GM Drops WJ & KJ?

[sdwarf36]

but in the end, i can't say that i'm surprised based on the products that the big 3 have put out lately.

I seems strange to me--the car companies have been doing biz the same way for years--their costs have been (close to) the same for years--same for the product line--but now all of a sudden EVERYONE has ways they should have done thing differently.
There is only one thing that caused all this-- PEOPLE STOPPED BUYING CARS + TRUCKS!!!! There were plenty of choices of smaller vehicles to buy from the big three-maybe imports have better stuff or not--but what fun is that when you can buy a F-250 with a V-10?
How many Priuses you see 2 years ago? College professors + the crazy cat lady down the block maybe?
The car companies were making what (dumb us) wanted to buy. Our tastes changed overnite-they cant change that quick.

 

[none]

I know this is robbing from "The Lounge" but it sums up my opinion of the problem with the BIG 3........

http://www.nitromater.com/lounge/19510-today-s-austin-newspaper.html

 

[Professor Dave]

the $70/hr salaries

First of all, people paid by the hour earn a wage not a salary. Second the $70 per hour wage rate is obtained by taking all labor costs, including benefits paid to current workers and the amount paid to to retirees in retirement beneits and health care (these are referred to as legacy costs) and dividing by the number of hours currently worked. Current workers do not earn $70 dollars an hour. I know you heard the $70 hour figure in the news, but just because something is in the news doesn't mean it's true. I have to explain to my students that while financial markets are in the worst shape since the Great Depression, the rest of the economy is not yet there. This recession is likely to be the longest since the Great Depression (it only has to last until April to earn that distinction). But the unemployment rate would have to rise another 4.1 percentage points to match the high of 10.8 percent in December of 1982 and another 2.1 percentage points to only 8.8 percent to max the 4.4 percentage point increase in the 1973-75 recession. Finally total output would have to decline by another 3.4 percentage points to max the 3.75 percent decline in output in the 1957-58 recession.

Now that I've bored you with the facts, we can get back to the likelihood that the Johnson's will probably be leasing powerplants next year to any and all callers.

 

[yoda]

First of all, people paid by the hour earn a wage not a salary. Second the $70 per hour wage rate is obtained by taking all labor costs, including benefits paid to current workers and the amount paid to to retirees in retirement beneits and health care (these are referred to as legacy costs) and dividing by the number of hours currently worked. Current workers do not earn $70 dollars an hour. I know you heard the $70 hour figure in the news, but just because something is in the news doesn't mean it's true. I have to explain to my students that while financial markets are in the worst shape since the Great Depression, the rest of the economy is not yet there. This recession is likely to be the longest since the Great Depression (it only has to last until April to earn that distinction). But the unemployment rate would have to rise another 4.1 percentage points to match the high of 10.8 percent in December of 1982 and another 2.1 percentage points to only 8.8 percent to max the 4.4 percentage point increase in the 1973-75 recession. Finally total output would have to decline by another 3.4 percentage points to max the 3.75 percent decline in output in the 1957-58 recession.

I want to take your class Dave... Just reading that post made me smarter... Wanna send it over to Capitol Hill?

Now that I've bored you with the facts, we can get back to the likelihood that the Johnson's will probably be leasing powerplants next year to any and all callers.

DING, DING, DING!!!!

 

[Vince]

Here's a fact as reported on ABC news recently. The "Big Three" pay an average of $74 per hour in wages AND benefits to their workers. The Japanese companies average $44 per hour in wages AND benefits. The difference comes out to approximately $1,500 per vehicle. Never said what their actual wages are, but I'm sure they're proportional. Oh, and all the Japanese plants are non union.

Here's another kicker. The auto workers get 95% of their pay when they're laid off. Nice.

I found it interesting that the UAW had the balls to stand up on national TV and say that there was no way that they would entertain any type of pay cuts to get things back on track. That type of mentality makes me want to say, "screw em, let them go bankrupt and lose all those jobs." The downside is that a lot of innocent folks on the sidelines will get hurt as well.

If someone told me that the only way to keep my job was to take a cut in pay, well, that's a no brainer to me.

All that aside, maybe these cutbacks will open the door to more affordable Pro Stock racing and get more grass roots guys involved again. Or, worse case, the teams with unlimited resources will totally dominate. Like we need more of that.

 

[Johnny Mopar]

Here's a fact as reported on ABC news recently. The "Big Three" pay an average of $74 per hour in wages AND benefits to their workers. The Japanese companies average $44 per hour in wages AND benefits. The difference comes out to approximately $1,500 per vehicle. Never said what their actual wages are, but I'm sure they're proportional. Oh, and all the Japanese plants are non union.

Here's another kicker. The auto workers get 95% of their pay when they're laid off. Nice.

I found it interesting that the UAW had the balls to stand up on national TV and say that there was no way that they would entertain any type of pay cuts to get things back on track. That type of mentality makes me want to say, "screw em, let them go bankrupt and lose all those jobs." The downside is that a lot of innocent folks on the sidelines will get hurt as well.

If someone told me that the only way to keep my job was to take a cut in pay, well, that's a no brainer to me.

All that aside, maybe these cutbacks will open the door to more affordable Pro Stock racing and get more grass roots guys involved again. Or, worse case, the teams with unlimited resources will totally dominate. Like we need more of that.

The difference between GM's initial expense per vehicle and that of the Asian manufacturers (located in America) costs GM over $1,000,000.000.00 more per year. How in the world are they to overcome that? This isn't about cars or technology, this is about Unions. That's why the Democratic Congress and Senate want so badly to provide assistance to the auto makers...it buys them Union votes during the next election cycle. Actually...that makes all this a political issue...that has very little to do with building vehicles. It's about mandating job security and compensation. That's why the Unions are standing up and refusing to take pay cuts to make the business model more workable. In the mean time GM is going in the tank...one of the all time classic American manufacturers. What an incredible shame...

 

["Dr. Dirt"]

They have abused the business model for the big 3 to the point that it's beyond obsolete. Expecting a bandaid of any size, to fix things is akin to putting your finger into a breach in Hoover dam knowing it's going to blow at any minute.

When you don't make course corrections along the way while the signs clearly point to the needed changes, you deserve to arrive at a destination that resembles everything you hoped to avoid.

I'm sorry to say this applies to both the automaker's business model as well as the UAW's beloved stranglehold.

 

[nick name]

Wow, there is so much misinformation in this thread I'm ready to nominate it for Best of the Internet or something.

As Dave pointed out, no one in an auto plant makes $70 an hour.

The big difference between US costs and Asian costs has a lot more to do with culture than unions. Know why the Asians don't have the retirement costs we do? First, the industry is only a third of the age and they don't have as many retirees. Second, there basically IS no retirement over there. Each family is expected to take care of its own.

We all know what the American Dream is (and has been). Over there, it's being able to afford a 500 square foot apartment so 6-10 people and three generations have somewhere to live. If that's the system people are pointing to as superior, we can simply eliminate Social Security and Medicare; Gramps and Granny move in with you and you pay the bills including the doctor visits and prescription drugs.

Even at that, the Japanese are pretty much getting their butts kicked by the Koreans and Chinese. Those two countries are doing to Japan what Japan did to us - undercutting costs by a major amount due to a standard of living that's an order of magnitude less.

The Japanese goverment has always supported their auto industry from money to laws and tariffs. For example, in the 70s when Borg Warner built most auto trans in Japanese cars, the Japanese government donated millions of dollars to fund the development of the first home-built transmission.

Everyone screamed about windfall profits for oil companies, but I haven't heard a peep regarding the imported cars. If they have a $1500 per unit advantage, why are their cars more expensive than our domestics? And before you reply with outrage that US cars are more expensive, just go price a Honda or Nissan vs a US car and let me know what you find out.

Next, the much-hated sub pay (getting a large portion of your check if you're laid off) is a negotiated benefit. Since auto work has always been cyclical with layoffs, etc, the UAW and the automakers devised the plan to try and avoid the ups and downs. It was good for the workers and good for the manufacturers since it kept a trained labor force ready for when the boom times came.

The money to fund this came out of the negotiated package. If it hadn't been used there, it could have gone to pensions, health care, hourly wages, vacation pay or any other benefit that was on the table during a negotiation. I'm sure you could get the same thing where ever you work - just go to your boss and tell him to take X/hour of your wage and put it into a fund that you get paid if you get laid off.

But previous posters are right in the degree that this whole thing has been politicized. The Democrats want to support the unions that have mostly supported them. The Republicans want to nail the unions that mostly have never supported them. What's good for the country doesn't seem to be anything that's being worried about.

As far as I'm concerned, it's all about jobs. Cars aren't selling because hundreds of thousands of people have lost their jobs. Millions of others have been downgraded into our new "service" economy. I'm sorry, but you're not going to buy a new car if you're making $8-10 an hour.

The financial sector got a care package without much discussion, debate, or requirements. A lot of very powerful people stood to lose a lot of their money. But compared to the millions that will lose their jobs if we lose our auto industries, I'd bet the number is just a very small handful.

I guess what I'm saying is that instead of taking care of a thousand millionaires, I'd much rather make sure that 100,000 people get their 50K a year. Considering that 2/3 of the economy is due to retail sales, which group do you think spends more of their money?

I was never jealous of the auto workers nor begrudged them their pay. Anything (including labor) is worth what someone else is willing to pay. That makes things essentially non-linear when you think of people like Oprah or any professional ball player.

OK, I'm done. All of this should have been in the non-racing area but I really felt some of the erroneous statements needed challenging.

 

["Dr. Dirt"]

When so much of the UAWs wages, pensions, benefits, etc. were not negotiated at all but achieved by virtue of a "strike" I'd disagree with any discussion on how they are so good for the auto makers. I also understand the union mentality will strongly disagree.

 

[ramblerjay]

i still think its funny how the uaw thinks it is "entitled" to free healthcare for life and a pension.

in the private sector, it's called a health savings account and 401k. you pay for it out of your own pocket and live within the means that you have left. not a handout that is destined to run a company into bankruptcy.

as for quality, the mags can say what they want about initial quality. you get what you pay for. gm cars are worth squat after you own them for a year. hondas and toyotas will give you a good amount after you trade them in. i've owned GM cars and still own a truck. the cars go through alternators, drivetrain parts, ignition problems etc. year after year. honda- change the oil and thats it. my chevy truck- new brakes and rotors needed after 12k miles. simply pathetic.

the consumers have chosen quality (you don't see honda/toyota) begging for the government's help, do you? if the big 3 can't provide quality and value, then let them evaporate.

 

[Leebone]

Can Kurt survive with just AC Delco? I wonder if the Victor Cagnazzi and Ken Black teams will be affected by GM cutbacks? I realize Jeggie is self sponsored and Black has Summit dollars, but still. Will Charter still be on for Connolly? What about the rest of the GM cars, Krisher, Yates, Stanfield etc. etc.? Will they survive the cutbacks?

 

[The Fall Guy]

They probably look at it from the yearly profits and if they end up in a lose then they will have to cut spending to gain profit .

Someone sent me an article a while back about the differences between american car manufacturers and japanese car manufacturers . Don't take this the wrong way or anything because I love american cars but they compared the whole thing to a rowing race and they used toyota and ford as an example . So that I don't have to explain it I will copy and past the article .

A Japanese company ( Toyota ) and an American company (Ford Motors) decided to have a canoe race on the Missouri River

Both teams practiced long and hard to reach their peak performance before the race.

QUOTE:"On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.

Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to 'equal the competition' and some of the resultant savings were channeled into morale boosting programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year's racing team was out-sourced to India .

Sadly, the End.

Here's something else to think about: Ford has spent the last thirty years moving all its factories out of the US , claiming they can't make money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants inside the US The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.
Ford folks are still scratching their heads, and collecting bonuses..." QUOTE

I know we are talking about general motors but I just thought that I should post that .

If this ain't the truth I'll eat my shirt. Saw crap like this at Raybestos and now it looks like it is going to close .

 

[Pink]

Can Kurt survive with just AC Delco? I wonder if the Victor Cagnazzi and Ken Black teams will be affected by GM cutbacks? I realize Jeggie is self sponsored and Black has Summit dollars, but still. Will Charter still be on for Connolly? What about the rest of the GM cars, Krisher, Yates, Stanfield etc. etc.? Will they survive the cutbacks?

A.C. Delco -IS- General Motors. I think that they are their aftermarket brand like Motorcraft and Mopar for Ford and Chrysler respectively.
And FYI GM announced today that AC Delco is going to be sold off.

The shoe that I am waiting to be dropped: The Big 3 ask the federal government to assume all responsibility for their pension obligations under the PBGC.
The real solution: Chapter 11, scrap the UAW contracts, slash the workforce even more, close most of the dealerships, and learn how to build and sell cars for a profit again.

It's called creative destruction by free markets. It sucks. The only thing that sucks worse is any other way of running an economy.

 

[Bill]

Dan's comments are pretty close to how it actually works. I'm working in China right now in the Shanghai area and the average hourly worker makes about 2,500 RMB per month or $370/month. Ask them if they'd like to have a union that actually did something for them.

The bottom line is the Big 3 are in a fight for their lives and the current financial crisis only made matters worse. They should have the chumps in Washington and Wall Street who created this mess line up for a tar and feathering.

 

[Gipraw]

As Dave pointed out, no one in an auto plant makes $70 an hour.

They don't make $70 an hour .. but they cost the company $70 an hour, in benefits, pension, etc. It is an all in number reflecting total cost to the company. A full time employee, complete with all benefits, will have a total cost to the employer of anywhere from 140 to 180% of the salary or base wage (using very round numbers there)

Take the current worker's wage and benefit cost, tack on the legacy pension and health benefit cost for the retired workforce, and that is where the $70 an hour comes from. Do the same thing for the Japanese competitors, and the cost is $20 - $25 an hour less ..


The Big 3's two biggest problems are workforce cost and public perception. They build very good quality, very fuel efficient cars, but no one knows they do .. The general public thinks they build crappy cars that get 15 miles to the gallon. They dug their hole 20 years ago, and have not been able to dig out of it.

 

[snapper]

They don't make $70 an hour .. but they cost the company $70 an hour, in benefits, pension, etc. It is an all in number reflecting total cost to the company. A full time employee, complete with all benefits, will have a total cost to the employer of anywhere from 140 to 180% of the salary or base wage (using very round numbers there)

Take the current worker's wage and benefit cost, tack on the legacy pension and health benefit cost for the retired workforce, and that is where the $70 an hour comes from. Do the same thing for the Japanese competitors, and the cost is $20 - $25 an hour less ..


The Big 3's two biggest problems are workforce cost and public perception. They build very good quality, very fuel efficient cars, but no one knows they do .. The general public thinks they build crappy cars that get 15 miles to the gallon. They dug their hole 20 years ago, and have not been able to dig out of it.

I could not have said it better, Doug.

 

[JL]

Can Kurt survive with just AC Delco? I wonder if the Victor Cagnazzi and Ken Black teams will be affected by GM cutbacks? I realize Jeggie is self sponsored and Black has Summit dollars, but still. Will Charter still be on for Connolly? What about the rest of the GM cars, Krisher, Yates, Stanfield etc. etc.? Will they survive the cutbacks?

On Bobby's site, the story about Ken Black says they are preparing to lose Pontiac backing... I would say that if WJ and KB are losing factory backing, they are all doomed. I wonder if AJ will keep his?

 

[Paul]

The Big 3's two biggest problems are workforce cost and public perception. They build very good quality, very fuel efficient cars, but no one knows they do

I agree, and would add on that "trendiness" is another large factor in the big 3's loss of sales to the imports, especially in the higher margin luxury cars. Its considered more in style by the aging yuppie set to buy a foreign car.

Of course all these people would have a cow if all of a sudden it became "trendy" to use foreign sources for their job functions. The one guy that really lights my fuse is my son's just retired school superintendant, he got paid way too much and it didn't bother him at all to drive a brand new Jaguar convertible to school everyday and park it right in front in his reserved spot right by the front door, even though the teachers here in California have a really hard time makings ends meet on their salaries.

This guy is supposed to be helping our youth prepare for the work force and he is sending his fat public salary overage out for jobs in another country? And flaunting it?

I wanted to ask him how he would feel if all of sudden it became in style to use oh so sophisticated educators from France to run our schools remotely, but he held too much sway over my kids and I couldn't do it. So I keyed his car one day (just kidding about that part, at least for the record).

Paul T.

 

[Toyse Jr]

On Bobby's site, the story about Ken Black says they are preparing to lose Pontiac backing... I would say that if WJ and KB are losing factory backing, they are all doomed. I wonder if AJ will keep his?

"My Opinion" AJ will keep his sponsorship unless the Car Czar kills it to fund his favorite project in his state.

 

[ramblerjay]

well it looks like president bush is going to intervene here. start the countdown to when they'll come back to dc begging for more of our money. after all, it is simply a bridge loan.

what people arent considering is the PR damage done to GM during this time. who the hell in their right mind would buy a car from GM (or ford and chrysler for that matter) with all the bad news. would you want to drop 30 grand and be unsure if the company could support your warranty? i sure wouldn't. hopefully their 4th quarter sales numbers will be enough to make them file bankruptcy, bust the union contract, get rid of free lifetime healthcare and wages for their past workers (who currently generate zero revenue for the company), and force them to re-emerge with a lean mean car/truck-making machine comparable to honda/toyota.