GM Loses Another $16 Billion -- Bankrupt?

[Vanguard]

Originally posted by Oerdin
Isn't producing the same (or roughly similar) cars for less money the very definition of greater efficiency?

What do you mean for less money? Less money to who?

GM produces 7 million cars a year that sell for 140 billion dollars a year. Toyota produces 7 million cars a year that sell for $130 billion. (these figures are made up but represent the general values). Does this make Toyota better or worse? Shouldn't they want to sell the same number of cars for more money? Is GM selling better cars for more money or equivalent cars at a higher price?

Equivalent cars from GM and Toyota sell at about the same price. Otherwise people would buy the cheaper car. The mere fact that GM sells more cars than Toyota implies that their equivalent cars must be priced lower.

The fact that GM shareholders don't make any profit on those cars does not mean anything about efficiency of manufacturing.

The Japanese make cars with fewer man hours largely because they use more robots.

No they don't. The Japanese used more robots earlier than the Big Three. But there is no particular reason to think that US automobile manufacturing is now less automated overall than the Japanese.

What the Japanese do is buy more parts from small manufacturers and then assemble them with fewer Toyota employees. So, yes, there are less people who work for Toyota than work for GM. But on the other hand there are more workers making car parts in Japan (and Asia) than there are making car parts in the United States.

The Japanese simply outsourced earlier than we did. And it resulted in economic disaster. Widespread deflation required huge bailouts to the actual automakers of Japan---- the small scale parts makers and the rest of the economy outside the headline companies.

Robots which the UAW are militantly against because they eliminate jobs.

Robots have been in widespread use in US automaking since the 1970s. So what the UAW wants seems to be irrelevant. Not that they actually seem to have been all that militantly opposed to them. But who cares?

If you notice the Japanese (and Germans and even Hyundai's new factory) were all placed in states with almost no union membership precisely because they wanted to avoid the unions.

Yes. Management don't like unions.

But who cares what they like? Management isn't in the business of maximizing my wealth. Or the wealth of my county. It is in the business of maximizing its own wealth. And they do a good job at it, regardless of who else it hurts---- shareholders, workers, the country at large.

You know another group of people who do a good job of maximizing their own wealth at the expense of others? Pirates. Yar matey!

[Kidlicious]

Originally posted by Oerdin
Isn't producing the same (or roughly similar) cars for less money the very definition of greater efficiency? The Japanese make cars with fewer man hours largely because they use more robots. Robots which the UAW are militantly against because they eliminate jobs. If you notice the Japanese (and Germans and even Hyundai's new factory) were all placed in states with almost no union membership precisely because they wanted to avoid the unions.

Robots don't make you more efficient. Like Vangaurd said, GM has had them since the 70's. GM management thought they would make them even more competitive with the Japanese but they didn't. Think about this, how productive is a robot when it's doing nothing? The Japanese have a whole different style of management which is superior to the traditional american model.

[Seeker]

I can really see a redo of the old Saturday Night Live 'Francisco Franco' bit....

"....and this just in, GM is STILL bankrupt...."

[Dinner]

Originally posted by Vanguard


What do you mean for less money? Less money to who?

Jesus man, we're comparing auto makers on a per unit cost. If one car maker takes an average of 25 man-hours to make a car and the other one takes an average of 19 man-hours to make a car then we'd say they are more efficient. Just as if one car maker can make a certain car at an in house cost of $17,000 while it's competitor makes a nearly identical car for a cost of $15,000 then we would say the second is more efficient then the first. They're building the same (or largely similar) car for less money and thus has a larger profit margin.

[Dinner]

Originally posted by Kidicious


Robots don't make you more efficient. Like Vangaurd said, GM has had them since the 70's. GM management thought they would make them even more competitive with the Japanese but they didn't. Think about this, how productive is a robot when it's doing nothing? The Japanese have a whole different style of management which is superior to the traditional american model.

Want to bet? If the net result is that it costs you less per car to make a car then you are a more efficient producer. Also it isn't the case where one uses robots and the other doesn't. It is a case where one uses a lot more robots then the other. One might have 33% of the process automated while the other has 50% of the process automated.

[Dinner]

This is what they need to do in the US.

http://info.detnews.com/video/index.cfm?id=1189

[Sandman]

Guardian article: An auto industry bail-out will fail

It isn't difficult to imagine why congressional leaders are pressing ahead with plans to bail out the Big Three automakers. Having shovelled hundreds of billions of dollars at failing financial companies, where workers earning absurd multiples of the average American income endangered the whole of the world economy with their careless behaviour, how could Democratic leaders say no to the blue-collar workers manning the assembly lines at Ford and General Motors? In the wake of a magnificent electoral victory built on promises to help Main Street, how can the president-elect tell the country that the government's bail-outs are reserved for Wall Street?

One easy answer is that such rescues aren't to be made lightly, and automakers (unfortunately for them) aren't threatening to destroy the global financial system. Another is that once the government is in the business of bailing out automakers, it becomes very hard to say no to airlines, retailers, technology companies and every other struggling firm out there, which is every firm out there.

But the best answer of all is that a bail-out involving tens of billions of taxpayer dollars ought to hold out the promise of helping the people it's supposed to help. Saving Ford, General Motors and Chrysler provides no such hope. In all probability, a bail-out will hurt the very region it's meant to help.

One reason for this is that a rescue is unlikely to work. The Big Three face an enormous array of challenges. Recent economic conditions have battered all automakers, but in both good and bad times Detroit has more or less constantly ceded market share to rival firms (many of which employ thousands of Americans and will operate through the recession with no government assistance). Its plants and equipment are old. Its management is unproductive and rigid. Its products are of low quality. Absent major restructuring, it is fantasy to expect a change.

Detroit has found itself in these straits in the past. Nearly 30 years ago, as the American automakers flailed amid high oil prices and foreign competition, Chrysler went to the government hat in hand, seeking help to avoid bankruptcy. It got it, and in return promised to build better and more fuel-efficient cars. Chrysler survived and even thrived at times on sales of minivans and SUVs, but the firm never solved its fundamental problems. The bail-out kept a company alive, yes. But it failed to save the Rust Belt or produce the necessary top-to-bottom restructuring. We have little reason to expect a different outcome this time around.

More important still is the opportunity cost of saving the automakers. It is suggested that millions of jobs might be lost if the firms folded. That may well be true, but those workers wouldn't remain unemployed forever. At present, the Big Three suck up labour and human, physical and financial capital that might instead be employed at more productive firms in healthier industries. Allowing the automakers to fail creates an opportunity for a much-needed reallocation of resources. From their ashes, anything, including an automaker free of the institutional burdens of the Big Three, might emerge. Standing in the way of this process will damage the long-term outlook of the entire region.

Political energy in the Rust Belt is also geared toward maintaining the status quo at the expense of other priorities. It's frequently suggested that the region's manufacturing expertise might be redeployed into green industries, producing valuable new technologies for global consumption. But regional legislators politically committed to automobile production often push a less aggressive approach to climate change legislation – reducing the profit potential of green products. Heavy dependence on the old slows progress toward the new.

And there is the direct opportunity cost of the money involved – $50bn spent propping up the Big Three is $50bn that can't be spent on direct investments in the people and cities of the Rust Belt. That kind of money could fund early retirement for older workers and unemployment benefits and retraining for younger workers, with enough left over for infrastructure improvements, research incentives and educational grants for the region as a whole.

Ford, General Motors and Chrysler are American institutions. They have helped define the character, the shape and the economy of the nation for a century. They're also just companies – corporate entities designed to provide goods and services at a profit. For too long, these firms have failed at that goal, and they've dragged down an entire region with them. We can spend that $50bn simply perpetuating, for a while longer, the names and structures of these companies. Or we can spend that $50bn helping the people and the cities of the Midwest. I don't think we can do both.

[Dinner]

I doubt Ryan Avent has ever even driven an American car or knows anything about quality. I bet if pressed he'd whine about trucks and SUVs (I.E. design choices) instead of actual quality. The big 3 actually make pretty good quality cars but are stuck with bad management who are trying to relive the 60's rather and only think about next quarter rather then the long term positioning of the company.

Reform dealing with health care costs and union hubris is what is needed along with outside management and the government finding a way to end the credit crunch.

If we have to choose between the Thatcherite method used on British Leland and the French method used on Renault then I know which I would take. Notice how Renault has bought a controlling stake in Nissan and is now one of the world's largest automakers? Anyone remember how Thatcher told the French Renault wasn't worth saving? Notice how Thatcher completely destroyed the British auto industry? Why follow people who's methods have proved complete failures?

[Sandman]

Is the plan to nationalise them, though? That would work okay (though it would still mean huge job losses).

[Dinner]

No, that's not the plan. It would be my plan though.

[Arrian]

Their cars suck, Oerdin. I've driven some of them, fairly recently, though I was smart enough not to buy any of them. No doubt they have improved since the 80s (when they were a friggin' joke), but they are still inferior products.

That's a fundamental problem. As is the SUV/Truck thing. The "design choice" you refer to was ****ing stupid, and there is no evidence that they will really change. Gas prices have dropped again. They will pay lip service to producing efficient cars and trucks but they won't actually do it... unless they literally have no other choice.

Can't they be restructured in bankruptcy?

-Arrian

[Kidlicious]

Originally posted by Oerdin


Want to bet? If the net result is that it costs you less per car to make a car then you are a more efficient producer. Also it isn't the case where one uses robots and the other doesn't. It is a case where one uses a lot more robots then the other. One might have 33% of the process automated while the other has 50% of the process automated.

Oerdin,

This is ridiculous. You seem to be saying that whoever has the most robots will be more efficient. It's much, much more complicated than that. That is precisely the kind of thinking that caused GM to be so ****ed up. The more robots you have the more robots you will have doing nothing.

[Dinner]

Who ever can build the cars cheaper and in fewer man hours is the most efficient. Isn't that self evident?

[Dinner]

Originally posted by Arrian
Their cars suck, Oerdin. I've driven some of them, fairly recently, though I was smart enough not to buy any of them. No doubt they have improved since the 80s (when they were a friggin' joke), but they are still inferior products.

That's a fundamental problem. As is the SUV/Truck thing. The "design choice" you refer to was ****ing stupid, and there is no evidence that they will really change. Gas prices have dropped again. They will pay lip service to producing efficient cars and trucks but they won't actually do it... unless they literally have no other choice.

Can't they be restructured in bankruptcy?

-Arrian

Possibly but the big problem is that the auto business requires lots of capital most of which has to be borrowed. Who will loan money to a company which just declared bankruptcy?

[Kidlicious]

Originally posted by Oerdin
Who ever can build the cars cheaper and in fewer man hours is the most efficient. Isn't that self evident?

Well of course, but just buying the most expensive machinary isn't going to do that. That's what the Japanese have known for a long time.