Balloon-Juice has a nice explanation of the auto industry’s current situation in play form. The gist is this:
Big 3: I need Labor to build cars.
Labor: I would like to work for you but need $40/hour to save for my inevitable retirement and health needs.
Big 3: We will not pay you $40, but will pay you $30 and promise to pay for retirement and health costs.
Labor: Deal.
Big 3: Here are some car designs folks may or may not want to buy. Please build them.
Labor: Roger that.
The auto companies do not save to pay for their health and retirement obligations. The cars don’t sell as well as they had hoped. Mitt Romney blames labor.
Here’s the parts he ignored.
To reach that deal (example # 2 above) you left out the part where the union said
LABOR: “We are going to cripple you financially by striking all your plants and draining every resource at your disposal if you don’t accept our terms.
BIG 3: uh, ok since we have no choice.
LABOR: “The retirement & health are nice, but ya know what? When business slows down and we aren’t selling any products and there’s nothing to build and you have no cash at all coming in, uh, our guys are gonna need 95% of their paycheck until things pick up. Oh, like above, we’ll strike your plants and cripple you financially if you don’t agree. mmm…kk??
There’s blame on both sides because it was a no-win situation, and though the market share dwindling adds to the problem, it doesn’t change the PER CAR COSTS….If GM loses $3,000 everytime it sells a malibu for 20k and Toyota makes $3,000 everytime it sells a Camry, who is gonna stay in business??
No matter what side you fall on blame wise (labor or management), the simple fact is, you can’t sell cars and lose money and the ONLY difference between Toyotas & Chevies is the cost of labor. The materials are identical.
Cry all ya want, I say let ’em file chapter 11 and work it out themselves. By the way, I love GM products and I buy a new suburban every two years, and my wife a new GM product every two years as well and have for 20 years, but if they can’t work this out themselves without a bailout, I’ll adjust to a Sequoia or similar.
I’ve given GM thousands and thousands of dollars for my vehicles, I’m not giving them my tax dollars too.
The bailout debate has given us a new colorful lexicon for the old class warfare debate of who is most important and therefore more deserving: white collar or blue collar workers.
Now it’s those who shower before they go to work vs. those who shower when they come home from work. 2 showers a days is bi-partisan?
It may have re-ignited the class warfare debate, but it needn’t. Regardless who is “to blame” it’s nothing more than a simple math problem now.
Right now, I think we’re really playing for next time. Which myth is going to have more currency when we plan future systems? The hard working entrepreneur showered with riches for his vision and industry? Or the hard working Everyman, advancing and prospering for his diligence and simplicity?
In some ways, I guess we’re returning to Hamilton versus Jefferson.
The comments here reveal that the Republicans have been right – if you repeat a lie often enough, it becomes the truth.
Labor costs are far from the defining issue between foreign and domestic auto makers. Foreign auto companies have been given government incentives domestic car companies could not even pray for (tax abatements, support from their home country governments during times when they are more vulnerable, etc.) Moreover, design is a big part of the expense of car manufacture – and even the Big Three have admitted they need to rethink the design cost to manufacture on their smaller vehicles. And somebody might want to take a look at the differences in executive compensation between foreign and domestic auto makers.
We can make this a simple play with good guys and bad guys – or we can look at the complexity of the situation at approach it like big boys and girls. I think the latter is more likely to help us find a way out of the econimic crisis domestic manufacturing is in (and I would add not just car, and not just union, manufacturing).
Nancy, it’s not a Republican vs. Democrat thing. Take the emotion out of it and it’s Econ 101. Actually, it’s more like 5th grade math.
Tim –
Junk in-junk out. You won’t come up with the right answer if you start with the wrong numbers. That’s the part of your equation that is wrong. And the idea of perpetrating big lies in recent history has been spearheaded by Karl Rove – a Republican partisan. That’s the reference I was making.
One persons lies are anothers truth. The point is moot as BOTH sides parrot the bullshit, be honest.
As an old boss of mine used to say when confronted with a bunch of us managers pointing fingers, “Yesterday doesn’t make a damn bit difference, cuz right here’s where we’re at”.
In the car business after about 90-120 days most of the used cars in everyones inventory had lost about 30% of their value, just due to natural market forces. Some dealers & managers would cling to the notion they could “sell” their way out of “being upside down” in inventory values. Guess what, that doesn’t work. If you’re selling at a loss or keeping your prices high to AVOID a loss, all you have done is prolonged the inevitable. You take your “whack” and move on, watching your days in inventory more carefully so it doesn’t happen again, or else you go out of business.
Sure, everyone has an opinion politically, Rove is a war criminal, Obama is a Muslim, GW is a bumbling idiot, Bill Clinton is a lying, womanizing thief, none of it matters in the case of the big three. No matter how you add it up it, 2+2 ain’t 6…it’s still 4.
Sure both sides do – kind of the point I was making – you just misunderstood it. My point was that we can’t be simplistic and shallow with our inquiry about what is wrong. The question is important and the truth is complex. There is no 2+2 analysis possible, there are more factors at play than that. It is time to stop hunting for easy answers and look at the real picture.
Nancy, your last 2 sentences are where we disagree completely “There is no 2+2 analysis possible, there are more factors at play than that. It is time to stop hunting for easy answers and look at the real picture.” I say it’s now time to keep it simple…..
My contention is, for waaaaay too long, we have over-complicated, intervened, and nuanced far too many problems that could (and should) have been settled by opposing sides using common sense and existing law. Too many opinions,legislators, lawyers,members, managers, pundits etc. have made this (as well as a lot of other things) a complete clusterf&%k.
Some things really can be black and white, if you aren’t afraid to let the chips fall where they may.
Just using the big three as an example, if they file bankruptcy, it will solve their problem one way or the other with a mechanism (bankruptcy court chapters 11 or 13) already in place precisely designed for companies in financial straights.
No outside money, influence, or interference is required. You can’t (as a business) work your way back from the bottom until there actually IS a bottom. Artificially propping them up only prolongs the problem, it doesn’t solve it. We currently have the same problem in the Real Estate, Banking, and Stock Market biz, nobody will move on anything because there is an artificial bottom.
Rip off the band-aid and let it bleed out on it’s own, so the economy can rebuild. Throwing borrowed money at the problem is ludicrous.
Real solutions take real work. Frequently life is hard. I believe that to find real, lasting solutions we need to look at the root causes of our calamities. And address those causes in as logical a manner as possible. There we disagree.
If three people have gunshot wounds and we let them bleed out, their death surely stops the bleeding. But maybe, just maybe, we should identify how in the world they wound up with bullet wounds rather than just wait for the next three guys to show up bleeding to death. And maybe, if we know how, we should practice a little medicine and save those with a reasonable chance of going on to live healthy, fulfilling lives. Just maybe.
Mitt Romney couldn’t beat the weakest campaign put together byrepublicans since Goldwater, who cares what he thinks.
Chris, thanks for the insight, we are now officially closer to a solution with your keen observation.
Once again, this is why it’s so hard to get anything done, you hated Mitt “The Candidate” so why bother to consider his opinion as Mitt “The wildly successful” businessman. He grew up in the Auto Manufacturing biz, and has turned around more than one company that was on the ropes, (not to mention the Olympics too)… and has a personal NET worth of over 200 million. That’s guy whose advice shouldn’t be tossed aside..
Nancy, you said “we need to look at the root causes of our calamities”, I agree and I respectfully submit the root cause of this particular calamity is and has been “throwing money at problems hoping they’ll go away”.
Well, they didn’t go away and they won’t.
Mitt could indeed provide some guidance. First, perhaps we could see if the system is providing rewards in proportion to value added. Has Mitt added $200 million worth of value to the economy?
I don’t begrudge Mitt for maximizing his haul under the system with which he was presented. That’s just playing the cards you’re dealt.
But, I suspect we could get guys like Mitt to contribute the same value for less reward. That suggests some waste in the economy. That said, I have no idea how to patch that particular leak.
Tim,
Mitt having 200 million doesn’t impress me. Ken Ley was rich too, and his business sense sucked. Being rich doesn’t make you smart, or moral, or anything else. If anything, making that much money nowadays probably makes you a greedy bastard.
For the record, I’m not poor, so don’t throw the envy line at me
You may want to research Mittens, While he wasn’t my pick for Prez, I admired his business record. He’s a bankable turn around guy.
Courtesy of Wikipedia (cuz it’s fast)!
“Business career
After graduation, Romney remained in Massachusetts and went to work for the Boston Consulting Group, where he had interned during the summer of 1974.[10] From 1978 to 1984, Romney was a vice president of Bain & Company, Inc., another management consulting firm based in Boston. In 1984, Romney left Bain & Company to co-found a spin-off private equity investment firm, Bain Capital.[11] During the 14 years he headed the company, Bain Capital’s average annual internal rate of return on realized investments was 113 percent,[12] making money primarily through leveraged buyouts.[13] He invested in or bought many well-known companies such as Staples, Brookstone, Domino’s, Sealy Corporation and Sports Authority.[14]
In 1990, Romney was asked to return to Bain & Company, which was facing financial collapse. As CEO, Romney managed an effort to restructure the firm’s employee stock-ownership plan, real-estate deals and bank loans, while increasing fiscal transparency. Within a year, he had led Bain & Company through a highly successful turnaround and returned the firm to profitability without layoffs or partner defections.[12]
Romney left Bain Capital in 1998 to head the 2002 Salt Lake City Olympic Games Organizing Committee.[15] He and his wife have a net worth of between 250 and 500 million USD.[16][17] , not including Romney’s blind trust in the name of their children, which is valued at about $100 million.[18]
Turning around the 2002 Winter Olympics
Romney served as president and CEO of the 2002 Olympic Winter Games held in Salt Lake City. In 1999, before Romney was hired, the event was running $379 million short of its revenue benchmarks. Plans were being made to scale back the games in order to compensate for the fiscal crisis.[19] The Games were also damaged by allegations of bribery involving top officials, including then Salt Lake Olympic Committee (SLOC) President and CEO Frank Joklik. Joklik and SLOC vice president Dave Johnson were forced to resign.[20]
On February 11, 1999, Romney was hired as the new president and CEO of the Salt Lake Organizing Committee.[21] Romney revamped the organization’s leadership and policies, reduced budgets, and boosted fund raising. He also worked to ensure the safety of the Games following the terrorist attacks of September 11, 2001 by coordinating a $300 million security budget.[22] Despite the initial fiscal shortfall, the Games ended up clearing a profit of $100 million, not counting the $224.5 million in security costs contributed by outside sources.[23][24]
Romney contributed $1 million to the Olympics, and donated the $825,000 salary he earned as President and CEO to charity.[25] He wrote a book about his experience titled Turnaround: Crisis, Leadership, and the Olympic Games.[26]”
All I pointed out is how foolish it is of you to politicize bailing out the big three and disparaging a guy with a verifiable wealth of knowledge.
As for your comments about not being impressed by wealth, nor am I by itself, as you point out lot’s of morons have lot’s money (see Michael Moore, Ludacris, Rosie O’donnel etal)Mitt’s money is clean money. He earned it by building companies, not ripping them off.
I don’t know if it’s the mormon thing or the republican thing, or you just don’t like his hair, but it’s hard to deny his expertise in these matters.
Mitt Romney lost my vote when he told a reporter that “national service” for his five (young) adult sons was to help get their Dad elected President of the USA. Meh (for lack a more publishable naughty word).
yes, he’s good at turning a profit for his company, but what’s good for his company may not be what’s good for the economy or society as a whole. Putting all the UAW employees out of work or sending them back to 10 dollars an hour doesn’t help anyone in the long run.