Dec. 4 (Bloomberg) -- U.S. lawmakers were told General Motors Corp., the country's largest automaker, may fail this month if they don't give the cash infusion the company seeks. "I believe we could lose General Motors by the end of this month," Ronald Gettelfinger, president of the United Auto Workers union, told a Senate panel today in Washington. The Big Three automakers renewed their plea for an emergency federal bailout as a deadlocked Congress showed no progress in deciding how to aid them. GM Chief Executive Rick Wagoner said his company needs an "immediate" $4 billion, and $4 billion more next month. "We're here today because we made mistakes," Wagoner told the Senate Banking Committee. "Forces beyond our control have pushed us to the brink." Wagoner, Chrysler LLC Chief Executive Robert Nardelli and Ford Motor Co.'s Alan Mulally together are asking for as much as $34 billion in federal aid. "I am sorry to be asking for this support," Wagoner told reporters before the hearing began.
Dec. 4 (Bloomberg) -- U.S. lawmakers were told General Motors Corp., the country's largest automaker, may fail this month if they don't give the cash infusion the company seeks.
"I believe we could lose General Motors by the end of this month," Ronald Gettelfinger, president of the United Auto Workers union, told a Senate panel today in Washington.
The Big Three automakers renewed their plea for an emergency federal bailout as a deadlocked Congress showed no progress in deciding how to aid them. GM Chief Executive Rick Wagoner said his company needs an "immediate" $4 billion, and $4 billion more next month.
"We're here today because we made mistakes," Wagoner told the Senate Banking Committee. "Forces beyond our control have pushed us to the brink."
Wagoner, Chrysler LLC Chief Executive Robert Nardelli and Ford Motor Co.'s Alan Mulally together are asking for as much as $34 billion in federal aid. "I am sorry to be asking for this support," Wagoner told reporters before the hearing began.
Never figured, regardless of how people felt one way or another, the government would let GM go down, but if they've got less than a month, they're probably not going to make it. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
Defending The American Car Industry
Though you would never know it from the way the news has been reported, for forty years the Detroit companies' foreign competitors have systematically pursued predatory pricing in the American market. They have thereby starved Detroit of the adequate returns necessary to invest in new, more efficient production technologies. The Japanese in particular have used unfair trade practices to devastating effect. On the one hand they have kept their home market as a protected sanctuary, where they often garner superrich profits. On the other in the American market they have often sold their products at little more than marginal cost. All Japanese government denials to the contrary, the Japanese domestic market is heavily protected. Thus the high pricing there is reserved for Japanese producers. Two German manufacturers, Mercedes-Benz and BMW, enjoy token positions at the top end but have been strictly boxed in to ensure that for more than two decades the combined share of all foreign makers has been kept to a mere 4 per cent. Even Korean car makers are shut out (though they sell effectively against Japanese competition everywhere else). It is not as if the Koreans and Japanese don't trade with each other in other industries. Actually they do a huge trade: Korea is Japan's third largest trading partner and Japan is Korea's second. The fact is that as a matter of policy on both sides, cars are not traded (Korea's car market is even more protected than Japan's and even more hostile to American imports). For students of Japanese protectionism perhaps the most telling point is that though France's Renault company, through its stake in Nissan, nominally controls Japan's second biggest showroom network, it has never been allowed to sell more than a few hundred of its French-made products in Japan.
The Japanese in particular have used unfair trade practices to devastating effect. On the one hand they have kept their home market as a protected sanctuary, where they often garner superrich profits. On the other in the American market they have often sold their products at little more than marginal cost.
All Japanese government denials to the contrary, the Japanese domestic market is heavily protected. Thus the high pricing there is reserved for Japanese producers. Two German manufacturers, Mercedes-Benz and BMW, enjoy token positions at the top end but have been strictly boxed in to ensure that for more than two decades the combined share of all foreign makers has been kept to a mere 4 per cent.
Even Korean car makers are shut out (though they sell effectively against Japanese competition everywhere else). It is not as if the Koreans and Japanese don't trade with each other in other industries. Actually they do a huge trade: Korea is Japan's third largest trading partner and Japan is Korea's second. The fact is that as a matter of policy on both sides, cars are not traded (Korea's car market is even more protected than Japan's and even more hostile to American imports).
For students of Japanese protectionism perhaps the most telling point is that though France's Renault company, through its stake in Nissan, nominally controls Japan's second biggest showroom network, it has never been allowed to sell more than a few hundred of its French-made products in Japan.
For another thing, what about the many markets where the Japanese compete and Detroit doesn't? Like Africa, for instance? Or Southeast Asia?
I think that the biggest problem GM and Ford have is centered on their products, not their wage costs or manufacturing efficiency or brand management or executive compensation. They simply don't make the kinds of cars that people want to buy. You can't buy a car made in Detroit that competes with the Honda Fit or Toyota Yaris. Period. At any cost.
Should there be money to be made, I think Detroit would have solved the right hand drive issue. Ford certainly knows how to make right hand drive vehicles. This is certainly not the first time I have heard the protected domestic market argument and I have yet to see it convincingly refuted. I doubt that it can be. Nor is this the first time I have heard the strong dollar argument.
My suspicion is that these policies strongly favor large US retailers and those in the financial dis-services industry who have bought up, closed down and laid off workers of US manufacturers so they could ship the production to China and other low labor cost destinations and then clean up and sell the property formerly owned by said hapless manufacturing companies.
I believe that this is a suicidal, unsustainable race to the bottom that now has succeeded in hollowing out the US economy for the benefit of retail, transport and finance and has helped create a massive national accounts problem that had to blow up, which it is now doing.
The other significant contributor to this problem has been our oil companies and the associated national accounts problems deriving from importing so much oil, especially at $40 to $140/bl. This has allowed those companies with domestic production to sell at great profit oil that costs them $2.00/bl. to $20/bl. to produce.
So due to the highly unequal distribution of wealth in this country and the consequent highly unequal distribution of economic and political power the whole country has been systematically looted and run into the ground in the interest of a few small vested interests. The rest of us are left with the carcass of an economy. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
And you're right that Ford in Europe knows how to make LHD cars--in order to sell them in Britain. But how many Detroit-made cars find their way to Europe?
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Despite this commitment, Toyota's foreign workers in Japan are second-class citizens. On arrival the guest workers' passports are confiscated. During the first year as "trainees," they are not covered by Japan's labor or minimum wage laws. They work alongside Japanese workers, putting in the same long hours, but often earning less than half the minimum wage - as little as $2.76 an hour, or $479 a month. As guest workers, they are required to remain with the same employer - no matter how bad the working conditions - and to live in the company housing assigned to them - even though some are charged twice what their Japanese colleagues pay for comparable accommodations. Any worker who tries to change jobs, or who complains about conditions may be forcibly deported. By the time food, housing, and taxes are deducted, some guest workers end up earning less than $600 for an entire year, according to several advocacy organizations and unions that work with subcontract plant temp and guest workers. ... In the U.S., Toyota has set up non-union plants in the South - far from the unionized auto industry stronghold of the Midwest. Blunting support for unionization is Toyota's practice of paying wages nearly on par with the U.S. auto companies (around $25 an hour in comparison with G.M.'s $26 to $28) - although with much lower benefits. Meanwhile the Big Three's falling sales and market share have forced the American companies to adopt, and their workers to accept, two-tier wage and temporary worker schemes eerily similar to those used for years by Toyota - just to compete. And the race to the bottom seems to be just warming up. In September 2008, an internal Toyota memo leaked from its Georgetown, Kentucky plant, laid out management's plans to cut $300 million in labor costs in its U.S. operations. In April 2008, the Wall Street Journal reported that Toyota plans to end its practice of pegging its hourly wages to UAW rates, and will now pay new hires only 50 percent above the local prevailing wage. In Kentucky, this would mean a savings of about 12 percent, or $3.00 per worker hour - which, of course, will put even more of a squeeze on the Big Three U.S. auto companies and their unionized workforce.
In the U.S., Toyota has set up non-union plants in the South - far from the unionized auto industry stronghold of the Midwest. Blunting support for unionization is Toyota's practice of paying wages nearly on par with the U.S. auto companies (around $25 an hour in comparison with G.M.'s $26 to $28) - although with much lower benefits.
Meanwhile the Big Three's falling sales and market share have forced the American companies to adopt, and their workers to accept, two-tier wage and temporary worker schemes eerily similar to those used for years by Toyota - just to compete. And the race to the bottom seems to be just warming up. In September 2008, an internal Toyota memo leaked from its Georgetown, Kentucky plant, laid out management's plans to cut $300 million in labor costs in its U.S. operations.
In April 2008, the Wall Street Journal reported that Toyota plans to end its practice of pegging its hourly wages to UAW rates, and will now pay new hires only 50 percent above the local prevailing wage. In Kentucky, this would mean a savings of about 12 percent, or $3.00 per worker hour - which, of course, will put even more of a squeeze on the Big Three U.S. auto companies and their unionized workforce.
Primary strategy. The 2007 GM-UAW contract was the first "bailout" scheme, to capitalize GM's bond rating and pensions in exchange for slashing wages. At the time Gettlefinger said, union members had made enough sacrifices to allow GM to be competitive with non-union automakers. But he's hinted recently bosses aren't averse to breaking the line in order to support the automakers' pitch to Congress for $34B.
The complete Toyota report is at NICNet.org Diversity is the key to economic and political evolution.
Doesn't generally happen that way, in my experience.
Example: A friend of mine is married to a Frenchman[1] who came over on (I'm pretty sure) an H-1B, and who was in the process of getting a green card when they started dating. The process is expensive and a pain in the ass, but it's a pretty boring and formal process. I don't think his employer cared much either way.
[1] (See, Jerome, we love the French, even in the South. And he's not even one of those fake Canadian ones.) Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
but but isn't that exactly the issue with greencards in the US.
Why, yes, Helen :) picking scabs is an age-old American pasttime. When when labor organizes and agitates and wage demands squeeze margins, corporates shanghai recruit the world's poor and yearning to be free. By the boat-load.
Oh. That scrubbed Detroit News article, "$10M cost of do-over is obstacle; powerbrokers in Mich. to press solution with national party"? I saved bits I thought interesting back when... March 2008.
The governor, in an interview with The Detroit News, referred to the contest as a "firehouse primary" -- more expansive than a party caucus but not a full-blown affair like a traditional, state-financed primary. People would have to declare themselves Democrats in order to participate, and the contest would be run by the Democratic Party, not the state. [...] In another development, a new Michigan team was set up Thursday to talk with the Democratic National Committee about a resolution. The members are: U.S. Sen. Carl Levin, U.S. Rep. Carolyn Cheeks Kilpatrick, Democratic National Committeewoman Debbie Dingell and UAW President Ron Gettelfinger. All are neutral in the presidential race. [...] The national party needs to ante up or help raise money to pay for it, she said. State taxpayers already shelled out $12 million for the Jan. 15 primary, and Granholm said she won't ask for public funding for a make-up contest. Hillary Clinton won the January primary, but she was the only major candidate [sic] on the ballot. The others, including Barack Obama, had their names removed. [...] Granholm and state Democratic Party Chairman Mark Brewer said the national party has been pushing for party caucuses. Brewer estimated the cost of running a firehouse primary at $10 million, to cover the mechanics, staff and publicity.
There's always more to the story ... Diversity is the key to economic and political evolution.
For one thing, they drive on the wrong side of the road and Detroit doesn't design their cars to have steering on either side. So that keeps out the vast majority of cars.
That's actually trivial. In a lot of plants around the world, LH and RH drive cars come off the same line.
The problem isn't simply not having small-car designs either: they do - in Europe (the Ford Fiesta is simply the first one that comes to mind).
The US carmakers chose to neglect the economy segment - and now they're paying for it. The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
you are the media you consume.
The problem is that the US market focused, thanks to insanely low gas prices (due to lack of taxation) on bigger and bigger cars, and Detroit did respond to what the market wanted - and fed that demand too, because they had an advantage in the light-truck sub sector.
Demand has shifted brutally because the impact of gas prices is much stronger in the US than elsewhere, and the Big 3 are weaker in the smaller segments - they simply haven't marketed their products as "no-nonsense" cars, and it takes more than a few years to change your product mix. In the long run, we're all dead. John Maynard Keynes
Not a single Japanese car: zero, none. Probably the only country in the world (with North Korea?). It was really striking. Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.
On the one hand they have kept their home market as a protected sanctuary, where they often garner superrich profits.
GM makes: Cadillac, Saab, Hummer, Corvette and Chevy SUVs.
Ford Japan: Mustang and SUVs.
Chrysler: PT Cruiser, Grand Voyager, 300C, 300C Touring
I would send you the link, but like their cars, the website is overweight and cumbersome, takes ages to load up each page. They apparently only care about people who like fat cars and fat bandwidth.
Although in the ultra-chic parts of Tokyo you do see SUVs once in a while, and even (though very rarely) a hummer (which looks absolutely ridiculous on the streets of Tokyo), most Japanese don't go in for the sort of models that Detroit produces.
Zwackus has a better handle on the Japanese car market than I do, but that's my take on it.
Also, a friend of mine living in Japan points out:
Almost 3M small cars and 1.4M of the ultra small "Kei" cars that Detroit doesn`t even make. Those two categories are 3/4 of the total domestic market. The Big Three are focused on the small, high end market which is already crowded with European makers that have more prestige.
On the other hand, this does not address the issues of workers' benefits, especially to retirees, that Japanese makers do not have to pay, apparently, in their U.S. factories. But I believe asdf makes a good reply to that point:
My understanding is that the labor cost in a car is only about 10% of the total. It's a capital intensive business, and Japan has pretty high labor costs just as does the U.S.
Having said all this, I still think bailing out GM may be the right thing to do to prevent 2-3 million jobs from vanishing, especially after listening to this:
The Big Three U.S. Auto Makers Head Back to Washington
But this all might be moot, as one month is not a lot of time to do this in. Truth unfolds in time through a communal process.
Also, America is a huge market with only a few competitors for the Japanese. They haven't gone into Europe as extensively, and couldn't, as the local market is so strong in most countries.
I also leaning toward protecting current jobs with FutureIncomeTaxesNOWTM. But...One just wonders, what lasting good will come of two months of pouring 8 billion into GM? What happens in February that they will suddenly be able to be on their feet and join rdf's dancing plan? The economy is not going to be magically triumphant after O'Bama's InauguralSpeechOfDestiny. There are still too many houses yet to go into foreclosure and too many companies who rely upon consumers...who just happen to be either out of money, or (gawds forbid) saving money...yes, Americans actually taking money out of the system by saving...a good thing in most regards, but a giant bad thing in an economy that needs their Spend-O-RamaSensation to keep the carousel spinning...in this case the car companies' carousel...which ain't gonna happen in February unless they use the 34 billion to buy everyone cars - no payments, no interest, pre-bought car, BankErrorInYourFavor - Free cars for everyone.
As for Detroit wages, I just can't believe that they are higher than in Bavaria, minus the health and welfare aspect, which is so poorly done in the heretofore non-socialist America. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
However, all developing economies require protectionism : One of the defining qualities of "free trade" is that it prevents establshed economies from competitors due to their inherent strutural advantages. Japan has simply retained a legacy flag carrier from a period of relative weakness. They may no longer need it, but it fulfills a cultural requirement. keep to the Fen Causeway
Japan eliminated import tariffs on all cars in 1978.
Then in 2002 it proposed to the WTO that all developed industrialized countries drop all tariffs on passenger cars, trucks and auto parts (on which it has no tariffs), but the European Union rejected the proposal. (At the time the EU had tariffs of "around 10 percent on passenger vehicles, 22 percent on trucks and five percent on parts", according to this article.)
So tell me, what "cultural requirement" was the EU fulfilling by maintaining these tariffs despite the fact that Japan having none? Was this an anticipation of the "cooperative protectionism" recently advocated for Europe by Emmanuel Todd?
And to repeat my question to Jerome above, how is Japan being protectionist in the automobile market? (It may very well be, but I would like to understand exactly how, as there seems such an assure consensus on this claim.) Truth unfolds in time through a communal process.
I've heard from various people that trying to sell foreign products in Japan can be unusually interesting. Regulations can make it very difficult to open stores, never mind local factories, and there's a certain background level of xenophobia and exceptionalism which means that Japanese buyers only take foreign products seriously if their brand is seen as having high status.
Just because it's an open market in theory doesn't mean that it's open in practice.
On the opposite side, imports are comparatively exceedingly high (than say, if the yen were at 2 to the dollar), which fits their market just fine. Never underestimate their intelligence, always underestimate their knowledge.
