Obama faces tough decisions on US auto industry

[babylonsister]

Obama faces tough decisions on US auto industry

By TOM KRISHER AND KEN THOMAS
Associated Press Writers


WASHINGTON (AP) -- The Obama administration faces difficult choices on the fate of the U.S. auto industry, weighing the cost of pouring billions more into struggling companies against possible bankruptcies that could undermine plans to jump-start the economy.

General Motors Corp. and Chrysler LLC are racing against a Tuesday deadline to submit plans to the government to show how they can repay billions in government loans and return to viability despite a sharp decline in auto sales.

The terms of the federal loans set "targets" for concessions, largely from debt-holders and the United Auto Workers union, but concession talks have made little progress with just a couple days left before the initial deadline.

Negotiations between GM and the UAW broke off Friday night but were to resume Sunday, still focusing on exchanging the company's cash payments into a union-run retiree health care trust for GM stock, according to a person briefed on the talks who didn't want to be identified because the bargaining is private.

more...

http://hosted.ap.org/dynamic/stories/O/OBAMA_AUTOS?SITE=CONGRA&SECTION=HOME&TEMPLATE=DEFAULT

[TahitiNut]

1. The auto industry offers far more "bang for the buck" than the money-lenders.

Productivity, particularly in manufacturing, is the ONLY thing that will allow us to recover from decades of off-shoring, trade deficits, and the excesses of global militarism.

The folks who say "give us your money" and offer no products in return are usually thieves.

[2Design]

2. wow you have a candy store going there - n/t

[TahitiNut]

4. Some folks call her "Peggy."

:evilgrin:




Me? I just WISH I had the libido that'd let me be a whore.

:hide:

[2Design]

5. Enjoy being a Ho!

[babylonsister]

7. ...

:spank: Funny thing is, I got that 'toon in an e-mail last week and pmed it to CAPeggy. :D

[TahitiNut]

8. (LOL!)

You've always been peaches to me. :loveya: :hug:

[2Design]

3. But if they are using the money to fix things in mexico - what do we do

They are spending money in other countries more than here - so does it make sense for us to give them money - they don't seem to understand they can make the changes on the backs of their union workers and management needs to give up some of their frills - this is the same problem in so many corporations - the top 10 to 20 % have 80% of all the benefits and money

[blue_onyx]

9. Change our trade policies

to give all companies, including GM and Chrysler, the incentive to produce products here. It is cheaper to produce products in Mexico and import them back to the US. So the good business decision is to do this, although it may not be in the best interest of our country. We complain that the US car companies aren't running their business well but also complain if they do something that may save them money. I think we need to support US companies and give them the business incentive to keep US jobs.

[Greyhound]

11. The work done in Mexico, in particular, sucks, it's only "good business" because

it's cheap. In the long run it is detrimental to the company because of dissatisfied customers with higher repair bills.

[blue_onyx]

14. Much of US manufacturing has left the country

because it cheaper elsewhere. If customer dissatisfaction was big enough to be detrimental to companies, why haven't companies started moving their manufacturing facilities back to the US? If it was such a bad business decision to send manufacturing to foreign countries, then we would probably see a slew of companies moving back.

[Greyhound]

16. Toyota, Honda, BMW, etc.

None of these companies were even competitive with Chrysler, let alone Ford or GM, 40 years ago. MBAs and hereditary managers and their short-term, bad decisions, taking over more and more of the industry has promoted the move by the American consumer to foreign cars.

"The fastest way to go broke is to buy more and more into a shrinking market".

Every quarter the profit goes up because of short-term savings derived from such strategies, all the while ignoring the consistent loss in market share. We are buying more cars, so the overall market is growing, but we buy a smaller percentage from the Big Three and that is the result of management decisions.

The Japanese came into this market with poorly made cheap crap, subsidized by their government, they put all their energy into making better designs and higher quality. How did Detroit answer? More advertising, more managers, more lay-offs.

[Jack Bone]

6. Just wait until Tuesday...it's all conjecture until then...nt

[blues90]

10. I have a huge problem with the big three

Mainly because I worked for one for 34 years and saw just how things got where they are.

They worked with the oil companies all these years and even in the early 70's with the two times there was some sort of oil shortage the big three reacted by offering smaller cars that used less fuel.

But as soon as this threat was over and many people still had the big model gas hogs mainly because they were not ready to jump to a small car if in fact they could afford on to get rid of the hog car since no one would buy one.

But as soon as this gas shortage evaporated and the price of gas shot up where if you recall it was justified that we paid more for a gallon of milk than a gallon of gas.

THen the big three were back to producing gas hogs with a face lift , back with the V-8 and back with the large car and how unsafe a small car was. Then soon came the SUV and the people bought into this craze because gas was still affordable because people still had jobs that paid well for the most part.

Behind the scene there was a demand on outsourced parts not made in america and the bigs threes plan of obsolescence actually spurred the after market parts trade because the big three did not offer the repair parts anymore.

THe big three created the trend of bigger SUV's and the people bought into this yet the imports stayed with small cars as they have always been.

Point being the big three knew just what they were doing and only because the american people bought into this insane mindset that it was possible.

People forget of they were not around in the 70's and did not know.

Point is the big three knew about peak oil and knew about the more fuel efficient cars being produced over seas but ran with what they called progress and defined it as desired. Americas idea of a car is the car makes a statement and the rest of the world the car is transportation.

[Greyhound]

13. Agreed. The Big Three's problems are, and always have been, management.

They have, OTOH, always been successful and laying the blame off on the workers and the union, and that is our fault for not paying attention.

As for the ever popular screed of "Americans wanted (gas guzzlers, SUV, whatever) and we were only giving them what they wanted", it ignores or discounts the power of PR. In reality, Americans want whatever Madison Avenue tells them they want. Business does not spend billions of dollars each year on it because it doesn't work.

[blue_onyx]

15. American consumers weren't victims that had SUV forced upon them.

I don't understand people that choose to blame companies for personal decisions. It the same as people who blame fast food restaurants for people being overweight rather than blaming people for eating the food. We all know there is a relationship between oil companies and US car companies. The US automakers made a poor business decision in focusing only on SUVs and for its part in killing the electric car. But to blame the companies for people choosing, of their own free will, for buying the gas guzzlers is absurd.

[Greyhound]

18. So you don't believe that advertising works?

Let me ask you this, what was the percentage of over-all SUV (they weren't even called SUVs then) sales from 1970 - 1990? Each manufacturer has made them this whole time, so what happened in 1990 to cause sales of these vehicle to take off?

Millions of Americans just wake up and said to themselves, "I'm really tired of driving a comfortable, easy handling, car. I think I want an expensive huge 4-wheeled drive truck to go to the store in"?

[blue_onyx]

21. Of course advertising works

but to ignore consumer responsibility doesn't make sense. Auto companies like SUV because they bought in higher profits than small cars. It was consumers, however, that ultimately decided they liked these vehicles and continued buying them. If consumers didn't like SUVs, they wouldn't have bought them and the car companies would have stopped producing them. No amount of advertising can take a product consumers hate and turn it into a product they are willing to purchase. Companies advertising their products (that's what ALL companies do) and its up to the consumers to decide whether to purchase that product.

[Greyhound]

24. We're not ignoring it, you are avoiding the point.

It has been proven over and over for decades, people will buy what they are told to buy. The only variable is what is the most effective way to tell them what they want.

Ford made the Bronco and Explorer, GM made the Suburban and whatever they called the Jimmy before the rename, for decades and consistently sold the same number of them. They were purpose-built specialty vehicles useful to a certain segment and nobody else bought them. Why would they? They served no useful purpose for most people.

Then some MBA notices that the profit margin on them is greater, mostly because they don't fall under certain safety and mileage requirements, and voila, a $100,000,000 advertising campaign later and they can't keep them in the showroom. The consumers didn't drive the demand, the manufacturers did.

Meanwhile, the Japanese and European manufacturers market share keeps growing and growing.

Of course the individual consumers made the decision to buy them, but that decision was driven by the campaign.

[blue_onyx]

27. I'm not avoiding anything....I'm disagreeing with you

"The consumers didn't drive the demand."

Yes they did. If the demand wasn't there, nobody would have purchased the vehicles and the auto companies wouldn't have made SUVs.


"It has been proven over and over for decades, people will buy what they are told to buy."

I think this is a pretty sad view of people. We're all mindless zombies that just buy what we're told? So people buy Snuggies because they've been told they need one? I think this is where our disagreement is. I'm giving consumers more credit and assuming they put more thought into decisions. Even if I were to assume you are correct (that car companies create the demand for SUVs), consumers chose, whether consciously or unconsciously, to make the purchase. Advertising can be a powerful thing but I think responsibility ultimately lays more with consumers.

[Greyhound]

28. You've stated your belief, so how about your explanation for why, after ignoring them

for decades, consumers suddenly wanted to drive the SUVs that this conversation has focused on?

Is it your contention that this mysterious demand suddenly appeared of it's own accord and then the manufacturers decide that it was time to blow a few hundred million dollars after the fact?

Have you ever studied advertising? There is no shortage of material out there, including very detailed studies of just how to do exactly what we're talking about.

[blue_onyx]

29. Tastes change

Circumstances change such as gas prices. A big part of SUV popularity was that gas was cheap enough to allow people drive SUV (which wasn't always the case during the years preceding the 90s).

I majored in marketing in college but didn't focus on advertising specifically. I know very well what we're talking about. As I said in my previous post, "advertising can be a powerful thing but I think responsibility ultimately lays more with consumers." Giving into an advertisement is a choice. An ad can led someone to have certain views on a vehicle (ex: SUV are more luxurious and safer) but when it comes to pulling the trigger on a purchase, the consumer is responsible. I believe it's the consumer's responsibility to make informed and rational decisions. The car companies sold us SUVs because they made more money off those vehicles and consumers bought SUVs because we wanted them.

[blues90]

22. It's not that simple , no offense.

The big three paid a lot of money for certain people to tell them what americans would buy , many used the same fellow and his company to advise them.

People don't decide what the big three put out of their factories , we only see the product when it is ready for the showroom or at auto shows.

People buy what is offered so in that sense they are forced to be faithful to the american big three or stray and buy imports, This does produce a guilt trip in a certain sense.

Just one case in point , ford stopped making convertables at one point and then the trend was on put there by ford not by demand of the public and what did ford do. In 1983 they took a stock mustang and outsourced the top which was a stock mustang with the original hardtop cut off and a convertable top added on and it was a joke , nothing fit proper and there were nothing but problems yet the customer was never aware of this. Then there was this retro car time which was started by the comeback of a modern VW Beetle and ford put out their old T-bird which was another horror by ford with nothing but leaks and creaks and problems for everyone other than ford. The customer was pissed because of the cost and the people who fixed these cars or at least did what they could were at the firing line of the repair issues and finally ford dropped the product. There was no way to make these T-birds leak proof and quiet because of the way they were designed, no way.

When these units are advertised with all the high speed open road shots and promoted people will buy them but in no way did the people ask for them. Same like the Vans with the removable seats that looked so easy until one found out it was a two or three man job to lift the rear seat out.

It was never the workers who were to blame for any of this , it was the people who designed this crap and promoted it. People who bought the focus were bombarded by endless recalls and one was never a recall that involved an ignition switch that without warning suddenly would not turn so it involved a tow in and $200 + to repair it once it was out of the 36,000 / 36 month warrenty. I never saw a new model with so many recalls and since the time of the exploding Pinto recalls became a daily ordeal on almost all of there products where they all could have been avoided through better design and or better parts that were not made by the lowest bidder as they were. Radios were also a huge issue , years ago , if fact I'll bet today you could connect a battery to an old 60's or 70's car piled in a junk yard for years and turn on the radio and it would still work perfect. People did nat ask for electronic radios , no one ever bitched about mechanical preset buttons and a dial. Progress to make it cheap to produce and offer more options brought this to the consumer. Now people expect more. Radio controls in the steering wheel plus an air bag and cruise control , one accident and look at the cost once the airbag deploys just for that one thing , insurance anyone?

Make the damn things simple and basic ,it's transportation not a home away from home as they are now thought of and who's idea was that?

[blue_onyx]

25. I agree...its not that simple

but some people seem so willing to take all personal responsible out of the equation. Advertising can only go so far in persuading people to buy certain products. If people hated SUVs, no amount of advertising would make them buy one. If consumers didn't like SUVs, they wouldn't have purchased them and the auto companies would have stopped making them.

You make it seem like SUVs were the only things offer by the Big Three. When people went to a Chevy dealer, there were SUVs (ex: TrailBlazer) or the cars (ex: Cavalier). The auto companies are to blame for people making the decision to go with the more expensive, gas guzzling SUV instead on the practical, fuel-efficient compact car? At what point do we start taking responsibility for our purchases/decisions?

[blues90]

26. That's true , however

Advertising is a long perfected art. You see more ad's when the SUV's came out than cars and many people I met working at dealerships came in convinced they already wanted an SUV , they felt it was safer and more room for the family and all their stuff would fit in so it was an all around do all unit.

I was not a salesman but a salesman is not going to tell a customer what they really need , they just need the sale.

I agree it's up to the people to be informed and be responsible for what they buy , there is also peer pressure involved , people want what they see someone else has in their driveway. There used to be station wagons.

People felt they were getting more for their dollar since an SUV was not much more per month than a small car if you got the basic model and the fuel never entered the picture at the time. Most SUV's I saw only had wear in the drivers seat same with the big crew cab PU trucks.

[Tierra_y_Libertad]

12. GM is now threatening bankrupty to blackmail congress for more dough.

Too big to fail?

[babylonsister]

17. I think that's part of the dilemma. No decision will be easy. nt

[Sen. Walter Sobchak]

19. I got flamed for this months ago

But GM already got what they wanted out of the bailout - enough capital for a successful Chapter 11 re-organization. If they can shake more money out of Washington all the better but the purpose of the auto-bailout was to get enough capital to go through Chapter 11 and break the UAW contract without running the risk of liquidation since they would never have been able to obtain debtor in possession financing.

Thanks Suckers!

[Jack Bone]

30. It's not the UAW contracts they're after....

trust me, we know who butters our bread. We'll roll over for anything sustainable for us and for the retirees. It's the suppliers contracts that are the toughest to break. It's those suppliers contracts that are the majority of their expenditures, thanks to all of the outsourcing of the late 80's & 90's, that have come back to bite them in the ass.

I work for Chrysler, for the time being, here's their proposal to Congress from last fall.

http://www.freep.com/assets/PDF/1202chryslerplan.pdf

on page four they give a summary of expenditures(projected)for the 1st qtr of '09 ($Billions).

Parts Supplies = $8.0
Other Vendors = $1.2
Wages = $0.9
Healthcare/Legacy = $0.5
Capital expenditures = $0.5
Other expenditures = $0.5
---------------------------
Total expenditures = $11.6

since wages only amount to $900 million, I assume that's all wages..hourly & salary alike, going after the UAW for wage concessions is just a small part of the needed solution.

If bankrupcy is the only viable solution, please refrain from parroting Sen(s) Corker & Shelby's talking points, in that the UAW is the problem.

[OhioChick]

20. The unemployment rate is so terribly high...

People just aren't buying cars. If one has lost their job or is worried about losing it (huge percentage of people right there).......they're not going to buy ANY brand of car.

People need JOBS in order to buy cars. There's a good article "out there" called "No Job, No Recovery."

[MarjorieG]

23. Even if GM made electric car they had in 90s, and destroyed, who'd buy them now?

When would they? That's reorganization aside.

Axelrod was great on MTP today, with this, banks, politics....