Letting the Auto Makers fall.

[HistoryBuff44]

G&M article

First, I am glad that the government is saying they will let them fall. For sure it sucks for those who could lose jobs but the government needs to think at a macro level. how is it fair to the country to prop up those failing businesses and not all the other industries failing as well. not to mention how is it fair to taxpayers to get saddled with debt from companies that were failing in some of the best economic times in the last 30 years.

I do find it funny though that ol' GW said they should be helped and we pumped money into them. Then Obama, after the audit that scared most, says no to their next request and then we again follow suit. while i like the direction were going, you definately cant say we are leading the pack...

[scribblet]

I didn't read that article, but read this one, I'd say generally people are not in favour of the union. I wouldn't like to see that many people unemployed or pensioners lose their income, but I'm not sure that GM can be saved. $19.00 an hour isn't just from the hourly rate, it's a combination of wages and benefits, so it seems me, that would be preferable to no job.

I haven't seen anything concrete about cuts to CEO wages..

http://business.theglobeandmail.com/servle...NStory/Business

[jdobbin]

While these businesses might fail regardless, it will still be a huge burden to the taxpayer are the fall-out will be one that lasts many years.

For each car company that fails, there is the possibilty that hundreds of thousands of workers that might be out of work.

[Moonbox]

Some of the car companies have winning strategies and could easily turn things around. Letting them fail during a really rough time would cripple the Canadian economy moving forward and is not worth the cost.

On the other hand, some of the car companies (GM and Chrysler to be specific) have shown nothing but total incompetence. The CAW/UAW has compounded the idiocy.

I can get into it more if I have to, but if we're going to bail out GM there has to be MASSIVE changes there for it to be worth anything to the average Canadian. Chrysler has no hope but bankruptcy so I won't even go there.

[Smallc]

For each car company that fails, there is the possibility that hundreds of thousands of workers that might be out of work.

And as a result, tens of billions of dollars in lost income tax. It may cost the federal treasury significantly more to let them fail.

[Sabre Rider]

I've read that in the US 1 in 4 jobs are related directly or indirectly to the automotive industry, however in am not sure what the Canadian figures are. That being said, allowing two of the big American 3 fail would dramatic and far reaching negative percussions throughout the entire highly integrated North America economy, and that includes Mexico.

I've noticed that the most vocal attacks are generally aimed at the unions, however the unions have been making concessions to companies for quite awhile now, including a two-tiered wage structure that allow the Big 3 to pay new-hirers less then the old hands, much the same deal that the Supermarkets cut with their unions years ago. But no one has mentioned the impact that these concessions and wage cuts have had on the local economies as a whole. Less income means less taxation revenue, less consumer spending and less investments into RRSP's and the like. Meanwhile, the Big 3 upper management and Board members live the life of Reilly and continue to ignore the basics of producing quality products that give the consumer value for their money.

[Smallc]

I've read that in the US 1 in 4 jobs are related directly or indirectly to the automotive industry, however in am not sure what the Canadian figures are.

I think it's around 1 in 7 in Ontario and I can't remember the number for Canada, but it's high. Almost 500K jobs in Ontario and almost 100K jobs in Alberta are very closely linked to the industry.

[Sabre Rider]

I think it's around 1 in 7 in Ontario and I can't remember the number for Canada, but it's high. Almost 500K jobs in Ontario and almost 100K jobs in Alberta are very closely linked to the industry.

I don't drive anymore, preferring to either ride my motorbike or take the bus when it snows. Actually since breaking my arm walking to a bus this past December, I've haven't even been riding. However, even the motorcycle world is showing the pains of this economic slow down/recession/depression (everyone can choose their own option) and Harley Davidson, a brand I would never be seen dead on let alone ride (then again, I don't like cruisers no matter who makes them) is also facing major financial problems. They have had to cut back on their work force, shut down and consolidate operations and plants and issue bleak projections for the coming year. Apart from their product mix being basically aimed at 40+ somethings with large disposable incomes, most of HD's financial woes came about because they forgot what industry they were actually in, that being the making and selling of motorcycles. They started up their own financing arm and much like GMAC putting the boots to GM in North America, HD's financing arm has knocked the stuffing out of the motorcycle arm. It's not looking good.

[Hydraboss]

I don't drive anymore, preferring to either ride my motorbike or take the bus when it snows. Actually since breaking my arm walking to a bus this past December, I've haven't even been riding. However, even the motorcycle world is showing the pains of this economic slow down/recession/depression (everyone can choose their own option) and Harley Davidson, a brand I would never be seen dead on let alone ride (then again, I don't like cruisers no matter who makes them) is also facing major financial problems. They have had to cut back on their work force, shut down and consolidate operations and plants and issue bleak projections for the coming year. Apart from their product mix being basically aimed at 40+ somethings with large disposable incomes, most of HD's financial woes came about because they forgot what industry they were actually in, that being the making and selling of motorcycles. They started up their own financing arm and much like GMAC putting the boots to GM in North America, HD's financing arm has knocked the stuffing out of the motorcycle arm. It's not looking good.

You're bang on with Harley. It was mainly their Financial division that got them in a world of crap (very similar to the sub-prime issue). They were approving far too many people that should never have qualified. I paid cash for both of mine and I'm glad I did when I did. HD is announcing lay-offs and I don't think they've hit bottom yet. They have begun to cut production, raise prices and have already applied for federal funds should they need them.

a brand I would never be seen dead on

Good thing too. They're much too hard to ride when you're dead.

[punked]

I am the only one who reads the Globe?

http://business.theglobeandmail.com/servle...y/Business/home

I don't see an issue. "Automobile manufacturing as a business has generated profits every year in Canada since 1972, except 2002" Why is there all this CAW hate the car companies aren't losing money here they are losing it in the states.

[tango]

Ottawa is prepared to let Canada's two financially troubled car makers collapse rather than provide long-term financing to companies without a viable future, Industry Minister Tony Clement said Thursday as he ratcheted up the pressure on the Canadian Auto Workers union to negotiate new deals to slash wages and benefits.

It's just posturing ... bargaining.

I heard from the union today that GM in Canada has always been profitable. Workers' wages are a non-issue. It's just negotiation.

[Sabre Rider]

Good thing too. They're much too hard to ride when you're dead.

A friend told me he saw three bikes riding in December and one of them was a Harley Davidson. I quickly corrected him in that he had actually seen two bikes and a tractor.

Can you guess by my nickname what I ride? Here's a hint, VF45S

Edited April 17, 2009 by Sabre Rider

[Riverwind]

I heard from the union today that GM in Canada has always been profitable. Workers' wages are a non-issue. It's just negotiation.

Chrysler is the one in trouble. After Obama's ultimatum Fiat can play hardball. If the union does not give in then Chrysler goes under then Fiat can pick up the factories for cheap without the hassles of legacy labour costs.

[fellowtraveller]

what concerns me the most bout the proposed auto bailouts is the lack of security for the loans from the govt to the companies.

All the global assets of both GM and Chrysler -including Candian real estate-are pledged already to the US govt, which means if they fail we taxpayers get zero.

That makes the deal ultra-risky, and perhaps not worthwhile.

[HistoryBuff44]

And as a result, tens of billions of dollars in lost income tax. It may cost the federal treasury significantly more to let them fail.

Yes they lose money from lost income tax, but is that lost tax more than they pay out to the company to keep it running? unless it is the case, its an inefficent use of resources.

I dont believe it is because if you follow that logic through to the end, it would make sense for a government to spend forever to earn even more back.

[HistoryBuff44]

Ottawa is prepared to let Canada's two financially troubled car makers collapse rather than provide long-term financing to companies without a viable future, Industry Minister Tony Clement said Thursday as he ratcheted up the pressure on the Canadian Auto Workers union to negotiate new deals to slash wages and benefits.

It's just posturing ... bargaining.

I heard from the union today that GM in Canada has always been profitable. Workers' wages are a non-issue. It's just negotiation.

i would take anything the union says with a grain of salt... or a pound of it. Can GM Canada survive if GM goes under? GM has lost 84 billion over the last few years according to the independant audit ordered by the US government. thats what scared the obama administration from giving them the last 16 billion they requested.

[Molly]

Yes, CAW does say, and think, that it's 'just a negotiation', but I figure they've fatally misread the situation.

But, Historybuff... some investments pay back handsomely, and the auto industry is one that has done so.

[Hydraboss]

A friend told me he saw three bikes riding in December and one of them was a Harley Davidson. I quickly corrected him in that he had actually seen two bikes and a tractor.

Can you guess by my nickname what I ride? Here's a hint, VF45S

I used to love those bikes back in the 80's.

They're so cute when they're that size...

[Argus]

And as a result, tens of billions of dollars in lost income tax. It may cost the federal treasury significantly more to let them fail.

In all likelihood, a bankrupt GM or Chrysler would wind up being reorganized, and someone would buy the profitable assets and continue churning out cars and trucks. Of course, bankruptcy negates all labour agreements, so any employees would have to take whatever they were offered or walk away.

[HistoryBuff44]

Yes, CAW does say, and think, that it's 'just a negotiation', but I figure they've fatally misread the situation.

But, Historybuff... some investments pay back handsomely, and the auto industry is one that has done so.

Molly, there will always be an auto industry, its just a question of who is it. if GM or Chrysler falls, other will step in buy up the pieces and continue on. so long as people demand vehicles there will be companies to supply them. Therein lay the fundamental argument, you dont build something and then try to create a market for it, you spot the demand and build something for it. As soon as you remove the true nature of what competition does for us, you reduce quality and allow prices to be higher than need be. So if other companies can do it profitably, why should we support those who can't seem to?

[Topaz]

I don't think Chrysler will survive and there's been talk only cars GM will keep is the Cadillac and Chevy. They got rid of the Olds. division which I think was a mistake, so now we are talking about the "green" cars and I for one will NOT drive a small car and I'm not sure how many people will drive small cars and if they don't there goes GM! I, also, think that if people think they will get cheaper prices if the CAW-UAW unions are gone, well they won't. Another fact is if these people lose their jobs, and Windsor has a 13 % unemployment now higher than the national, we will ALL pay with higher taxes because the taxes the Feds collect will be much lower.

[madmax]

....so now we are talking about the "green" cars and I for one will NOT drive a small car and I'm not sure how many people will drive small cars and if they don't there goes GM!

Green Vehicles do not have to be small.

Green vehicles will have to be affordable or desired or they will sit on the lot just like every other car/truck made.

People without jobs don't buy vehicles, and certainly not NEW vehicles regardless of whether they are "green".

[madmax]

I don't think Chrysler will survive

When Chrysler was purchased by Cerebus, they had no intention of running a manufacturing operation. Their intent was to flip it or liquidate it.

It doesn't matter if the Autoworkers take a paycut or not as to the survival of the company. Perhaps the Federal government thinks that cutting the wages will make the product more attractive to Fiat, or somehow they think that by getting concessions, this will make an unnecessary bailout of Chrysler more palatable to the public.

Fiat can buy Chrysler split 2nds after declaring bankruptcy, and that's when the deal should happen. Taking cuts entails no job security, find out what the real situation is in CCAA where "Bankrupt" companies either prove that they are incompetent in running an operation, or as had happened on many occassions, silly little $100 Million quarterly profits get in the way of the bankruptcy argument.

Alot of this is posturing. At the end of the day, it won't matter what the union does or says. Everything is run from the top.

I, also, think that if people think they will get cheaper prices if the CAW-UAW unions are gone, well they won't.

Why would a company sell vehicles for less then what the market is willing to pay? Of course the price of vehicles won't go down of the "unions" are gone. However, buying power may diminish in both Union and non union operations as wages continue their 25% drops. Toyota matches union rates and if they drop the wages at Toyota will be held inline until Union rates equal that of Toyota. Toyota, should they choose to drop wages could induce Unionization (Note Irony) in order to protect their high wages. Fork Lift operators, a $10 most anywhere, have cleared $108,000 at Toyota.

Vehicles made in Mexico, offshore etc, are all priced as high as the market will bear.

As for these automakers, if you are making a pitch for money and claiming "bankruptcy", you better make it look horrific.

I don't find this is smart business if your intent is to sell vehicles. Look at the posts here and the mindset of the people with regards to the NA manufacturers at "risk". It is a turnoff, and even if they do make a good product people don't value it.

Honda, Toyota, etc are in trouble, but not nearly as bad as they have a cushion, but you never know, we may not be that far from a Hyundai incident or Daewoo failure, or a meltdown as happened in Japan some 20 years ago, that put them into the backseat of the economy.

Meanwhile, 1 company just closed here this past week. It is "NOT" bankrupt and has NOT filed for bankruptcy, but has denied its Salary and Non Unionized workforce their pay, vacation, and severance.

The His Buff, is correct that there are entire industries being let down by our Federal Governments incompetence, and inability to handle an industrial and manufacturing economy let alone let down hundreds and hundred and hundreds of thousands of employees.

Too much focus is spent on Auto, but that is the fault of media and of the General public who confuse all manufacturing with automotive.

Just as if they foolishly believe that the only factor involved in making a car is the final assembly and the wages of those employees in final assemble can turn the fortunes of $100billion enterprises.

There are far to many variables and inputs, but if it makes people feel better to put the burden on the final assembly unionized workforce, you can feel better, and punish them, but it isn't going to make a hill of beans difference in the long run.

However, the power that the auto has is to shut down these operations where unions such as the CAW refuse to offer up more concessions and if the government wants to play that game, they are doing no one in Canada any favours.

Chrysler may well go, but I wouldn't waste time dealing with Cerebus, or put any belief into the sales pitch of the Chrysler Executives. They need to clean house. Its funny how Chryslers way out of their last round of bankruptcy was to build small cheap affordable cars with great gas mileage. And the CAW fought concessions and chrysler went on to great things, until being swallowed up by larger, bureacratic orgs with no connection to production, only to money

[Moonlight Graham]

Why are we bailing out car companies that produce shoddy products? Honda and Toyota make terrific cars that are extremely reliable and fuel-efficient. Chrysler makes garbage cars. GM doesn't make the best cars either. Many Chev vehicles are junk compared to their Japanese competition.

In the end, its really the unions and the workers themselves who are to blame for this. They wanted ridiculously high wages and benefits that these car companies just cannot sustain while also trying to make quality cars AND turn a profit.

If these companies (and workers) want the bailout, they must drastically cut the ridiculas wages/benefits. If they don't agree, let the companies fail.

Edited April 18, 2009 by Moonlight Graham

[punked]

Why are we bailing out car companies that produce shoddy products? Honda and Toyota make terrific cars that are extremely reliable and fuel-efficient. Chrysler makes garbage cars. GM doesn't make the best cars either. Many Chev vehicles are junk compared to their Japanese competition.

In the end, its really the unions and the workers themselves who are to blame for this. They wanted ridiculously high wages and benefits that these car companies just cannot sustain while also trying to make quality cars AND turn a profit.

If these companies (and workers) want the bailout, they must drastically cut the ridiculas wages/benefits. If they don't agree, let the companies fail.

Thank you for showing us a poor arguement.

Unions+Car markers=Bad product (and to prove this you compare Domestic Car markers to foreign ones)

Too bad this isn't the problem with cost, the problem is retirees. Their is a high number of Pensioners for Domestic Car makers no so much with Toyota who has a structure that GM did 50 years ago when it had no pensioners.

GM has 400,000 Pensioners

Toyota has 200 BIG DIFFERENCE in fact it is the biggest difference and those who blame unions with out mentioning the pensioners make their arguement look dumb.