Auto sector bailout

[bush_cheney2004]

Obama can please a lot of people by bringing policies that reward Americans for buying vehicles that are made in America, and I expect that is exactly what we'll see early next year.

It may piss off a lot of people in Canada, but so what?

That might very well happen....in the form of tax incentives. Because until the demand side dynamics change, auto sales will be down by several million units per annum.

Ummm, the #1 reason the EU was created was to protect their own industries and their own jobs, at any cost. What other reason could there possibly be for building Citroens or Renaults?

No fair confusing him with facts!

They have zero interest in opening their markets to our products, and know that they cannot compete with China or the US in supplying our markets. All the baloney about this serves the PR and optics for both Canadian govt and the EU, but that is as far as it will go.

Correct..as in divorce...it is cheaper to keep her.

[bush_cheney2004]

I support a bailout on One Condition. The US congress and Canada collectively buy up all the shares of GM, Chrysler, Ford and put those share in a public Trust overseen by a board who scrutinize and evalutate the company's actions.

Not going to happen.....hell, Ford only wants a loan guarantee just in case, cause they are in the best relative shape. Chrysler should have been gone years ago.

So what makes sense, hand them over money or take the companies on behalf of taxpayers and then pump money into them??

Government run anything leaves a lot to be desired. Look at your health care system! (uh - oh)

[Huston]

Government run anything leaves a lot to be desired. Look at your health care system! (uh - oh)

Yeah, the don't understand that is it controlled by questionable U.S. corporations or industries (controlled by limited number of larger corporations) in pharmacology and agriculture is supported by the government.

[bush_cheney2004]

Yeah, the don't understand that is it controlled by questionable U.S. corporations or industries (controlled by limited number of larger corporations) in pharmacology and agriculture is supported by the government.

That's OK by me, just as long as the GOVERNMENT isn't actually running business operations.

[Huston]

That's OK by me, just as long as the GOVERNMENT isn't actually running business operations.

But it has been for some time now. If it wasn;'t for government intervention, those companies would not exist or hold that power. They would have had to work for it. It would be a lot cheaper. By removing government, what would you then impose so that they do not gain anymore power then they do have.. they will just end up at world agencies instead, and the people are helpless to get real choice back. But people are too concerned that people jobs are at stake. Is this totalitarian, or just terrible management that things have gone so far, because of neocon and neolib movements of progress, that failure will cause terrible problems like starvation.

[fellowtraveller]

That might very well happen....in the form of tax incentives. Because until the demand side dynamics change, auto sales will be down by several million units per annum.

It is not enough to have tax incentives, there must be punitive duties on anything built outside the US, and that will apply to Canada in a big way.

And Canada will have to bite the bullet and eat a very large sh*t sandwich, since we have little to bargain with other than oil, which is hardly in demand.

[bush_cheney2004]

It is not enough to have tax incentives, there must be punitive duties on anything built outside the US, and that will apply to Canada in a big way.

Sounds good in theory, but the Tier II & III supply chain is too integrated for that. We even have NAFTA parts content information clearly indicated on window stickers. Hmmmm...is that new car smell Canadian or American or Mexican?

And Canada will have to bite the bullet and eat a very large sh*t sandwich, since we have little to bargain with other than oil, which is hardly in demand.

I think you are mostly right, but for more indirect reasons related to Obama's game plan. I for one have invested a princely sum in Canadian and American alternative energy sectors, only to be thwarted by cheap oil.

[Argus]

I think some people are getting it. Consumers do not want to buy American Gas Guzzling shitboxes. These cars can all go to the crusher for all they are worth. Honda, Toyota, and Nissan are making fuel efficient Cars that people want to buy

This is a cliche, you know. The big 3 make a lot of fine cars and their quality is very similar to that of the foreign automakers.

Generally, they do not last as long, however. On the other hand, they cost considerably less, and the parts and repairs are much lower than the foreign car makers.

[Smallc]

GM's market value - 7 Billion US

http://www.cnbc.com/id/25392542

Chrysler market value - 7 Billion US

http://www.247wallst.com/2007/04/what_is_chrysle.html

Ford market value - 5 Billion

http://finance.sympatico.msn.ca/Investing/...mentid=11070250

None of them are worth near that anymore. Also, Ford is worth more than GM. You can't take numbers that come out months apart and compare them. You could probably buy all 3 companies today for less than 6 billion.....except you couldn't buy Ford, since the family has control of the B stock and a larger percentage of the A stock.

[bush_cheney2004]

None of them are worth near that anymore. Also, Ford is worth more than GM. You can't take numbers that come out months apart and compare them. You could probably buy all 3 companies today for less than 6 billion.....except you couldn't buy Ford, since the family has control of the B stock and a larger percentage of the A stock.

True and not true.....market cap is only one metric. One could not buy all three for $6 billion USD..or it would have happened already.

[Smallc]

True and not true.....market cap is only one metric. One could not buy all three for $6 billion USD..or it would have happened already.

Because they have huge debts that far outweigh it...and as I said, Ford can't be bought.

[whowhere]

None of them are worth near that anymore. Also, Ford is worth more than GM. You can't take numbers that come out months apart and compare them. You could probably buy all 3 companies today for less than 6 billion.....except you couldn't buy Ford, since the family has control of the B stock and a larger percentage of the A stock.

From a benefit point of view, Ground Zero is to "own" the company. If the governments set up a trust to oversee these shares and sell them off as the economies recovered I believe the taxpayers would come out of this with huge returns. What is happening instead is the shareholders of GM, Ford, and Chrysler laughing all the way to the bank.

Hold on wait, I have to go buy some GM shares Actually, this open up a huge integrity problem when it comes to accounting and shareholder entitlement. The US for the most part is land of cheaters. How many companies over the years have cheated investors or deprived company profits to investors through accounting loopholes. The US capital market is a cheat and a fraud. Until the US redresses this, they will get zero confidence and respect from the world investment community.

[Wilber]

I think some people are getting it. Consumers do not want to buy American Gas Guzzling shitboxes. These cars can all go to the crusher for all they are worth. Honda, Toyota, and Nissan are making fuel efficient Cars that people want to buy. This 6.8 billion should be put in front of them to expand their production in Canada and that will sustain the auto Industry in Ontario.

Put good money after good. The fact is Canada for alot of years has been relying on Commodites to sustain it self. Politicians have to recognize Canada is a Naturally wealth Country with resources that can be sold to anyone in the world.

Canada has to open up serious trade relations with Europe and tell the US to FAK OFF.

OK, we get it, you hate Detroit iron. November US auto sales: Toyota down 35.6%. Honda down 46.6%. Nissan down 51.8%. Now tell me again why they are going to expand North American production. Besides, if there is no domestic auto industry for them to compete with, why should they build cars here at all?

[Smallc]

From a benefit point of view, Ground Zero is to "own" the company. If the governments set up a trust to oversee these shares and sell them off as the economies recovered I believe the taxpayers would come out of this with huge returns.

I already told you, the Ford family owns a large part of Ford. You would probably have to pry it from their cold dead fingers. Considering that they aren't even asking for money up front, the Government can't really even put any strings on them like they will on GM and Chrysler.

[whowhere]

OK, we get it, you hate Detroit iron. November US auto sales: Toyota down 35.6%. Honda down 46.6%. Nissan down 51.8%. Now tell me again why they are going to expand North American production. Besides, if there is no domestic auto industry for them to compete with, why should they build cars here at all?

Well, I didn't want to point out the obvious but some need the obvious. ahhh, if GM and Chrysler go bankrupt they will no longer be selling cars. If they are no longer going to be selling cars in North America, would this not translate into higher sales for Honda, Toyota, Nissan, and whoever else??

Was it that hard???

[August1991]

The fact is the game is up for the United States. The world knows their game. In this time of economic confusion do not throw good money after Bad.

Honda and Toyota are manufacturing Heavily in Ontario. If there is any money it should be put their way to have them expand their business to take advantage of those Losers at GM, Ford, And Chrysler.

So Honda and Toyota should manufacture cars in Ontario and ship them to, uh, Spain?

The single state of California has more GDP than all of Canada too....maybe they should kick in a few billion.

You miss the point, BC.

For GM and Chrysler, the Canadian government is a player (or a rube). California may have a GDP equivalent to Canada but Schwarzenegger is not discussing a subsidy of $7 billion. Clement apparently is.

It's false economics. If there was any economic value realized by these auto companies it would certainly be wiped out by giving the 6.8 billion to them. Where is this money going to come from?? Why should other sectors taxes go to subzidize these losers. Why should Honda and Toyota be penalized for running a proper business and building products that makes sense to the market.

The essence of the argument. We are penalizing success to encourage failure.

BTW, GM's current line of argument is that their credit operations (GMAC) have taken a hit just when GM is about to roll out new vehicles. GM is asking for breathing space during a financial crisis not of its making.

I think some people are getting it. Consumers do not want to buy American Gas Guzzling shitboxes. These cars can all go to the crusher for all they are worth. Honda, Toyota, and Nissan are making fuel efficient Cars that people want to buy. This 6.8 billion should be put in front of them to expand their production in Canada and that will sustain the auto Industry in Ontario.

Put good money after good.

And of course politicians like Harper, Dion, Duceppe, Clement and Layton really understand the car business and know exactly how to give money in a way that will, as you say, put good money after good. (If Harper, Dion et al know so much about the car business, why are they in the political business?)

Maybe instead you should wonder why people who know the car business well are asking people like Harper, Layton et al for money.

IME, politicians and bureaucrats cannot pick winners - unless it concerns themselves.

----

Current political irony. There is zero support in Quebec to subsidize the auto sector in Ontario and yet if this coalition project were to succeed (with Duceppe's support), a Dion federal government would open the taps to subsidize Ontario's car industry. Go figure.

Edited December 7, 2008 by August1991

[bush_cheney2004]

Well, I didn't want to point out the obvious but some need the obvious. ahhh, if GM and Chrysler go bankrupt they will no longer be selling cars.

Not necessarily so....GM and Chrysler could operate if they could solve the warranty problem.

If they are no longer going to be selling cars in North America, would this not translate into higher sales for Honda, Toyota, Nissan, and whoever else??

Hasn't so far....their sales are down too. Besides, those firms do not have the capacity for light truck production needed for commercial firms and government. GM will survive in some form....Chrysler should have died long ago.

[betsy]

Is it true that auto workers in assembly lines get $84.00 per hour???

[betsy]

The Coalition have been fighting for more billions to prop the failing auto sectors....to keep the jobs of aouto workers. You hear Layton speaking and grieving for for this sector everytime he opens his mouth.

Here is what these folks make in year 2006.

Labor cost per hour, wages and benefits for hourly workers, 2006.

Ford: $70.51 ($141,020 per year)

GM: $73.26 ($146,520 per year)

Chrysler: $75.86 ($151,720 per year)

Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).

Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D. (see graph above, click to enlarge), and 52.6% more than the average worker at Toyota, Honda or Nissan.

Many industry analysts say the Detroit Three, and especially Ford, must be on par with Toyota and Honda to survive. This year's contract, they say, must be "transformational" in reducing pension and health care costs.

What would "transformational" mean? One way to think about: "transformational" would mean that UAW workers, most with a high school degree, would have to accept compensation equal to that of the average university professor with a Ph.D.

http://mjperry.blogspot.com/2007/07/uaw-pr...-of-market.html

WHY DON'T THEY TAKE A PAY-CUT INSTEAD???? Why should we spend billions on these workers when there are millions other Canadians who make so far, far less than them, who makes only minimum wage and struggling to put food on the table?

What makes this sector so special to the Coalition???

[margrace]

I don't have any economic training but even I could see at least 15 years ago that Ontario was in trouble with its dependance on the Car market. Greedy owners (shareholders?), greedy unions, greedy people in general that is what we have.

This also instigated the housing market bubble. Why does anyone need a house over 5000 square ft and only two bedrooms.

[scribblet]

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

They want 6.8 billion, but can or will they ever be able to pay it back. Both sides have to make changes, union contracts have to be voided and management has to take much less pay. One thing they have to stop is this paying employees not to work, which I think the American union agreed to, not sure.

There have to be guarantees that this money will all stay in Canada, not to any new plants in other countries, the price of autos has to come down a lot, and possibly a tariff on imports?

[scribblet]

That's what it costs the company, part of that is wages, the rest is the cost of benefits. I wonder what the union dues are.

this explains it

http://www.canadianbusiness.com/markets/he...;utm_medium=rss

Despite union arguments to the contrary, this represents a substantial cost to the Big Three automakers, which are struggling to stay afloat amid slumping U.S. vehicle sales and turmoil in financial markets, Faria said.

Before the last contracts were negotiated, the total cost of compensating a CAW employee for an hour of work - which includes wages, benefits and the so-called legacy pension costs of supporting retired employees - was approximately $77 an hour, according to both GM and the CAW.

UAW costs were slightly less, averaging approximately $73 an hour.

At that time, the U.S. and Canadian dollars were around parity.

However, UAW workers made several concessions in their latest contract, including the implementation of a two-tier wage system.

Under this system, current employees will keep their current compensation rates, but new workers will make significantly less in benefits and wages. These new workers will only cost their employers $47 an hour all-in, while non-assembly line workers will only cost $26 an hour.

In another concession, the UAW will take control of health-care benefits as of 2010, meaning the all-in cost of the workers who were hired before the two-tier system was implemented will fall to $62 an hour.

[scribblet]

I have some American friends retired for about 10 years from one of the big three, they still receive $1000.00 a piece for a Christmas bonus.... multiply that by thousands of retirees every year.

[whowhere]

That's what it costs the company, part of that is wages, the rest is the cost of benefits. I wonder what the union dues are.

this explains it

http://www.canadianbusiness.com/markets/he...;utm_medium=rss

Despite union arguments to the contrary, this represents a substantial cost to the Big Three automakers, which are struggling to stay afloat amid slumping U.S. vehicle sales and turmoil in financial markets, Faria said.

Before the last contracts were negotiated, the total cost of compensating a CAW employee for an hour of work - which includes wages, benefits and the so-called legacy pension costs of supporting retired employees - was approximately $77 an hour, according to both GM and the CAW.

UAW costs were slightly less, averaging approximately $73 an hour.

At that time, the U.S. and Canadian dollars were around parity.

However, UAW workers made several concessions in their latest contract, including the implementation of a two-tier wage system.

Under this system, current employees will keep their current compensation rates, but new workers will make significantly less in benefits and wages. These new workers will only cost their employers $47 an hour all-in, while non-assembly line workers will only cost $26 an hour.

In another concession, the UAW will take control of health-care benefits as of 2010, meaning the all-in cost of the workers who were hired before the two-tier system was implemented will fall to $62 an hour.

Actually, I believe there is pay equity laws out there. If you do the job you get the pay. It's hard to figure how these laws are bent to accomodate the greedy and self serving. These political a-holes better start standing behind the laws they create and force equality across the board. That means a pay cut across the board and severing of legacy costs from the balance sheet. Why should current shareholders, Bondholders, employees and management be beholden to costs that should have been accounted off the books and dispensed of.

The reality is bankruptcy of GM and Chrysler is right action. These workers have gotten their heaven off the backs of exploiting auto parts suppliers and their exploitating of workers of paying them $10 an hour with no benefits or Chance of Full time employment at a descent wage.

The fact is, Corporate America/Canada have zero say going forward. The minute they asked for welfare checks they lost all their rights to their exploitive repressive business practices. Corporation and their management deserve to be prosecuted and fined to the full extent of law when it comes to their business practices and mismanagement.

The message to be learned with all the bailouts is it ok to lie and cheat people. So remember people when and if times do get tough.

Do not be afraid to do what you have to do, to Eat!

[madmax]

There have to be guarantees that this money will all stay in Canada, not to any new plants in other countries, the price of autos has to come down a lot, and possibly a tariff on imports?

Are you suggesting this scriblett? Or is that from an article.