The Big 3 are in an impossible situation. The problem is labor costs which can be twice as high as foreign rivals. GM spent $3.8 billion dollars last year paying for health care for people that don't even work for the company anymore. If you've worked for GM at some point in your life then you and your entire family get free health care. Toyota's entire net profit last year was $6.1 billion so if they had to pay the same costs they'd lose over 50% of their profit. GM has been doing it for decades so you can imagine the tens of billions of dollars they've given up for things like research and development. People often say that Detroit should sell cars people want to buy, but actually the Big 3, even with the loss of market share over the past 20 years or so, still have 3 of the top 4 spots. Toyota now sells more than GM but we're talking about a couple of hundred thousand units out 2.5 million. People still buy GM cars, the problem is that GM can't make any money selling them. The legacy costs I mentioned above add $1,500 to $2,000 to the price of every US car and it has absolutely nothing to do with the cost of materials. When you pay $20,000 for a Honda then Honda gets $20,000. When you pay $20,000 for a Ford then Ford gets $18,500. Detroit has actually increased their quality quite a bit in the last decade. Ford is now on par with Honda, but it will take a long time for the perception to change. It took the Japanese 15+ years to have people finally see that their cars are good. The US is going to have to go through a similar perception time frame. The Big 3 sell a lot of trucks, which people know guzzle gas, but when you compare similar cars to each other you'll find that Detroit isn't lagging in this area. People just think of inefficient trucks and the perception is that the entire line, including passenger cars, is fuel inefficient. Some people want them to go into bankruptcy so they can break the contract with the labor unions and start over. That's true. The risk is that people will probably turn away from buying a car from a company that's in bankruptcy, so in the end they might lose more cash in lost sales than they'd have to pay for health insurance and pensions. In reality the bailout was supposed to be a band aid to help the Big 3 reach 2010 which is when the auto union agreed to take over their own health insurance and pensions. That was the year they were supposed to finally be on a level playing field with their foreign competitors. The economic crisis made waiting for that impossible. So....they'll probably get the money from the White House. They're going to use money reserved for the bailout. AIG gets over $100 billion in aid when they helped to create this mess but we can't seem to find $25 billion to help the auto industry and protect 2,000,000+ jobs. It is a waste....it will help to continue to pay for absurd labor contracts, but there was at least an end in sight to that. Option 2 would be to put those people out of work at which point they'd file unemployment claims which the government would have to pay for anyway. If the government is going to pay I'd rather see them pay to keep someone working than pay an unemployment claim for jobs they just eliminated. You also have the mental game of an economy that just lost a major industry...if people watch the industry fail then it will lead to more penny pinching and a loss of revenue everywhere. For whatever reason the auto industry is a hot button for a lot of people which means politicians turn it into a political football. Did you see the hearings where the guy asked the Big 3 Presidents if they'd be willing to fly commerical? The Senator doesn't fly commerical. Not only is it a security risk but it's an inefficient way for a guy to run a company, a guy you're paying millions of dollars a year to do. I can't imagine the secretary of the president of GM telling one of GM's banks that the president isn't available because he's checking into a flight at Detroit International Airport. So instead of getting a politican who wants to solve the problem we get a politician asking a dishonest question in order to try to get reelected. It's all pretty screwed up in my eyes....
The big 3 always complained about foreign car companies when they should have been focusing on building smaller and more efficient vehicles to sell to the masses. Maybe they should give them a enough money to retool for that. It just seem every time we do bail them out they'll want it again, and again and if we start giving them billons weres it stop? It might best to use the sink or swim method in this case.
That's quite true, actually. I was with my friend the other week and his boss turned up in his HUGE 4x4. Now his boss is an Estate Agent. From the way he talks and dresses, he sounds like the type who has a lot of money. He was complaining his car was getting on a bit (about 4 or 5 years old, I think). He was considering something "more sensible" as a family car. I can't remember what he thought about, something like a Vectra. He didn't want a new one, though.... but he wants to get the earliest model he could of the new shape. Why? Because the huge beast that he drives now has custom plates spelling his name, and he will transfer them over. That makes the car seem dateless, so everyone will think it's new! haha. You are?? Well, I guess it saves on tissues... watch out for paper cuts, though!! OH:
;-) Incidentally, I don't think it's fair to say America make boxy cars any more. If you look back, they've been quite varied. The cars of the 50s and 60s (and some 70s cars) were quite beautiful, although often huge. True, in the 80s you did see a lot of 'boxy' cars, perhaps because it seems popular to use the same 'platform' for cars in the US, especially GM cars (OK, so we reused the same chassis here, but usually with a completely different body). However, I will say that American cars of the past 10 years or so have all had very similar shapes. In fact, I've seen some cars from different manufacturers have almost identical shapes! I remember seeing a car that looked like my friend's Chevvy Malibu, but it was in fact a Nissan IIRC. If I remember what it was, I'll post pics.
I think the Unions do have a simple choice, either accept the reduced benefits or workers loose their jobs. Chrysler already got bailed out back in 1979 and were restructed, although I thought they were owned by Daimler until I noticed they were sold earlier in the year. Me thinks Chrysler are one company that could disappear off the face of the earth and Dodge and Jeep will get bought out but no one will seriously miss Chrysler. GM really need to sort out their pay / benefits mess out and retire a number of brands, do they really need Buick, Saturn, Pontiac, Saab and even Hummer? They really need to try and stop selling cars in the same market under marques unless they are different, having Daewoo, Opel / Vauxhall, Holden and Chevorlet all selling normal cars seems rather pointless as they fight over the same piece of markert. Chevorlet for America and elsewhere in the world where there is no market, Caddilac for the old people and pimps, Holden for the aussies, Vauxhall for the brits, Opel for Europe and Daewoo for Asian markets. Ford seem to be doing okay, although they should get rid of the Mercury and Lincoln brands and just have Ford and Volvo. Ford and GM should get some money just to restructure and refinance but it should have lots of strings attached including getting rid of incompentent senior management and the unions accepting harsher terms to bring them into line with BMW, Mercedes, Honda and Toyota in America.
Bare 2 things in mind regarding Volvo: 1: Volvo Trucks have almost flatlined in the previous 12 months http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=456069 2: Since being bought out by Ford, Volvo cars division has never made any profit. http://www.telegraph.co.uk/motoring/3539657/Ford-evaluates-sale-of-loss-making-Volvo.html I'd hate to see the Volvo brand disappear completely as they make good, reliable and safe products, albeit generally more expensive to run due to the higher consumption afforded by being wrapped in a steel cage! Ford would do well to relinquish themselves of the Swedish burden, but the chances are Volvo Group wouldn't buy Volvo cars back, even for $1 right now given their own financial position. I also agree with the comment that Chrysler products could disappear and nobody would give a damn. Hummer is pretty much a dead duck now too given that most people no longer want to drive around in such large gas guzzlers.
They're the second largest truck manufacturer in the world (after Mercedes-Benz). They own a lot of other truck brand, several of which are american brands.
Whhhhhaaat? Never seen one of the amazing Volvo VN on the road? http://www.volvo.com/trucks/global/en-gb/trucks/new-trucks/volvo_vn/volvo_vn.htm
Hmm, maybe I have. Maybe I should pay more attention, lol. My mom has a Volvo...it has seat warmers.:033:
Yeah, I hate the styling of most American cars, but that's more consumer driven. I read an interesting article about how Toyota decided to "flair out" the bumpers and other parts on the Camry to turn it into a bland bubble car and that's when sales started to take off in the US. In Japan the cars are tight with great lines and I think they look amazing. They can even take a boring American minivan, add the right aftermarket parts to it, and make it look pretty sleek. I guess each country is different. Want to know the best selling car in China? Buick. Friggen Buick, people.
Well in reality, the Federal Reserve has already thrown way more than the $700 billion bailout that's in the news towards the banks, try somewhere in the area of several trillion. Thing is the Federal Reserve isn't really answerable to congress, that's why we're seeing these "Congress demands accountability" type stories in the news lately. That was part of the reason the bailout failed in the first place, becasue Paulson wanted complete and total control, without any oversight as to what this money would actually do. That's why Bank of America can refuse to provide loans to the Republic Windows company for payroll, even though they got Federal bailout money to do exactly that. Becasue that money came with no strings attached. It's starting to come out that many of the banks are using this federal money to do things like buy other banks or purchase roads in Europe. Hey, that's lassie-fair socialism there. So the big thing about the auto bailout is that they actually want to get some results for the money this time (partially motivated I think by thier utter humiliation by the banks.) Hence all the talk of re-organization of the auto industry to produce more hybrids, electric cars, green alternatives, etc. The big three don't have a viable competitor to the Prius, and sure gas is dirt cheap now but we all know that's only a temporary respite. You know why gas is cheap now? It went down becasue of the election (gas always goes down a bit six weeks before an election, if you haven't noticed.) It's plummeting further becasue of the tanking dollar, but it won't stay that way for long. It's only a matter of time before we're paying $4 a gallon again. Thing is, for an economy to be competitive it has to have a healthy auto sector, and they all know this. It's not just the guys who make and sell the cars, it's all of the other jobs and services that are associated with them - mechanics, maintenace, transport, parts, etc. So we're talking millions and millions of people here who could be out of work. This situation is pretty dire.
Yeh. I hear banks, not just BOA, are keeping the money, and not lending to borrowers with high credit ratings. It's happening here in FL to construction contractors who need it for projects, to finish up, etc. and they simply aren't getting anything from the banks that received such aid. Banks are simply keeping it as a cushion to keep their dividends healthy.
That's not enough, it should be way more than that. America should also help reducing the use of gas. $8 is more reasonable. And, no way do a country need an auto industry to have a good economy, there's several countries who have great economies without an auto industry. Norway and Finland springs to mind.
I was lucky not too many months ago I got a ride in a Volvo tractor trailer and man, that was one nice ride I'll tell you! The owner was complaining though, it wasn't making the stated gas milage. I though HOLY S.... for the price, it should do all the driving too! Oh well, What ever the case it was one nice long ride, Lol! I always have liked volve in the past because I thought they were good quality car, but these days there getting so small and ugly I don't know weather I can stomch one.:crying: Guess won't have to worrie never really planned on buying one of those anyway, LOl! :redface: