Dire Times for the Auto Industry

[Mullet]

I think unions cripple companies. Companies are in business to make a profit. If they have to pay XX dollars an hour then take it or leave it (companies should be able to dictate what they are willing to pay instead of being forced). Unions make companies pay more and that is a huge reason the car companies are in trouble (yes, slowing sales are another huge factor).

On a side note I can say all the Mercedes I have owned have been near perfect (nothing is perfect) and I will continue to buy Mercedes because they are much better built and engineered compared to American cars. Quality (especially build quality) costs extra.

 

[B O N Y]

I've often wondered why no one seems to bash the European auto unions. The Germans work a lot fewer hours a week, have more vacation time , and make a lot more money than their American counterpart. No one says they are over payed. Are the cars they build that much better than ours? Maybe once, but not that much anymore. M-B has some of the highest warranttee costs in the business. I worked as a mechanic on Volkswagon Porshe and Audi's for a few years. I could tell you stories about the so called "German" quality.

Well let me comment. I remember in the 70's working with German wineries and breweries and the quality of the work was like art. Nothing left in the mail, or by telex until two people reviewed it and they both signed their names to it. Well for the last 15 years the quality of their workmanship has been in a downward spiral. Today the progressive countries are Spain and Portugal with some of the former Soviet satelites not far behind.

Used to drive Mercedes Benz's, between my wife and me we had one in the shop every other week. Got to know the names of the techs at the dealership.

Can also tell you as beer wholesaler, our people make top dollar, are assured of a life time job and work for their kids during every school break and holiday. Their benefit package rivals anyone's. But they perform every single day and are closely monitored... just like we partners monitor each other. You get what you inspect and not expect.

 

[B O N Y]

On a side note I can say all the Mercedes I have owned have been near perfect (nothing is perfect) and I will continue to buy Mercedes because they are much better built and engineered compared to American cars. Quality (especially build quality) costs extra.

Sorry, can't agree with you about MBZ. I have my Volvo V70r in for major service and am driving a FORD FUSION and I will proudly say that is as good a daily driver as I have ever driven. My Volvo's are the best street daily drivers I have had the pleasure to proudly own. As long as FORD owns them, I will drive them. Ford sells Volvo I will go to Lincoln MKS.

Interesting sidebar comment, not one CTS V at SEMA last week...blew me away.

Glad we got you banner up, did you thank DBK?:wink

 

[Mullet]

banner thank yous sent.

 

[RV King]

Bottom line is that Unions are destroying this country! Wages and benefits should be determined by the market, period. If unions want to establish a company not for the purpose of generating a profit, but for the sole purpose of providing high wages & benefits for low skilled workers let them do it!

Chip you are right on!

Amazing how Wal Mart just reported a 10% increase in profits in this spiraling economy. Why do you think that is GT Tech?

 

[S592R]

Gentlemen, I have sat on the side lines with this one and have been off forum for a few days working on business issues. I do agree with several of the comments on this thread. Chips comments are valid and telling. GM/Ford are only a buy IF the federal government bails them out. I do not favor using TARP funds directly but rather indirect via the banks. Why? to stop the spiral of businesses "too big to fail" running to the government for money using the media as weapon further destabilizing the economy and eroding "consumer confidence". Since our new president has been elected the market has dropped almost 1700 pts. Why? FEAR. Plain and simple. If the government took a hard line and said "no funds from us but we will help you with the banks" and then provided a secondary guarantee then things would begin to flow and people would stop feeling that the world is about to end. It is the fear in the market place that causes JOE PUBLIC to react irrationally. Factually the markets are too big for the government to stimulate but rather like a switchman on a railroad they can cause direction changes by changing the track the economy runs down.

Now on workers and legacy costs. Personally, I have always believed treat a tenured employee like a partner but make it hard for a new hire to become tenured. In other words make sure they work and are company oriented instead of constantly looking to "career enhance". In this era intellectual property is the most valuable asset a company has so controlling the flow of information and keeping it inside the company is crutial... oh hell its critical. On the subject of company managers ... promote from within to keep the intergrity of the company in company hands. Toss out six sigma as its not used in the manner that Jack meant it to be when it came about at GE and every company does not have the issues that GE had then. Any tool is just that a tool and as the job changes so does the tool required for it. The issue with American corporate culture is that they get fixated and then just meanders like a wounded beast but as long as the "profit margins" LOOK good then no one makes any waves. Its the same type of mentality that says we have to spend our budget this year or we won't get it next year senior management won't think we have any value. Why? because senior management is trained in school to cut cost to justify their bonuses that are usually way to high for the true good of the collective company. (sorry guys just being honest here). IMHO bonuses should only be paid based on rational performance and be scaled to the basic fundamentals of a traditional business model and then in a rational formula to each employee not scaled so heavily to the management equation. Good business costs money to run if run right then you make profit. If you lose money then you lose your job. That is capitalism. What is occurring now is anything but capitalism.

My mother teaches english for a local literacy group as a volunteer and has done so for more than a decade. One of her students (former soviet) mentioned the other day that "in the decade that I have been here the US has become more like the soviet union every year." Sad comment from someone who knows both.

 

[S592R]

Amazing how Wal Mart just reported a 10% increase in profits in this spiraling economy. Why do you think that is GT Tech?

By using the old SEARS model and not paying their suppliers for up to 120 days which is just about their standard. Its amazing what happens when your big enough to make people play ball your way. Don't credit employee costs on that one ... thats pure float.

 

[Mullet]

By using the old SEARS model and not paying their suppliers for up to 120 days which is just about their standard. Its amazing what happens when your big enough to make people play ball your way. Don't credit employee costs on that one ... thats pure float.

the vendors do not have to sell to Wal Mart and they know going into it they will not be paid for 120 days (I as a business owner decided to not take receivables in my business and can say I have zero today, it's the way I choose to do it). They can always sell their products elsewhere. Now if Wal Mart changed from 30-60 day pay to 120 then there's an issue.

 

[B O N Y]

Dragging payables is an absurd business plan.

Walmart-Sam's and Costco are among my top five clients and they always pay as agreed. All major breweries demand 10 day from FOB payment via preapproved bank deduction. My largest client prepays for additional discounts.

Bottom line is to be paid exactly as agreed upon.
When that does not occur the system of cash flow management crumbles.

 

[B O N Y]

The American dream used to be father who was the bread winner, a stay at home mom and a fair wage to allow that to happen.

If mom and dad both work 40 hours a week and pop malkes $15 per hour and mom makes $12 what type of life can they expect to have?? Can they buy a home, a car, go to a movie, ball game?

Our world is tilted.

 

[Kayvan]

My plan:

-Cut the # of models
-Cut the # of dealers
-Salebale Product:

>high margin (F150),
>volume (escort/fiesta)
>premium or halo
>no finance-sub subsidization

Japanese/Euro have essentially done this, with expensive labor/welfare plans too

 

[B O N Y]

Your off to a good start, no question those are must do bullet points.

 

[dbk]

Ford has already dramatically cut it's operations. GM is still chasing market share, which is why their predicament is much worse. If you can't make a dollar controlling a quarter of the market, you won't be able to at 30%.

The key for Ford is just making it through 09, which they are well positioned to do. People said they were crazy securing the funding they did by mortgaging all their assets a few years ago. They look pretty smart now. The divestiture of non-core assets was done at the right time. Jag and Land Rover, Aston Martin - All someone else's problems.

Their model lineup will be fantastic inside 18 months. They have cash. They have aggressively right-sized the business and are not done yet (unfortunately). They have the best quality of any domestic manufacturer and are equivalent to the best Japanese. They got the most favorable terms with the UAW in the last deal.

-2010 Mustang
-2010 Global Fiesta
-2010 Taurus
-2010 Hybrid Fusion/Milan (38mpg/34mpg)
-2011 Global Focus
-2010 F-150
-Global Transit

Assuming nothing else changes, their cash burn rate will subside each quarter in the next fiscal year. If they secure loans from the US government they could be looking at 40-45 billion to make it through to 2010. Barring a complete economic meltdown in the U.S, they will be positioned as the premier U.S automaker, largely because they are within 2 years of legitimately operating the business as a global entity, not a series of little fiefdoms.

Either way, bankruptcy at GM or Ford is not realistic, because the UAW would not let it happen. If one files, the other does to avoid massive competitive disadvantage, and the first thing to go would be the union agreements. The UAW will not sacrifice the entirety of their membership, especially when it is so grim for them already.

 

[dbk]

December CR

Ford Motor Co. builds the most reliable American-brand cars and trucks. So said Consumer Reports, in its respected Annual Car Reliability Survey, which was released Thursday during an Automotive Press Association luncheon in downtown Detroit. "Ford is doing exceptionally well," David Champion, the senior director of Consumer Reports' Auto Test Division, said during a presentation at the Detroit Athletic Club.

Consumer Reports chose a beauty shot of the Ford Fusion midsize sedan for its cover. And inside, it lauds the automaker for continuing "to pull away from the rest of Detroit."

"Ford's reliability is now on par with good Japanese automakers," the December magazine says.

On Thursday, Ford, which has lost almost $24 billion over the last 2 1/2 years, was celebrating the latest recognition from an independent organization, calling it evidence of its disciplined new approach to engineering successful cars and trucks for the future.

"It's truly wonderful," Bennie Fowler, Ford's group vice president for global quality, told the Free Press on Thursday. "We want to be the best in the world, bar none."
While Consumer Reports said Detroit's other automakers presented "a mixed bag" -- with General Motors Corp. brands posting inconsistent results and Chrysler delivering a strikingly poor showing across-the-board.

 

[BlackICE]

Either way, bankruptcy at GM or Ford is not realistic, because the UAW would not let it happen. If one files, the other does to avoid massive competitive disadvantage, and the first thing to go would be the union agreements. The UAW will not sacrifice the entirety of their membership, especially when it is so grim for them already.

Bankruptcy isn't likely to happen, because the current powers and the power to be are beholding to the UAW and won't let it happen. DBK are you saying if GM doesn't get Fed help they are likely to file chap. 11 during the 1st quarter of 2009 and then Ford would have to follow? I just wonder what level of shareholder dilution comes with the bailout package?

 

[dbk]

Bankruptcy isn't likely to happen, because the current powers and the power to be are beholding to the UAW and won't let it happen. DBK are you saying if GM doesn't get Fed help they are likely to file chap. 11 during the 1st quarter of 2009 and then Ford would have to follow? I just wonder what level of shareholder dilution comes with the bailout package?

Basically, but the point is it won't happen in any circumstances. GM is FUBAR. They would most definitely end up in a situation where bankruptcy is the only legitimate option in the next 2 quarters without federal help. That said, even if they didn't get federal help (which they no doubt will), the UAW could not afford to let them declare, because Ford would then follow suit so as not to be at a massive competitive disadvantage. Even if it looks like it might happen, I'd expect Gettelfinger knocking on Wagoner's door night and day trying to figure out how to make it not happen.

 

[AJB]

A good start from Mr Gettlefinger would be to say:

"hey Mr Wagoner and Mr Mulally, we the UAW will start immeadiately to pay 30% of our Health Care like the Salaried people do (vs the 5% they pay now) and we will reduce our pay scale immeadiately to refect the average of all Manufacturing wages paid in the United States (not all of NAmerica, just the US), we will do whatever jobs make these companies better and eliminate the various classifications that get in the way ....and I and my UAW members will stand 'shoulder to shoulder' with all the workers in these companies to get it done...and by the way 'immeadiately means next Monday, first shift." Now lets roll"....
signed Ron
AJB

 

[BlackICE]

AJB, dream on. I would guess that the both Ford and GM get large enough "loans" to fully fund the UAW's VEBA plans with some left over for the companies to actually use in exchange for the UAW accelerating the 2010 terms to Jan 2009. This is the best tax payers can hope for given the powers in charge. If the companies have to claim BK, later the UAW is whole with the VEBA plan. Still the US autos will have the overhead of higher salaries than their competitors.

 

[GT Tech]

I have to agree with AJB.
I know that people hired in to the automakers for the last few years get about half of what I did, with less benefits. I'm no financial guru, but I would think thats close to the norm for a manufacturing job in the world. When I hired into Ford in 1977, I started out at $7.09 an hour, with good benefits. That was a great wage for the times. Back then, if you had a pulse, you could get a job at the big three. Now, unless you have a GED or better, don't even bother to apply.

I agree that wages and benefits got out of hand. But as I said before, who is to blame? the feeder or the "feedee". It's a wash. Nothing will ever be accomplished if We keep looking back and saying "It's all your fault". Time to move on.

As to Unions being good or bad, that discussion will go on forever, with both sides having valid points. I think the unions MUST be realistic in their demands (and they haven't been in past years). We don't live in the same world now as we did 30 years ago. And if the union leadership can't or won't see that, then they are doomed to fail. I hope they are now on the right track. I just hope Obamda will stay the hell out of things. He could really screw things up. The unions HAVE helped raise the standard of living in this country. I challenge anyone here to spend a year living on a $7.00 an hour pay check in todays world. No fun trying to decide between food and rent. As a worker, I'm glad I had a union. I'm sure thats the only reason I am able to live a modest lifestyle now. Am I "rich" financially? Not by a long shot.. I seem to run out of pension long before I run out of month. One thing I am glad of is that I was able to retire at an early age. I still work very hard at my new job, and will until I get the first shovel of dirt thrown on my face. A little know fact is that the average autoworker collects 18 pension checks before he dies. I've gotten 14, so I'm worried.

I have so many wonderful friends here on the forum, who have done financially well in life. Do I begrudge them for having done much better than I?
Quite the opposite. I hold them in the highest regard. Hard work and perseverance pays off. Thats what this country is all about. But what about the guy who works just as hard, and perseveres just as much, but doesn't catch a lucky break, or have the skills to do well financially? I hold him in equally high regard. As for the slacker who just wants to live off someone else's good fortune, (and there are more than a few in this world) I say *@#% off.

OK, I'll shut up. Off the soap box again.:thumbsup

Still wondering about the B-J dinners. Chip?

 

[Indy GT]

This type of exchange is what makes this Forum such a great place!

Both sides articulate plusses and minuses of each camp in a friendly and informative manner. Not that I necessarily agree with all points made, I certainly appreciate the time and writing effort GT Tech has made to explain the inside view from a Union standpoint.

Thanks very much for the perspective. We are glad you are a part of our family!