Tax breaks

[Topaz]

To get the cars moving the salesroom, someone has said that they should give tax break in return for the loans. I would like to see everyone that needs it get a FREE CAR or a TAX BREAK. I would think there would have to be a number but I can't see why they couldn't settle on 25,000-30,000 and it would have to be a car made in the NA. Any thoughts?

[scribblet]

A free car !! How would that help sales and the economy ? I'd go for tax breaks on N.A. cars only.

[eyeball]

A free car !! How would that help sales and the economy ? I'd go for tax breaks on N.A. cars only.

It would probably boost demand for oil.

[madmax]

A free car !! How would that help sales and the economy ? I'd go for tax breaks on N.A. cars only.

Shhhsshhs. Just get the car...

Ok, I admit, I have no idea what Topaz is trying to say.

[August1991]

To get the cars moving the salesroom, someone has said that they should give tax break in return for the loans. I would like to see everyone that needs it get a FREE CAR or a TAX BREAK. I would think there would have to be a number but I can't see why they couldn't settle on 25,000-30,000 and it would have to be a car made in the NA. Any thoughts?

Topaz, your idea in fact makes sense. Rather than give money (so-called "loans") to GM or Chrysler, the government could subsidize the purchase of a GM vehicle. Such a subsidy to buy (not a bail out) has the advantage that individual Canadians (not federal bureaucrats) would decide whether GM gets the subsidy or not and GM would know what models are popular.

GM Canada sells about 350,000 cars and trucks annually. In Canada, we are talking about a $4 billion bailout package. If converted to a direct subsidy, that would amount to about $10,000 less per vehicle sold for the next year. An Aveo retails for about $14000 plus tax - so Canadian buyers could get one for $4000 instead. It wouldn't be a free car, but close.

Topaz, I like your idea if only because it makes clear the numbers and what this bail out involves.

Edited December 23, 2008 by August1991

[msj]

Topaz, your idea in fact makes sense. Rather than give money (so-called "loans") to GM or Chrysler, the government could subsidize the purchase of a GM vehicle. Such a subsidy to buy (not a bail out) has the advantage that individual Canadians (not federal bureaucrats) would decide whether GM gets the subsidy or not and GM would know what models are popular.

Topaz, I like your idea if only because it makes clear the numbers and what this bail out involves.

This would not be a bail out if us taxpayers gave ourselves a good chunk of money to buy a GM or a Chrysler rather than a Honda or Toyota?

Is it the choice that turns it into a "subsidy" rather than a "bail out?" Does the distinction matter?

Oh, I have an idea - why don't we tell these companies to go screw themselves.

If they want to play the game of capitalism then they have to participate in "creative destruction" like the rest of us (or at least those not eligible for a "bail out"/"subsidy" because, you know, they - Toyota, Honda in this case - made the mistake of being successful).

Edited to add:

(American based, but coming to countries near all of us) Edited December 23, 2008 by msj

[madmax]

If they want to play the game of capitalism then they have to participate in "creative destruction" like the rest of us (or at least those not eligible for a "bail out"/"subsidy" because, you know, they - Toyota, Honda in this case - made the mistake of being successful).

FYI

Toyota had originally been projecting a massive profit of $13.9 billion for that period.

"Toyota's sales in the United States were down 34 per cent last month and were down 34 per cent in Europe as well," BNN's Michael Kane told CTV's Canada AM.

"So instead of making a profit as the company was expecting for the fiscal year ending in March, they are now expecting a loss which would be the equivalent of about $2 billion (CDN)."

Breaking from tradition, Watanabe gave no prediction for vehicle sales, or earnings, for the fiscal year ending in March 2010.

Edited December 23, 2008 by madmax

[Moonbox]

That still doesn't make Toyota unsucessfull. The company posted a 1 quarter loss after massive growth and profitability and is not anywhere near a situation where they would need a bailout. They'll weather the auto market collapse and be stronger for it.

GM and Chrysler, however, are completely boned.

This 'bailout' is nothing but a temporary measure. The companies are going bankrupt either way, but now they have until March to plan for it.

[Smallc]

That still doesn't make Toyota unsucessfull. The company posted a 1 quarter loss after massive growth and profitability and is not anywhere near a situation where they would need a bailout. They'll weather the auto market collapse and be stronger for it.

Look more closely at them. They are completely mirroring GM in many ways. They are getting too big, increasing the number of brands, and on some models (the Camry and Tundra) their quality is slipping. What goes up....

[punked]

That still doesn't make Toyota unsucessfull. The company posted a 1 quarter loss after massive growth and profitability and is not anywhere near a situation where they would need a bailout. They'll weather the auto market collapse and be stronger for it.

GM and Chrysler, however, are completely boned.

This 'bailout' is nothing but a temporary measure. The companies are going bankrupt either way, but now they have until March to plan for it.

Considering they are subsidized by both their governments and those of the southern states they can afford that loss right?

[madmax]

That still doesn't make Toyota unsucessfull. The company posted a 1 quarter loss after massive growth and profitability and is not anywhere near a situation where they would need a bailout.

I agree, however, many Japanese companies hide their fiscal woes for as long as possible, sometimes until too late. I don't see Toyota facing challenges other then a slow economy.

They'll weather the auto market collapse and be stronger for it.

Toyota could survive. However the North American economy was to face a slowdown as jobs moved to Mexico and offshore. The collapse of major auto manufactures through bankruptcy has the potential to set back the economy 5 to 10 years. Thus it is a choice between a slow burn or a quick fire.

GM and Chrysler, however, are completely boned.

GM is building facilities in Mexico and China, and production will be trimmed off by closing North American Operations. GM can choose Bankruptcy, or government loans to continue the transition. Suppliers to GM have always been cut to the bone, it will simply be a matter of continuing the operations without paying the suppliers monies owed.

Chrysler is a different kettle of fish. They are owned by a company which has enough money to bail them out themselves, if they felt the need. Better to get the governmet to pay. THat is what many companies do. Including Honda, Toyota and Nissan.

This 'bailout' is nothing but a temporary measure. The companies are going bankrupt either way, but now they have until March to plan for it.

Planning a bankruptcy is great strategy. Many companies operate in bankruptcy protection, or rise from the ashes of a smoldering wreck.

Yes, it is a temporary measure, whether or not the company goes bankrupt.

Bottom Line is this is about keeping GM afloat with Canadian Money, to build operations and continue future production outside of Canada.

How important is it to you, to use your money to help Mexicans and Chinese find employment at GM?

[Topaz]

Sorry to everyone not making myself clear. One of the problems in the auto sector is the backlogged of new cars not being sold and that the new loans to the auto sector they have to start making "green" cars. So why not give every taxpayer either a free NA made car to clear the inventory or a tax break at a certain montery value. A lot of the time the auto makers give a car voucher to retirers and also the taxpayer gets a direct pay back from the loan. Is this clearer?

[madmax]

Sorry to everyone not making myself clear. One of the problems in the auto sector is the backlogged of new cars not being sold and that the new loans to the auto sector they have to start making "green" cars. So why not give every taxpayer either a free NA made car to clear the inventory or a tax break at a certain montery value. A lot of the time the auto makers give a car voucher to retirers and also the taxpayer gets a direct pay back from the loan. Is this clearer?

What you are suggesting is similar Ontario Automotive Dealers Association. No point in building vehicles if you can't sell the ones you have. Peoples pockets are deeper and their arms shorter.

http://www.cbc.ca/money/story/2008/12/22/cardealers.html

New car dealers in Ontario are calling for the governments of Canada and Ontario to give tax rebates for three or six months to help get more people into showrooms and stimulate vehicle sales.

Geoff Wilkinson, the executive director of the Ontario Automobile Dealer Association, said Sunday night his members have a mixed outlook for 2009 because of the current weak economic conditions.

"But if we could see tax rebates for consumers and affordable credit programs, they'll better cope within this economic climate," he said.

The Dealers Association represents all dealerships for manufacturers worldwide, not just those manufacturers building automobiles in NA.

[M.Dancer]

One of the problems in the auto sector is the backlogged of new cars not being sold and that the new loans to the auto sector they have to start making "green" cars. So why not give every taxpayer either a free NA made car to clear the inventory or a tax break at a certain montery value.

Explain how everyone getting a new car will help the automakers sell new cars.

If I got a free new car, I would be putting off buying a new car for 7-10 years.

[Moonbox]

Planning a bankruptcy is great strategy. Many companies operate in bankruptcy protection, or rise from the ashes of a smoldering wreck.

Yes, it is a temporary measure, whether or not the company goes bankrupt.

Bottom Line is this is about keeping GM afloat with Canadian Money, to build operations and continue future production outside of Canada.

How important is it to you, to use your money to help Mexicans and Chinese find employment at GM?

I basically agree with everything you say, although I contest that everything is being outsourced to China or Mexico. I'm sure many things are, but assembly is usually done domestically because of the huge transportation cost advantage. How much do you think it costs to transport a new and completed vehicle from China to Ontario...or Mexico to Ontario? A lot. Certain things can be transported cheaply and certain things can't.

I know an orderly bankruptcy is necessary but what I'm really hoping is that whatever company emerges from bankruptcy protection doesn't have a militant UAW/CAW to deal with. When push comes to shove, the union is mostly responsible for the problems the Big Three are facing. Yes, poor management decisions helped things along, but the Union has always been there and it's been exaggerating labour costs for decades now to the point where there's a $30/hr wage and benefit difference between a Nissan and a GM worker.

I don't want ANY tax dollars provided for a bailout if we're just going to continue subsidizing CAW entitlement wages.

Edited December 23, 2008 by Moonbox

[Jerry J. Fortin]

I basically agree with everything you say, although I contest that everything is being outsourced to China or Mexico. I'm sure many things are, but assembly is usually done domestically because of the huge transportation cost advantage. How much do you think it costs to transport a new and completed vehicle from China to Ontario...or Mexico to Ontario? A lot. Certain things can be transported cheaply and certain things can't.

I know an orderly bankruptcy is necessary but what I'm really hoping is that whatever company emerges from bankruptcy protection doesn't have a militant UAW/CAW to deal with. When push comes to shove, the union is mostly responsible for the problems the Big Three are facing. Yes, poor management decisions helped things along, but the Union has always been there and it's been exaggerating labour costs for decades now to the point where there's a $30/hr wage and benefit difference between a Nissan and a GM worker.

I don't want ANY tax dollars provided for a bailout if we're just going to continue subsidizing CAW entitlement wages.

You can blame who you want for whatever problem you believe to be the cause of the entire auto industry. The bottom line is that our government has committed to a 20% total cost of a bailout for this industry to only two of the legion of players who will be bellying up to the bar with open hands. The politicians have blinked. If they do not act they will be roasted alive at the polls, if they do act they will be roasted alive at the polls. The difference being that there is a small hope that some jobs may be saved, but there is no hope of saving tax dollars at this point.

The harsh reality is that we are entering into a depression. We are just now starting to see deflation. Not only consumer goods are coming down, everything is. Commodity prices, stock prices literally everything, accept for the price of gold. Economies will contract, folks will lose their jobs, this isn't going to be pretty. In the end the politicians will lose their jobs as well.

Remember the phrase "The New World Order", well guess what, its here.

[madmax]

I basically agree with everything you say, although I contest that everything is being outsourced to China or Mexico. I'm sure many things are, but assembly is usually done domestically because of the huge transportation cost advantage. How much do you think it costs to transport a new and completed vehicle from China to Ontario...or Mexico to Ontario? A lot. Certain things can be transported cheaply and certain things can't.

Suppliers of GM were aware in 2005 to be prepared to relocate operations to Mexico and China, where future assembly production would be located. VW has been in Mexico for Decades upon Decades. Vehicles are shipped form South Korea, thus Hyundai and Kia, as well as many vehicles from the Japanese are shipped here.

The costs of supplier goods are shipped all over the continent, and it is nothing to ship a product made in Ontario, over to the US, then to Mexico for final assembly or visa versa. This has been a regular facit of the Automotive business for close to 2 decades.

When people purchase a car, they pay "Freight". There is no point in having suppliers in Ontario when New Manufacturing Plants are being built in Mexico, and the old ones closing in Ontario.

Vehicles built in Ontario, are shipped to the US, ie to the Southern States and California etc, which is little of little consequence to them if they were shipped from Mexico if one is worried about shipping costs.

But the Auto Industry being lean and JIT doesn't worry much about shipping costs

The Canadian Automotive sector has a logistics costs distribution that is particular, in the sense that it is different, not only from the average logistics costs distribution for Manufacturing, but also from various selected sub-sectors.

The first difference is that there is a lot more logistics outsourcing in the Automotive sector. For instance, the Motor Vehicle Manufacturing sectors outsource five times more than the Aerospace sector in terms of internal logistics costs expressed as percentages of total logistics costs.

I know an orderly bankruptcy is necessary but what I'm really hoping is that whatever company emerges from bankruptcy protection doesn't have a militant UAW/CAW to deal with.

When push comes to shove, the union is mostly responsible for the problems the Big Three are facing.

I cannot agree with your above statement. It is a myth, but myths are not reality.

Yes, poor management decisions helped things along, but the Union has always been there and it's been exaggerating labour costs for decades now to the point where there's a $30/hr wage and benefit difference between a Nissan and a GM worker.

Having close associates who have transitioned between Toyota, GM, Ford and CAMI/Suzuki, The difference is marginal and sometimes in favour of the Toyota employees. (the clarification lies in the fact that Toyota keeps paying their employees their entitlements, and GM has deferred and debted the benefits, to skew the costs/hour/employee)

Work Structures of some operations are comparable, others are not. But it is not wages or Benefits bringing the fortune of these companies to bear upon us. The fact that many of the Canadian Operations closing were highly productive and profitable would clarify that this is about major structural changes in relocation.

Last year, high energy costs, surcharges on Steel had continued, and the rising dollar, lowered margins. But for many operations, the collapse of purchasing power in the US due to housing collapse, followed by a financial collapse, have hurt all operations. On top of that, suppliers have had their banking system collapse, putting their sound operations into chaos.

Even with the collapse of Steel Prices, lower dollar, and lower energy costs, which should put Ontario back into profitable production, there is no confidence in the market south of the border, where sales occur.

I don't want ANY tax dollars provided for a bailout if we're just going to continue subsidizing CAW entitlement wages.

So.... a loan only if the Union Decertifies? And how do you propose we handle Auto Execs, management, etc, with our valueable tax dollars?

Edited December 23, 2008 by madmax

[msj]

Madmax, the difference between Toyota and GM that I am referring to is the difference between looking at the balance sheets of the two companies.

The information you have provided is looking at a narrow short term view of the income statement (which of course effects the Balance Sheet).

GM's balance sheet is a mess. Toyota/Honda's aren't (at least not yet).

This means GM is unlikely to weather the storm (well, not as they are now and not without a bunch of my money - if I wanted to give GM money I would buy one of their cars in the first place - without any "subsidy" per Topaz or August).

I don't know what Toyota's Z score is (and, admittedly I'm too lazy right now to find out), but GM's is under 1 which means "[p]robability of Financial embarassment is very high."

Edited December 23, 2008 by msj

[madmax]

I don't know what Toyota's Z score is (and, admittedly I'm too lazy right now to find out), but GM's is under 1 which means "[p]robability of Financial embarassment is very high."

No argument here.

[madmax]

The politicians have blinked. If they do not act they will be roasted alive at the polls, if they do act they will be roasted alive at the polls.

Yup

[Jerry J. Fortin]

Harper will suffer for this and other decisions in another month. My question is how will Iggy respond? If Iggy and the Liberals continue on the Dion path it means carbon taxes, that will keep the west in the Harper fold for sure. If he doesn't he will lose the Quebec and Ontario vote, lets make the assumption that a carbon tax is in the wings.

For Iggy to come out against a bailout of the auto industry he can start writing his own epitaph, unless he proposes somethings that Harper would not agree to and that the public wants. In that manner I expect we can see him come out against Harper. He needs a way to mark the differences between his party and Harper.

[Moonbox]

A carbon tax is almost as unpopular in Ontario as it is in the west. It's one of the main reasons the Liberals lost Ontario outside of Toronto.

The Carbon tax is ONLY popular in Quebec because most of their power comes from Hydro. It's an unfair, hypocritical plan that is only going to hurt the average worker in Canada and offer MARGINAL benefits.