I haven’t read a more succinct, clear-cut explanation of why the Big Three have no chance to win without significant change in their cost structure.

Well put and timely. The question will be whether the UAW heeds these words and understands that for the good of their current employees (continued employment) and their retirees (continuation of pension/benefits), they need to agree to these changes and allow the cost structures to get back in line.

The single most expensive part on a new GM/Ford/Chrysler is one that never adds value, their pension and healthcare liabilities… add those to a Toyota or take them away from the Big 2.5 and product cycles shorten/improve and costs go down.

Will not having these costs improve the big threes product or just increase the dividends to the shareholders?

^^^ Both. With that kind of cash, the Big 2.5 could actually develop desirable cars the market will want to buy as opposed to the hit and miss thing they got goin’ on now. With relevant products that actually sell without huge incentives, the domestics should find themselves playing with the big boys again. This can only be good for shareholders: increased sales lead to increased profits – pretty cool when they’re at the end of the trickle-down economics line.

There is no problem any automotive company has that cannot ultimately be solved by delivering what it’s costumer wants.

It would increase cashflow to product and investors rather than to bloated SG&A paying for the UAW. Both R&D and Dividend income will drive the stock price up (market cap), improve cash position which will improve credit rating that will decrease borrowing costs and drive profit to the balance sheet. Instead, they are paying prices for workers that are not free market equilibrium like Honda and Toyota are able to do.

Part of me blames the Big 2.5 for doing this as they shouldve had the vision to curb this long ago but when a strike threatens to shut down the company at times of boom, they gave up what they had to to keep the ship moving… Oddly enough, all those negotiators probably got huge bonuses for not having a strike.

Davidg1977: exactly. Now let’s see if the UAW will play nice this time…

Why is there constantly a conspiracy theory from so many about capitalism? This is a system set up to reward those that took risks with their money or their time. If you want to be part of this, you can either apply (they’re still hiring exceptional applicants no matter how many they are laying off) or you can buy their sales (or short them if you think they’re going into the abyss). These businesses are built to support their employees (paying a fair, market driven, at will wage) and their shareholders. JIM IN LA’s point about “the select few” can only be highlighted as shouldn’t those that take risk (put their money on the line) be the ones that benefit?

At no point do I mean to imply renegging on pension benefits (my father is about to become a pensioner and I know that he’s relying on the co’s promises to help fund his retirement), but they don’t need to pay wages to their laborers (or any of their employees) that are not free market justified.

WHAT EXACTLY IS REAL CAPITALISM? MAKE THE EVERYMAN RICH? Wall Street does that everyday by providing a market for Initial Public Offerings of companies who’s equity holders provided a unique proposition to solve old problems… and those with the ideas traditionally are not the elites.

Jim in LA is correct. Things got dramatically worse in the 1980’s. Up to that time, corporations were considered to individuals with the rights of individuals. As for the individual, the greater the net worth, the better. On average corporate executive may 25 times as much as the average employee. The 1980’s brought a new paradigm–one in which the corporation was only a mechanism to funnel money into the pockets of investors. Corporate wealth became “unrealized shareholder value.” It was the era of the leveraged buyout when outside interests using borrowed money bought up companies, used the assets of the companies to repay the loans, and pocketed the difference. Of course, the workers and the communities where they lived suffered. But, they did not count. The leverage buyout “unlocked shareholder value.” But, it is actually worse than that. For the most part, shareholder are not a lot different than the corporate workers. They are not the real beneficiaries of this new paradigm. That honor belongs to the corporate executives who are employees not unlike the workers on the factory floor. The major difference is that they make a lot more money. Whereas they used to make 25 times as much as their non-executive colleagues, they now made 100 or more times as much. They also have the ability to name their own salaries. Workers are exploited for their labor. Shareholders are exploited for their retirement money. Corporate executives make off with the loot.

Davidg1977, about 60 years ago USA wasn’t the superpower it is today, the events of WW2 made USA the powerhouse it is right now, and guess who made USA the most powerful country it is today, those were the hard working average Americans from average families, not some millionaires. And just because of that I think the government owes some kind of support towards the middle-class, middle-class is what really made US great, and these days the select few who control the stocks are only thinking of their pockets, outsourcing jobs to other countries, basically destroying the manufacturing business of USA.

Those who take the risks don’t come from poor or middle class families, usually those are well established people with some kind of backing to begin with. Twenty years ago an average middle class male was able to support entire household, these days it is virtually impossible as wife and sometimes even the kids need to help out as cost of living went up where the salaries obviously didn’t keep up.

Those investments on short term basis maybe look good on Wall Street but it basically enslaves USA into dependence on other countries even more especially China (funny how 17 years ago we fought against USSR and communism and these days we make huge business deals with a communist China). The value of dollar has been steadily decreasing eversince the 1950s, it just shows where our economy is heading.

davidg77, please let me know what you think of these two points:

how is defunding pension programs “taking risks”?

how is benefitting from illegal immigration wage reductions “taking risks”?

why should people be rewarded for this behavior?

as you can see, no one ever intended for capitalism to be without oversight or checks and balances. just like in government, even the best of intentions can turn to **** pretty quickly (see iraq – oops, that never was good intentions, but you get my point).

wall street is an institutionalized mechanism for separating wealth from the rubes (that means you and me) and redirecting that wealth upward to those who already have it. most IPOs are actually scams for those already in the game, designed to prey upon rube desires to get rich quick – which never happens.

we have been brainwashed as a culture to worship the affluent as though they somehow deserve their wealth while the rest of us can only aspire to it. it’s ridiculous – most of them were born into it – why do you think Bush and his cronies are so intent on abolishing the inheritance tax system? because IT DIRECTLY BENEFITS THE SUPER AFFLUENT. not the “family farms” you constantly hear about.

the rich do not deserve our admiration. they deserve our critical eye and constant vigilance – because believe me, they’ve got their eyes on you, waiting for that day when the masses come crashing through their security-guarded front gates.

I personally know many people that came from nothing (one a butcher at a safeway in college and another a beer delivery man (who ended up buying/running/selling the distributorship) that are now multi-millionaires b/c of the public markets and making businesses through entrepeneurship. I aspire to become one by working on my skills to better position any business idea and/or career opportunity that I have to enhance my chance to earn a bigger piece of the pie.

Those that say higher level managers “don’t deserve to be where they are” should work harder to surmount the obstacles that they think are illegitimate and beat them. If they don’t deserve to be there, why aren’t you there? You don’t need to audit them, you need to improve your skills to unseat them… And if you don’t like the obstacles, then go start your own business.

Who is defunding pension programs? My Dad is retiring from Ford with a fully committed pension provided Ford doesn’t go bankrupt, but my wife started there after the defined benefit was cut and therefore she doesn’t get one. She knew it going in and we have to save on our own b/c of it.

Don’t you see the SEC and Corporate Governance boards (although with some blackeyes — the ones that that news pays attention to, TYCO, Enron, etc) as the oversight that you’re looking for? What else do you want, “The these guys are too rich in my mind so they don’t deserve board”?? And who gets to define the “too rich”?? I bet you have neighbors that think you’re too rich b/c you have more than they do… it’s a sliding scale.

By making a reference to Iraq, you’re clearly involving topics that aren’t part of what we’re talked about. Why is Iraq even part of the discussion? You should’ve made an analogy to Bush shooting rockets into the Pentagon himself and Abu Ghraib too and then it would be the liberal trifecta of including non-related topics/conspiracies to a discussion.

IPO’s are not a scam. They are a way for a company to fund their growth at cheaper money than the VC’s or banks are willing to offer it. Investment bankers do the work to underwrite the offering and allow their institutional investors first chance at the shares b/c they deserve them (they take the most risk with the bank). I’ve never gotten killed on an IPO b/c I’ve never felt strongly about a company going public that I could buy shares for the actual price I, Joe-schmoe could get them at the price offered to me, the individual, for what I thought it was worth. But lots and lots have… see Google individual investors driving their Porsche’s all over the place if they are willing to take the risk, they deserve the reward. Additionally, I’m not talking about day traders. Look at public market returns over the last 50 years for any large public company. Put $1000 in Disney 30 years ago and you’d be a very wealthy man (don’t make an Eisner snipe).

Who gets to Monday-morning-quarterback “intent of capitalism”? Those that don’t have something?

Tell me who is benefitting from Illegal Immigration in the auto industry? Do you really think that if the UAW wasn’t around today, we’d have DCX hiring illegal aliens to build their cars?? Not even close… they are law abiding corporate citizens.

Oddly enough, Ford is driving for legal employment (at higher than normal rates in Mexico) at several of their facilities and finding great success. B/c GC’s hire guys to build houses doesn’t mean that Bill Ford is for illegal immigration?? That’s a slippery slope flaw (take logic class). This isn’t b/c they are “offshoring” everything, it’s b/c they can’t make a margin on the Fusion if it were built in Detroit.

Sorry for the long rant… but you asked me and I answered.

DavidG1977, I also know a couple of people that came from nothing into really something but luck really played a rather large role in it all, as you said, people take risks but some risks don’t pan out. 2 million Americans each year declare bankruptcy, 16% of children live in poverty, top 5% of population controls 85% of countrys wealth, value of dollar over the course of 40 years has dramatically decreased, and worst of all we let most of our manufacturing to go overseas which makes us dependent on other nations even more.

30 years ago $1000 was not a chump change, if you don’t have anything then how can you invest in anything? Most people have families to support and they don’t want to take risks.

And who is benefitting from illegal immigration the most? Probably the business owners who hire those people as they charge the same amount of money for the same product while paying a lot less for manufacturing it. Ford moved plants to Mexico because they don’t have to deal with US labor union disputes while also offering much lower hourly wages, and look at the prices of the cars assembled in Mexico, nothing has came down at all, no savings were passed to the customer, in fact the prices have increased more, some of that can be blamed on the strict safety laws which basically require more expensive technology on yearly basis but when you go to a dealership you’ll notice that a car made in USA costs about the same as in Mexico.

davidg – i can’t change your mind with facts nor emotion, so there’s not much point in continuing and boring the rest of the readers.

i hope you’re well positioned for the future; you’ll need to be.

by the way, ask united airlines employees about their pension and what happened when UAL went BK.

The UAW is a tumor in the Big Three’s brains. I believe that if the big three would replace the UAW with regular employees(such as Toyota) then GM wouldnt have such issues until all the retirees are dead so they dont have to pay as much pension. I believe i heard somewhere that there is a $2000 overhead on each car due to the fact that GM has to pay all the pension and what not. If GM can get rid of that maybe then they will produce a car without flaws.

DavidG1977, go back to your history class for a second, go back to pre-1945 USA and it’s state of economy and tell me who helped the most to dig out a country that was falling econmically apart? Without it’s average everyday citizen USA wouldn’t be a country by today. And then tell me if the goverment doesn’t have the obligation to support it’s citizens instead of making life more difficult for them? The era of 1990s and today is an era of greed, the rich get richer and the poor get nothing and only select few will manage to become successful. The gap between the poor and the rich is widening, and the middle-class is being slowly eliminated where most of the middle-class is starting to fall to the less fortunate category.

I know that a weak dollar helps to sell our products for a cheaper price but here lies the problem, most Americans don’t want to buy our own products (which is a part of another problem that most of the so called American products are not even manufactured in USA), our budget deficit is at an alarming stage, China owns a lot of US bonds, so does Saudi Arabia, so does European Union, Arabic countries want to sell oil for Euros instead of dollars. China wants to transfer some of it’s stockpiled dollars into Euros also.

Your problem is that you have a lot of book knowledge but you still need to gain some life knowledge. From your point of view most Americans would have to immigrate to other countries because only the rich count. You are only looking at things on short term basis without regard what will happen 20-30 years from now and as of right now it does not look good for average American. Remember that most Americans culturaly spend more than they earn, it’t the way of life, and where do you think USA gets their money to loan people? Foreign investors. And you think that foreign investors will continue to loan US government money when Americans spend more than the earn? Eventually it will all stop and then there will be one huge boom.

Who’s bored with this discussion?? I’m jumping in!

The problem with the argument on outsourcing jobs is that it is made from an idealist point of view and it stops there. So you keep the manufacturing jobs here. You pay the necessary wages needed to keep workers in the plant. This is where the idealist argument leaves off and ignores what happens when the plants take their products to market. Who is going to pay for this expensive product? It’s overpriced now. Do you know how much an inkjet printer would cost if it were manufactured here in the states? Roughly a grand. Would you buy that inkjet just because it was made here? No. Capitalism does work, and that is how. The customers are the checks and balance to the market. If there is a shady corporation out there, then it is the customer’s responsibility to not patronize that corporation. I hold the public accountable most of the time. Just don’t buy their products. The problem is, with this “gotta have it” attitude, it becomes more difficult every day to enforce that type of mentality. But that is not the corporations fault.

You can’t complain about companies trying to maximize profits and then turn around and complain about job layoffs. It’s profits that pays the salaries. If GM had the profit and didn’t have to pay so much for healthcare and pensions, then maybe GM wouldn’t have to close plants and people would keep their jobs.

Piablo, GM in the 1950-1960s was also making profits, most of the manufacturing and car parts were done on US soil. An average male workers one salary was able to buy and support a house, his family, to buy a car etc etc.

Now compare that standard of life to todays average class, it certainly has decreased. I am not here to argue who should make how much money and I know the times and trends are changing but I just want to compare an average standard of life in US 20-30 years ago and now. We didn’t outsource jobs then and the country was fine, we were a self sufficient country, we didn’t start wars with countries that we bough oil from so that the so called “investors” can make their share on human misfortune.

Goodness. This article seems to have struck a nerve with some of y’all! Endurancevm—I’ve heard that same statistic, but I think it’s more like $2500 per car. I don’t think most of us understand what a HUGE competitive disadvantage that is. All I can say is, I hope that the Big 3 are working on reducing those obligations for the future, with each new contract negotiation. They’re suffering from promises that were made years ago when the world looked a LOT different. I’m sure they never dreamed that there would be SO much competition from foreign makes, whose employees’ expectations, and demands, for their own future was so much simpler than we Americans’.

Germany and Japan are both capitalist countries too. The difference is that both countries have healthcare and pension systems that spread the load so the whole cost of healthcare and retirement isn’t landed on the corporation so if a company (or industry) goes bellyup the employees and retirees are screwed.

Another difference is that when times are good the Germans and Japanese invested. GM and Ford didn’t and their lineups got old and tired. You can blame unions all you want but it’s management that failed.

blitzkrieg79 – In the 60’s, no one had a $75 cell phone bill, they didn’t exist. No one had a $100 cable bill, cable didn’t exist. No one had a $40 broad band internet bill, AL Gore didn’t invent it yet. In fact, IBM hadn’t invented the personal computer yet that would cost everyone $1000 (and that’s on the low side). In the 60’s, there wasn’t a car for every family member over the age of 16sitting in the driveway. In the 60’s, the average size of a house was not 3000 sqft, it was closer to 2000.

You are correct, the life styles of today and yesterday are quite different. We just see it differently.

Piablo, Please take an economics course. Profits do not pay salaries. Profits are what you have left over after you pay for everything. They are reinvested in the company and/or they support the owners.

Piablo, I guess partially you are correct but tell me if an average US salary of $29,000 per year will let you afford to buy a house, a car, food, and clothing, and forget about secondary expenses such as computers, cable, or cell phones. If you already own a home then maybe that salary will be enough but when a young family wants to buy their first home without any other assistance it’s rather quite a long trek of saving up for a downpayment so that monthly mortgage rates won’t eat you.

I’ll tell you that in NJ $29000 per year won’t get you too far. Most families these days are dual income.

Actually, Richard, I am a Financial Analyst. If you want to get technical, I have all day bud.

I agree, $29k is not much at all. But there is assistance. FHA and HUD help out first time home buyers. If an individual only makes $29k, and that is all they are capable of making, those are the options. But if they are willing to go to college and make themselves more marketable, then they will be more capable of better luxuries. But at $29,000, that individual should be able to purchase a HUD home and buy a $500 vehicle. Don’t get a speeding ticket though. And say they keep making a paltry paycheck… they STILL will eventually own their home outright. I am currently working with a homebuilder. They have a community open that sells $1million townhomes. The county they are building in requires them to sell an “Affordable Dwelling Unit” for exery six normal lots sold. These ADUs sell for $100k. The county does reimburse the homebuilder. These ADUs are identical to the million dollar homes they neighbor, with the exception of having vinyl flooring versus cut slate. THAT is a social program, and they are out there.

I understand what you are saying. I feel bad for those who have meager means of living. But in this country there are choices to make. By the year 2012, which is right around the corner, there is an expected 2 million jobs that will go unanswered, unfilled. As baby boomers retired there will be an enormous vacancy in SKILLED labor. These are jobs that require an education and expirience. The jobs are there, but people are not making the choices to make themselves more productive. I have no sympathy for those who will not choose to help themselves. I have the deepest sympathies for those who have but seem to be dealt with bad luck.

Piablo, Despite your claims of being a “Financial Analyst,” I am convinced that you are a secondary school student. You are entitled to your own opinions, but you are not entitled to your own facts. There are many obvious factual errors in your posts, but they appear to be a result of simply not knowing any better.

For example, you say that people didn’t have cable TV in the 1960’s. Well, they did. In constant dollars, many cable bills could easily have been equivalent to $100 today. You say that IBM invented the personal computer. Well, it did not. That was done by MITS back in 1975, six years before the 1981 introduction of the IBM PC. You mention the “invention” of the Internet by Al Gore. That is just a repitition of Republican Party sloganeering.

In later posts, you talk about buying a $500 automobile. In 1975, a $500 car was a driveable jalopy. Today, it is scrap. You mention a $29,000 house. Again, if the buyer can find a prefab special somewhere. However, you will not find a liveable site-built house for $29,000 in the classifieds of any American newspaper.

Word to the Wise: It is not necessary to like your opinion to respect it. However, your opinion cannot be respected if your facts are just plain wrong. Please do some research before making factual claims.

Richard – I don’t really care what you are convinced of. How many people do you think had cable back in the sixties considering how many of them didn’t have a television in the first place? My point still stands. The IBM PC, yes was not the FIRST computer, nor the first computer available to consumers, but was THE first to put the personal into the PC and make it somewhat affordable. You may not want to buy a $500 vehicle, I don’t either. But in disecting every last word of my post, you lose the forest through the trees my friend. It’s not what you want, it’s what someone on a $29k budget can afford. Again, if you weren’t so busy disecting my statement, your reading comprehension would not suffer so. I did not say a $29k house, I said a house that someone could buy on a $29k salary could be afforded through HUD.

Word to the wise: Don’t let political bias get in the way of comprehension.

Endurancevm: that’s exactly what it is, a damn tumor! Well said.

“As baby boomers retired there will be an enormous vacancy in SKILLED labor. These are jobs that require an education and expirience. The jobs are there, but people are not making the choices to make themselves more productive.”

Look at the bigger picture. You’re talking about those lazy ass born in the US. Foreign workers who had to work their ass off will fill the jobs easy. Just look at Seattle, Raleigh, and Orange County… same analogy as the illegal cheap mexican workers.

The automakers made the deals with the UAW, so they must bear the burden. However the greedy UAW made themselves too much of a liability to their own employers instead of being an unreplaceable asset. Ultimately the UAW has to lose if the Big three are to survive.