GM & Chrysler on the Brink -- Part 3

[Zkribbler]

infrastructure projects and public works.

PC problem! PC problem!! Danger, Barack Obama! Danger!

Construction jobs tends to be almost exclusively male. The womenfolk are going to feel left out, and they can be nasty when slighted.

[Dinner]

Look at all the excuses Republicans came up with to avoid saving 3 million high paying American jobs and compare it to what they require out of a bank who wants free money. A bank just has to fill out a two page form. That's it. Just two pages.



The dirty car makers must jump through a million hoops and the unions must be destroyed. This double standard is outrageous.

[Vanguard]

Originally posted by Imran Siddiqui

Is it failing enough that it requires government handouts to keep itself afloat?

Toyota has already had its "bailout"---- the hundreds of trillions of yen the Japanese government dropped into the country in the Ninties to keep their economy from self-destructing.

Given that the Japanese public is almost forced to buy a new car every three years or so (because of their registration laws), I don't think Japanese auto companies have any valid complaints about us acting as a lender of last resort to our car makers during a complete collapse of financial markets.

Most well run companies realize that times aren't always good.

GM could probably have survived a small recession. They had a huge cash cushion and considerable financial assets. But the current crisis is unprecedented (though not unpredictable).

There are going to be a lot of companies going out of business in the new year. It is ridiculous to assume that all of them were badly run.

To deny GM's inefficiencies is silly. GM wasn't making money on small cars, they were making money on the financing of small cars. The reason they were doing ok when gas was cheap is because they were making money on light trucks and SUVs and failed to have any foresight to realize cheap gas wouldn't last forever (you'd have thought the 70s would have taught them that lesson).

Yes, there is some truth in this. They should have adjusted sooner and paid more attention to the quality of their own profits.

But the fact remains that they are still the largest (or second largest) car company in the world. Whatever they were doing, people apparently liked it enough to buy a lot of cars from them.

I wonder, do you define inefficiency by what companies you personally think are efficient or not? I can't think of a better measure that those who are not well run enough to respond to an economic downturn.

In this case, I define efficiency to mean producing a salable car without wasting much resources, whether materials, labor or capital.

I don't see any reason to think GM wastes much more material than the Japanese auto industry as a whole. Toyota itself probably wastes less. But that is only because they insist that their suppliers provide zero defect parts. So Toyota really just off-loads its wastage onto other companies. And these companies in turn were propped up by the Japanese government's bailout in the Nineties.

As for labor, GM does waste some. The jobs bank for example. There are undoubtedly other examples. But there is wasted labor in any large enterprise.

GM workers work basically the same way other industrial workers do. It isn't as if they have siestas in the afternoon or anything. They punch in, work eight hours, go home. What are they supposed to do, take engines home with them?

As for capital, well, who knows? Their financial arm could be worth hundreds of billions next year. Or it could be worth negative kajillion dollars. It is a total crap shoot at this point.

[Naked Gents Rut]

Toyota has already had its "bailout"---- the hundreds of trillions of yen the Japanese government dropped into the country in the Ninties to keep their economy from self-destructing.

That money was dumped into massive infrastructure projects like the one Oerdin has a hard on for. This stimulus failed to fix the Japanese economy and had little to no effect on the Japanese auto manufacturers.

Given that the Japanese public is almost forced to buy a new car every three years or so (because of their registration laws), I don't think Japanese auto companies can have any complaints about us giving loans to our car makers during a collapse of financial markets.

It has nothing to do with registration laws. You are ignorant.

[Dinner]

I heard a car needs safety checks when it is three years old (and then continuing after) in order to continue being registered. Supposedly the checks are designed to force cars off the road so that people have to keep buying new ones.

[Naked Gents Rut]

It figures you would think you know all about shaken based on something you heard one time.

[Ming]

Enough with the personal crap... last warning.

[Imran Siddiqui]

I define efficiency to mean producing a salable car without wasting much resources, whether materials, labor or capital.

So losing close to $2000 on every small car (while Toyota or Honda make money on them) isn't wasting something somewhere down the line?

Toyota has already had its "bailout"---- the hundreds of trillions of yen the Japanese government dropped into the country in the Ninties to keep their economy from self-destructing.

So the TARP bailout is sufficient to be considered a Big 3 bailout?

But the fact remains that they are still the largest (or second largest) car company in the world. Whatever they were doing, people apparently liked it enough to buy a lot of cars from them.

Perhaps if GM didn't have so many divisions (including a good deal that are unprofitable), they wouldn't have found themselves in the mess they are currently in.

Given that the Japanese public is almost forced to buy a new car every three years or so (because of their registration laws)

Bull. The Sha'ken is a bit more involved than our emissions testing (though in NJ, it was far more than just a simple emissions test as it is in GA), but it is far more thorough and probably better environmentally speaking.

Of course it also includes the car insurance for the next 2 years, which is what makes it a bit more pricey.

[Dinner]

You're figures are completely out of date. It hasn't $2000 for several years. Read the NYT article I linked to earlier. Right now the figure is $800 and by 2010 it will be done to $400.

[notyoueither]

When do they make a profit by selling a product they volunteered resources to build?

This if nucking futz!

[Dinner]

It depends on when the market stops collapsing. 2009 will probably be worse then 2008.

[notyoueither]

Maybe they should stop building them until they have a plan and conditions where they can at least break even?

I don't know. I didn't go to Harvard, but I've always considered it a bad plan to lose money every time I make a sale.

[Vanguard]

Originally posted by Imran Siddiqui

I define efficiency to mean producing a salable car without wasting much resources, whether materials, labor or capital.

So losing close to $2000 on every small car (while Toyota or Honda make money on them) isn't wasting something somewhere down the line?

No.

First of all, the idea that a company like GM loses $2000 "per car" is completely meaningless. Or rather, let's say it is a matter of internal accounting and strategy. GM makes those cars for a reason and we have no cause to believe it is a bad reason.

The only thing we are concerned with is whether GM makes money as a company. And the reason they are not making money as a company is their high costs.

But their high costs come largely because they pay a lot in pensions and health care. Paying pensions and health care is not wasting resources.

Let's assume that GM did not pay pensions or health care and instead the government picked up the tab for both these items for GM's workers. In order to fund these payments, the government taxes GM for the exact same amount GM now pays.

Under those conditions, GM might be making small profits right now---- but on the other hand they would never be able to make large profits, because the government would have to take progressively more of their profits as taxes to fund the pension and health care payments.

Would you consider GM to be more "efficient" then? They would be making profits. So they must be more efficient, right?

But the only thing that would have changed is who pays the cost of benefits (and when). It is just a change in accounting. How can that increase efficiency?

[Dinner]

Originally posted by notyoueither
Maybe they should stop building them until they have a plan and conditions where they can at least break even?

I don't know. I didn't go to Harvard, but I've always considered it a bad plan to lose money every time I make a sale.

They'll lose money not making sales too due to long term contracts with suppliers so the goal is the sweet spot where they lose the least money. BTW some sales are actually very profitable for them but the problem is those sales are now 40% less common then one year ago. Their goal is to keep lowering fixed costs, make it through 2009 which should be even worse then 2008, and then things should improve with the national economy.

The auto business has always been cyclical and right now we're in an especially bad cyclical down turn. They want to reform their business plan during this down turn, slash costs, ride the next up turn hording cash, and then use the cash cushion to ride out the next down turn. Rinse and repeat.

[Imran Siddiqui]

The only thing we are concerned with is whether GM makes money as a company. And the reason they are not making money as a company is their high costs.

So having too high costs is now unrelated to being an efficient company? If your input is so high compared to others in the same industry (meaning, of course, they are wasting less money and have lower input prices per car), how is that efficient?

Would you consider GM to be more "efficient" then? They would be making profits. So they must be more efficient, right?

But the only thing that would have changed is who pays the cost of benefits (and when). It is just a change in accounting. How can that increase efficiency?

Seriously? So GM can get rid of some of their biggest input costs, while keeping the same output level and their efficiency hasn't changed? Really?!

So if a company found a way to have robots do all of their car manufacturing and were able to halve their labor costs and produce the same amount of output, that wouldn't be more efficient?