record, I just think they've finally got the Malibu right, but I'm sure they'd screw it up again in a few years. I ADMIT I'm not the best critic here, as I really like the Aura also.)

 

Lastly, here's a summation of my point, "whatever your feeling about government intervention in the economy, or the correct level of income inequality, I think there's one thing we can all agree on: for the world to get better, things that don't work have to fail. We cannot keep alive every company, every car and every job that someone once liked, because that way lies stagnation and death. Places where production decisions are made based on how much labor they can consume, rather than how much value they can produce, make everyone in society worse off in the long run." Link.

 

RJ, I think you've accepted that things that don't work need to fail. Our point of disagreement is what would be the impact of a bankruptcy filing by GM right now and should taxpayer charity dollars be thrown at their cash burning corpse to put that off 4-9 months at a time.

[LSFan00]

Because the Korean government doesn't allow competition in their country, and they dump all their excess capacity here. Just like the Japanese.

 

You can't seriously blame the Koreans and Jap's for GM's cash flow/business problems today. That is a joke. Ultimately, negotiating to keep employment static is a losing tactic for workers and employers. The price for decades of such contracts will be paid sooner or later.

 

The way economic growth happens--the way we become a richer, more productive society--is to produce more stuff with the same amount of people. The union goal is to keep the number of people at least even, and if possible increase it, regardless of the level of production.

[jpd80]

RJ, I think you've accepted that things that don't work need to fail. Our point of disagreement is what would be the impact of a bankruptcy filing by GM right now and should taxpayer charity dollars be thrown at their cash burning corpse to put that off 4-9 months at a time.

 

Under normal circumstances that logic is true but the US is on the brink of deep recession and the

politicians are so scared of a depression, they're prepared to do nearly anything to avoid it.

You start letting companies fail at the moment and look out!!!

 

The point is now moot, both sides of parliament agree GM must be given immediate relief.

 

 

I believe Ford will grab GM's drop in market share, something is going to happen in 2009.

Edited November 15, 2008 by jpd80

[RichardJensen]

the rank free market capitalism that built this industry has always been important to it's success

http://en.wikipedia.org/wiki/Ludlow_Massacre

http://en.wikipedia.org/wiki/Truck_system

http://en.wikipedia.org/wiki/Triangle_Shir...st_Factory_fire

http://en.wikipedia.org/wiki/Lochner_era

Rank free market capitalism is never good.

 

And it was not particularly good for Ford either:

http://en.wikipedia.org/wiki/Harry_Bennett

 

RJ, I think you've accepted that things that don't work need to fail.

That is a central tenet in the second blog entry. Management must be replaced.

 

The idea that an institution that employs over 150,000 people in the US should be allowed to fail due to the poor (and, conceivably reversible) decisions of a handful of inexpert personnel seems a bit draconian.

 

I mean, consider Ford, without the $24B in financing they lined up to secure them during the time it takes them to undo past mistakes, would be in as much trouble.

 

The two differences between Ford and GM are thus:

 

Bill Ford admitted he was in over his head in 2006 and hired Mulally.

Rick Wagoner has still not admitted that he's in over his head

 

Ford Motor lined up 'bridge financing' ahead of time

GM did not.

 

Are those two errors a sufficient basis to allow a $180B/year business fail?

 

Not IMO. They're a sufficient basis to replace failed components (e.g. management), but not to, as it were, toss out the baby with the bath water.

[Pioneer]

You can't seriously blame the Koreans and Jap's for GM's cash flow/business problems today.

 

 

No, but I can blame them for being protectionist. Something our Government should try.

[LSFan00]

Throwing Harry Bennett at this isn't discussion, it's demagoguery. Pre-WWII (and great depression) worker challenges happened in a different legal, and social period of "rights" in this country, and are not pertinent to the post WWII growth, and labor agreements at issue today.

 

GM has a history of 30 years of poor business decisions, back at least to the X-body models, but again that's really trivia. It is hemorrhaging cash not simply due to poor products (which would truly be a reason not to bail them out) but because they've elected to continue working with and negotiating with the UAW, including in the latest agreement (in 2007, linked above) putting off major closures past 2010. I would contend that Mulally has made more than 1 big decision since taking the helm, and that his selection, and the steps since are more than "2 decisions."

 

Even if not, the first lesson I emphasize with my 5 and 8 year olds today is that you live with the consequences of your decisions. Yep; if GM made two big mistakes, you let them live with the decisions.

 

The intent of the UAW is not to produce cars efficiently but to "save jobs."

 

My reference to rank capitalism was clearly to post-wwII, not to Harry Bennett. The market dominance of the big 3 was really cemented post WWII; it was artificial due to the temporary weakness (decimation) of the rest of the global auto industry. The labor agreements in this period over-reached on health benefits and other rights/expenses.

 

Yes, you allow a $180B business to fail; you can't stop it. You can prolong it, but you can't stop it, anyway. The market determines success/failure. The fact is they can't sell anything but large vehicles and make a buck. Harry Bennett nor Jimmy Hoffa are going to rise up and tell old tails of workers to win customers.

 

I simply hope that a GM bankruptcy is quick, and that it results in a new power with Ford to renegotiate their agreements.

[jpd80]

I can't see any way out for GM but there is for others suffering because of them.

Edited November 16, 2008 by jpd80

[RichardJensen]

Throwing Harry Bennett at this isn't discussion, it's demagoguery.

Oh?

 

Was it you or me that said this:

 

the rank free market capitalism that built this industry has always been important to it's success

 

It is hemorrhaging cash not simply due to poor products (which would truly be a reason not to bail them out) but because they've elected to continue working with and negotiating with the UAW

 

Is Ford still working with the UAW?

 

GM has a history of 30 years of poor business decisions, back at least to the X-body models

 

Does Ford not also have a 30 year history of poor business decisions?

 

Even if not, the first lesson I emphasize with my 5 and 8 year olds today is that you live with the consequences of your decisions. Yep; if GM made two big mistakes, you let them live with the decisions.

 

So it is your contention that GM's assembly line workers should suffer the consequences of the decisions of GM management? How is that 'fair'? How is that an honest and equitable way of handling this situation?

 

It is your contention that the 3rd grader at a grade school in Flint Michigan whose parents own a grocery store should be deprived of a decent education and a home because Rick Wagoner couldn't admit he was in over his head?

 

Please see my discussion of the 'point theory' of economics, as it is apparently your belief that GM is a single pointlike entity that should deal with the consequences of the decisions that it (this single pointlike entity) has undertaken.

 

The application of the theory of personal responsibility to a major multinational corporation is a bit stretched. Would the theory of personal responsibility not demand accountability from the INDIVIDUALS that made the decisions, not the ENTITY that employed them?

 

My reference to rank capitalism was clearly to post-wwII

Hence your use of the words "always" and "built", right?

 

Yes, you allow a $180B business to fail; you can't stop it. You can prolong it, but you can't stop it, anyway

 

Really? How do you know that it can't be stopped? What is the difference between GM today and Ford in 2005?

 

I simply hope that a GM bankruptcy is quick, and that it results in a new power with Ford to renegotiate their agreements.

 

And there you go. Do you think that this hope colors your ability to reason on this subject?

Edited November 16, 2008 by RichardJensen

[Pioneer]

The intent of the UAW is not to produce cars efficiently but to "save jobs."

 

Really?

 

Harbour Report

 

And another thing, most transplant factories are more efficient, not because of the workers, but how the vehicle assembly line is designed. Transplant factories are relatively new with all the new technology. Most domestic plants are older and need to be gutted to make them more efficient, like what Ford is in the middle of doing by adding flexible manufacturing/body shops to plants that are receiving new products.

[jpd80]

No, but I can blame them for being protectionist. Something our Government should try.

I think that it's obscene that Korea and Japan are so protectionist of their own market

but demand unbridled access to every global market.

 

Those people who are nett exporters to the USA should pay import tarriffs.

Unless a proper to-fro free trade is in place, no concessions should apply.

[Pioneer]

I think that it's obscene that Korea and Japan are so protectionist of their own market

but demand unbridled access to every global market.

 

Those people who are nett exporters to the USA should pay import tarriffs.

Unless a proper to-fro free trade is in place, no concessions should apply.

 

I agree wholeheartedly.