Dire Times for the Auto Industry

[BlackICE]

What are the current terms for laying off UAW workers and how would it change in 2010? This has bearing on the cost they may incur if the recession is longer or deeper than expected, and or they lose market share. e.g. if GM has to cut capacity by 35% how much will that cost in buyouts, severance packages, etc? What costs are incurred by shutting down some of dealers? That is not impacted by the UAW contracts, yet the over abundance of dealers reduce profit potential of both the manufacturers and dealers, making them less competitive.

 

[dbk]

Not sure. It will undoubtedly cost billions to do both.

Be aware, Nardelli is ready to go nuclear, as is Wagoner. The U.S taxpayer is going to pick up $20 billion in pension costs should it happen, and the bill for several hundred thousand suddenly uninsured workers. My guess is that if they say no, Chrysler files, GM makes the call and somebody blinks to step in before they have to explain why a couple hundred thousand middle class people just got bailed on over $25 bil when the same people marked $700 bil for bad assets.

We'll see what happens.

 

[BlackICE]

The point I was making is the 25 bill. is most likely just the 1st installment. Sales will continue to fall, leading to even bigger over capacity, but further plant shutdowns don't save much if any money. Then what? Eventually the tax payers are on the hook anyway. I am a fiscally conservative and viewed the big 3 as bankrupt years ago when they under funded their retirement plans and healthcare liabilities.

If you put the 1st 25 bill in that will last until the 1st or 2nd quarter of 2009 then what. Either continued subsidies (that what I call loans that are not likely to be repaid), or tariffs on foreign makes (starts a trade war, Hoover did that), or restructuring of the labour, dealer contracts that can only be done in BK court. If BK is inevitable then do is sooner rather than later. However I don't think that will happen. I can't see the Democrats saying we will fund you if you fire 10K to 100k of workers and decimate the UAW. So they will get the 25 billion and punt for to make a harder decision later in 2009.

 

[Joehand1]

If Chrysler files, downsizes and renegotiates their UAW legacy contracts, doesn't that open the door for Ford and GM to match the Chrysler UAW terms without themselves filing chapter 11?

 

[BlackICE]

If Chrysler files, downsizes and renegotiates their UAW legacy contracts, doesn't that open the door for Ford and GM to match the Chrysler UAW terms without themselves filing chapter 11?

That is possible, you will have to ask Gettelfinger. But that doesn't address the dealer problems that have to do with state law.

 

[Cobrar]

If Chrysler files, downsizes and renegotiates their UAW legacy contracts, doesn't that open the door for Ford and GM to match the Chrysler UAW terms without themselves filing chapter 11?

A thought to ponder. How does a US bankruptcy filing effect a global manufacturer? Exactly where do you file and how? What about profitable divisions? There is a presumption that US law will take precedence in global restructuring.

 

[S592R]

My statements previously in this thread where direct and concise. IF a business needs a bridge loan then the proper place for this funding is via the banking community and not a national government. When we (globally) progressed to international businesses (such as Ford) then they lost their pure "national infrastructure" standing. Now if the federal government wishes to "encourage" the banking industry to provide funds to such companies on a global level using TARP as source funds then that is not an issue and fully a better investment for the American economy and American business with the caveat that fundings stay within the national boundries on all levels.

If you allow the banking industry to use "bail out" funds to purchase weaker banks, although a bit of that needs to occur, then just as they did with MA Bell ... divestiture needs to occur to prevent future mismanagement of companies "too big to fail". Encourage competition since we still choose to claim this is a capitalistic society ... which is unfortunately not exactly correct.

As for my comments regarding business models ... that was directly towards legacy costs. Gentlemen, there is a latent cause and effect that starts in government gets transferred into business practice which asks for increasing changes that leads to further government action. When you walk down a path towards an ambush ... knowing you are headed into an ambush do you continue to move forward towards your demise? No, you change course and out flank the ambusher. This is a simple thought process that everyone here can understand since someone commented about people's inability to understand I am keeping the concept direct and making it very simple. Broken models are broken and need to be changed ... it takes courage to admit that what has been being done is wrong and it takes a strong person to admit their fault in a matter. Hard to admit, harder to admit that change must come from the top down and from all concerned. Funding a unsustainable business model and trying to compete on a increasingly competitive arena (as all are stating it will be) is not capitalistic ... but rather purely socialistic. Do I feel an investment in covering new product costs at Ford a wise investment? Yes. Allowing bridge loans to encourage job retention? Sorry guys, no I do not. Workers have to build product that goes to a market to be sold and if collectively we want to sell 9 million cars in 2009 then frankly there needs to be a market for them. Automobiles have hardly been viewed as a critical mass item and perhaps a portion of this evolution is finding the true critical mass of a product.

I personally believe that the path to the bank of congress needs to be shut and Paulsen or the new administration needs to make the banking system work in order to make all segments of the economy work. If we infuse cash into one industry what stops another from saying what about us? Think about this .... what if the telecom industry came in and said our op costs have increased 400% and we can not sustain operations to the level federally mandated (a few seconds of network downtime a year is a serious offense issue). If we shut the switch ALL commerce in the USA stops! Help we need a new level of funding because our customers are not paying their bills and we have to keep out systems running. Gone are TV, telephone, ATM machines, remore medicine, ALL of ecommerce ... this website .. etc. A society and economy held hostage due to the "too big to fail" arguement in congress is not something that needs to be continued nor allowed.

I agree with DBK's comments about banks who bought assets they did not understand. The solution to this is FORCED LOSS not bail out. Hard money is hard money and speculative gains are just that NOT realized. Anyone buying a stock that trades 50-75 times earnings is just asking to have their monies devalued if they play long. Do the math on that in any formula that you wish to ... it is not sustainable.

Investing with a fast food mindset leads you to one place....

to get in front of one comment and thought process ANY infrastructure in ANY country is at any time capable of being NATIONALIZED. Historically it has happened in just about every country in the world who owned the plant/farm/whatever is of no matter at that time and rarely if ever reverts back to the original "owner".

 

[dbk]

I am a fiscally conservative and viewed the big 3 as bankrupt years ago when they under funded their retirement plans and healthcare liabilities.

...However I don't think that will happen. I can't see the Democrats saying we will fund you if you fire 10K to 100k of workers and decimate the UAW. So they will get the 25 billion and punt for to make a harder decision later in 2009.

Yeah, but Clinton, come on. Let's call it what it is. We're $10 trillion in debt, can't stop spending, gave away $150 billion for a "stimulus package", gave one guy carte blanche to disburse $700 billion as he saw fit ($446 billion of which has so far been marked for TWO companies!), want to give away another $150 billion for a second "stimulus package", owe almost $400 billion to communists, and now we're quibbling over $25 billion that they may potentially draw upon because economic conditions have deteriorated faster than any period save for the Great Depression. Any pretense of fiscal conservatism in this country is tantamount to the town whore screwing every man in the city for a nickel, then slapping a guy for asking for a kiss on the third date. It is what it is.

I think they get turned down, Chrysler files because Nardelli doesn't give a shit and Cerberus is already publicly laying the groundwork to sue Daimler for any loss on the investment, and then GM makes the call to Paulson and the White House to begin the game of chicken. Either they step in to supply the ability to support the crumbling supply base or GM also files. Who wants to explain why we canned 100,000 who went home with nothing today? Ford is just going to be collateral damage. If everything stayed the same as today, they would make it through 09.

The question is, when you take out a couple hundred thousand jobs, how much worse does it get?

 

[dbk]

If Chrysler files, downsizes and renegotiates their UAW legacy contracts, doesn't that open the door for Ford and GM to match the Chrysler UAW terms without themselves filing chapter 11?

The point you raise is something I think is fundamentally behind the game of chicken here. I think there are certainly people looking to force a Chrysler failure as a union-buster. If you're Ron Gettelfinger, are you better losing 100,000 members, or all 550,000? I think they know the answer.

 

[BlackICE]

The banking bailout isn't going to put Humpty Dumpy back together again and neither would a big 3 bailout. IMHO the best case would be for the big 3 to go for a restructing via a streamlined bankruptcy where by the Feds would invest whatever is needed 25 to 100 billion (who knows) in exchange for getting a competitive UAW contract NOW and being able to terminate lower tier dealers with minimal compensation. Allow streamlining of production capacity without obscene costs that have occurred in the past. Top mgt. may have to goes as well as a good faith gesture to the public and UAW, although Mulally and Nardelli would just collateral damage, not being on the job long enough to be a fault. Along with that the Feds should get out of the business of designing cars, via regulation such as CAFE fuel standard, hybrids, electric vs. gas vs. hydrogen etc. If you want to get off of oil, tax it, don't tell companies what to build. Mandate common gasoline and diesel fuel, safety and emission standards across the US. If this could completed in a week or 2 the impact to long term sales would be minimized.

 

[dbk]

Along with that the Feds should get out of the business of designing cars, via regulation such as CAFE fuel standard, hybrids, electric vs. gas vs. hydrogen etc. If you want to get off of oil, tax it, don't tell companies what to build. Mandate common gasoline and diesel fuel, safety and emission standards across the US. If this could completed in a week or 2 the impact to long term sales would be minimized.

I've been saying this for a long time. Funny the same people saying "let the market work" do everything in their power to prevent that from happening. But you don't get votes passing punitive fuel taxes.

 

[BlackICE]

Funny the same people saying "let the market work" do everything in their power to prevent that from happening. But you don't get votes passing punitive fuel taxes.

Politician speak sh*t out of both ends of there A*Ses!

 

[B O N Y]

Heard Levin today and he was well spoken about how every country is supporting the auto industry.

Here is the latest news from F:-
http://www.ford.com/about-ford/news...tail/pr-ford-motor-company-announces-it-29498

 

[dbk]

Toyota:
Overall sales down 33.9%
Passenger car sales dropped 32.3%
Light truck sales fell 36.1%
Sales of the Prius, Toyota's one-time hot-selling hybrid, dropped 48.3%

Honda:
Overall down 31.6%
Honda brand sales slid 30.6%
Acura division sales tumbled 38.9%

Ford/Lincoln/Mercury:
Overall down 31.5%
Volvo down 46.5%
F-series pickup down 18.9%

Prius down nearly 50%, F-series down nearly 20%. Irony.

 

[Cobrar]

Toyota:
Overall sales down 33.9%
Passenger car sales dropped 32.3%
Light truck sales fell 36.1%
Sales of the Prius, Toyota's one-time hot-selling hybrid, dropped 48.3%

Honda:
Overall down 31.6%
Honda brand sales slid 30.6%
Acura division sales tumbled 38.9%

Ford/Lincoln/Mercury:
Overall down 31.5%
Volvo down 46.5%
F-series pickup down 18.9%

Prius down nearly 50%, F-series down nearly 20%. Irony.

Interesting - Volvo sales last month in Detroit region exceeded objective.

 

[dbk]

Interesting - Volvo sales last month in Detroit region exceeded objective.

I dig Volvo cars but it's awfully hard to build cars in Sweden or Belgium and make them cost-competitive.

 

[RALPHIE]

Volvo is very well known for their safety testing and engineering - I'm sure that's where Ford's recent high rating was the result. Too bad if they have to sell it off - not a good time to have to sell a car company anyway.

 

[dbk]

Volvo is very well known for their safety testing and engineering - I'm sure that's where Ford's recent high rating was the result. Too bad if they have to sell it off - not a good time to have to sell a car company anyway.

Top IHS safety picks from Ford Motor -

Ford

Taurus, Fusion with optional electronic stability control, Edge, Flex, Taurus X, Escape, F-150


Mercury

Sable, Milan, Mariner


Lincoln

MKS, Lincoln MKX


Mazda

Tribute


Volvo

C70. S80, XC90

The C70 is on the P1 platform (not shared with any U.S Ford vehicles). The XC90/S80 was on the P2/D3, which is shared with Taurus/Sable/MKS.

Edge/MKX is CD3 and shares nothing with Volvo. Flex is D4 which is a revised version of D3. Escape/Milan/Tribue is CD2 and shares nothing with Volvo. F-150 is P415, another variant, built up the street at Dearborn Truck or in Claycomo, Missouri.

 

[dbk]

Revised with GM:

GM:
Overall sales down 41%
Passenger cars down 39%
Light trucks down 44%

Toyota:
Overall sales down 33.9%
Passenger car sales dropped 32.3%
Light truck sales fell 36.1%
Sales of the Prius, Toyota's one-time hot-selling hybrid, dropped 48.3%

Honda:
Overall down 31.6%
Honda brand sales slid 30.6%
Acura division sales tumbled 38.9%

Ford/Lincoln/Mercury:
Overall down 31.5%
Volvo down 46.5%
F-series pickup down 18.9%

Prius down nearly 50%, F-series down nearly 20%. Irony.

 

[B O N Y]

Ford sells Volvo, I am done.... hello MKS with the RK package as shown at SEMA..