The Fbodfather Lays it Down

[z28luvr01]

http://www.camaroz28.com/forums/showthread.php?t=648766

A very good read. If you think GM's irrelevant, you better think again.

[CARBIZ]

I think perhaps part of the problem is that Toyota, Nissan, etc. are all licking their chops and think that if GM or Ford go down, then they will automatically see a 20-30% surge in their business.

THAT WILL NOT BE THE CASE.

In the immediate short term, the sudden shock to the general economy of one or more major Detroit icons going down will only drag the economy down with it. In the long term, since it really isn't in the 'best interests' of any of the Japanese 5 to swoop in and take over the manufacturing plants, dealers, etc., the (high paying) job losses will affect auto sales for many, many years.

I suspect - and this is only a gut feeling at this point, that the general blow to America's pride and manufacturing stature will be permanent, which could very likely result in a general, permanent downturn of the American economy. The 3 or 4 million ancillary jobs to the Detroit auto industry will not be replaced in the short or medium term. Even if the Japanese 5 pick up a few dealers and factories here and there, those high paying jobs are lost FOREVER. The future value-added jobs will be lost forever.

Let me paint a little picture for you boys and girls from the Real World:

Once upon a time I owned a little video store in a town of 15,000. When I opened (naive 24 year old that I was), there were 7 other video stores in town, plus a half dozen convenience stores that rented movies, too. I laughed and scaffawed at those puny, ignorant mom&pop operations; I imagined that myself (under the auspices of a major national video chain) would swamp them all and become a billionaire.

When reality hit, I was half right: over the next couple years, one by one, the smaller operations did fold, but where did all their customers go? My sales made a slow, painful climb from the disappointing Grand Opening that I thrust upon the medium-sized town, but I puzzled as each store closed as to why I wasn't seeing a 20 or even 10% sales increase. (I also realized that the franchise I had was useless and got rid of them, but that is another story.)

For years, I labored under 60 hour weeks, sweating and busting my ass, until there were only myself and two other stores in town. Most of the convenience stores had given up and taken out their video sections. I still puzzled as to why I wasn't making money hand over fist. Where were all the customers?

Then along came a 'new' major chain and parked itself across the street from me. I quaked and I fumed, but I dipped into the family fund, doubled the size of my store and stood firm against this new interloper. Oddly, my sales went UP 30% the first year after this big chain opened across from me. My sales continued to climb, but so did my overhead: more staff, more computers, more maintenance, more taxes - all the joys of running a 'big business.'

I bankrupted the new chain, then bankrupted their successor again. I would pour every dime I had into my store on improvements, new computers, more movies, etc., but I never seemed to get ahead. In fact, each time I would spend any money on myself personally (y'know, take a vacation, get a new car), I would get slapped down by some new outrage: economic downturn, the Goods and Services Tax introduced in '91, for examples) that would affect my bottom line and I would struggle anew. If I didn't have a family with means to fall back on (at 9%, of course), I would have gone under a couple times.

Finally, success was within my grasp ( I opened a 2nd store in a nearby larger town) and the road to Easy Street was before me, then FAte threw another evil trick at me: a major cable company bought the store across from me. I had one brief flirtation with wealth (the 4 weeks they were closed for renovations), then had any hope for prosperity summarily snatched away from me forever.

No, I do not want your pity or tears, but I have a deep understanding of what it takes to run a good company. On the one hand, you can never let up; you can never sit back and enjoy the fruits of your labor (as GM and Ford did in the '70s/'80s.) There is always someone out there who is jealous and will covet your customers, who thinks they can do it better than you. This medium town where I struggled for 11 years is but a microcosm of what the general economy is like.

When an unknown 'foreign' entity targets you (as I later found out this cable company was prone to do), there is really nothing you can do. I had to pay my bills based on my customer service and my rentals only; this cable company treated the rentals as a (albeit major) sideline to their more lucrative cable drop off location. I didn't stand a chance. They were not playing by the same rules as me. They were much bigger than I, they were 'national,' their service was lousy. None of that mattered. As a real estate friend of mine said at the time,"nothing succeeds like success."

I handed the business to my sister, and fled for new frontiers, but I earned a grudging respect for the trials and tribulations of running a company in the modern world with labor laws, government interference, monopolistic competitors and changing market conditions.

[Camino LS6]

Absolutely true.

Now is not a time for ideology and infighting, it is a time for pragmatism and action.

There is only one choice in the here and now, the govt. must make these loans to the auto industry. The catastrophe resultant from not doing so is an option we simply cannot choose. To do so would be a gross misconduct of our leadership.

Grit our teeth and make the loans now, or endure the effects of a new Depression.

The choice before us really is just that simple and stark.

Choose.

[Camino LS6]

That whole thread is a good read, BTW.

[FUTURE_OF_GM]

There needs to be a fundamental shift in consumerism for anything to be long term.

Obama and Detroit need to work together to PROMOTE Detroit as a source of power, pride and heritage so that Joe Q Know-nothing Public has a clue as to what he is pissing on when he says negative things about Detroit.

The media needs to be shut up. (I don't think regulation is the answer, but if a media outlet spreads lies, then it ought to be subject to lawsuits from the big 3 IMO)

And the consumer needs to be informed...

Product is not the answer now. The big 3 HAVE the product. It's an IMAGE GAME and that's why Japan Inc, in conjunction with the media has worked SO hard to change and instill the perception of the domestics to NEGATIVITY.

I mean seriously, I remember not 3 years ago when the media was attacking GM for building vehicles for Nazi Germany... Seriously?!?! Give me a break!

When the domestics started recovering about 5 years ago, the media started piling on the negativity through editorials and opinion pieces because the product was no longer faulty. THERE GOAL was to completely remove Detroit from the equation (i.e. It wasn't enough for the american citizen to not buy american based on merit... No, the american citizen had to be conditioned to HATE and LOATHE american autos for the 'corporate policies' or 'notoriously bad products' or 'what their executives opinions of global warming is') So now, a lot of american not only WONT CONSIDER american cars, they flat out WONT buy them "just because".

And that "just because" is usually just that, because they can't provide any concrete reasons. It's the same mentality of people who voted for Obama "because of hope and change" or McCain "because he's got more experience" There is no specific reason, just a general line that has been conditioned into the psych by the media.

Edited November 13, 2008 by FUTURE_OF_GM

[cletus8269]

I mean seriously, I remember not 3 years ago when the media was attacking GM for building vehicles for Nazi Germany... Seriously?!?! Give me a break!

i think that showed up in the lounge not too long ago.

[smk4565]

Toyota has a very long term point of view, as do many Japanese companies. Many Japanese will work for one company their entire life, where as in the U.S. we tend to have 5-7 career changes, and we are more short term focused than they are. Toyota wouldn't mind 3-5 bad years after a Detroit collapse, if they know that in 2020 or 2030 they will be strong. Toyota has kept quiet, if they thought they were in trouble long term, they would have said something by now.

I also wonder what GM's plan to pay back this $25 billion loan will be?

[CARBIZ]

Toyota has a very long term point of view, as do many Japanese companies. Many Japanese will work for one company their entire life, where as in the U.S. we tend to have 5-7 career changes, and we are more short term focused than they are. Toyota wouldn't mind 3-5 bad years after a Detroit collapse, if they know that in 2020 or 2030 they will be strong. Toyota has kept quiet, if they thought they were in trouble long term, they would have said something by now.

I also wonder what GM's plan to pay back this $25 billion loan will be?

Paid for by the hapless Japanese consumers. Toyota has a 'guaranteed' market of 2 million units in Japan where it has been unchallenged for decades. The Japanese consumer has put up with 10 years of moribund bank stocks and flatlined real estate values so that Japan Inc can assault its foreign markets - or how else do you think Toyota can borrow monies at 0% and then ride the currency wave over here?

If Congress takes an equity stake in GM, then the $25 billion investment can be paid back in spades when GM starts to kick some ass again in 2 or 3 years.

It's a good thing Chrysler didn't face the same internet BS in '79 when they went before Congress.................

[smk4565]

If Congress takes an equity stake in GM, then the $25 billion investment can be paid back in spades when GM starts to kick some ass again in 2 or 3 years.

I know Toyota has some built in advantages thanks to the Japanese government, but the Detroit 3 just have to compete with that. If the Detroit 3 weren't paying $75 an hour to employees, maybe they could.

What product will GM kick ass with in 3 years? They cut annual R&D spending to about $5 billion or perhaps less. Toyota spends $8 billion a year, over 3 years that is a $9 billion dollar gap. GM has to get ahead of the curve for a change, and unless they spend about $10 billion a year, they won't.

[CARBIZ]

A lot of things are changing: GM's warranty costs are going down; Toyota's (Tacoma!!) costs are going up. With new powertrains, vehicles and (hopefully) game changing technologies like the Volt coming onstream, GM is well positioned to returning to profitablility and 'outspending' Toyota in the all important R&D department. GM has had a lot of partnerships with Lotus (one example), Fiat and others that often makes their R&D spending more productive. Another example is the new 6 spd, co-developed with Ford and others.

I don't understand how anyone imagines Detroit could have dealt with the UAW any differently. There was a time when GM and Ford actually stood up to the UAW and won (in the '40s, I believe), but would you advocate a return to the bitter days where guys on the line sabotaged vehicles because they were so enbittered?

Are we going to let an entire industry die just because Detroit has obligations to its own workers? How is letting the industry die and indirectly paying for all the retirees in Japan going to help OUR futures? 'Pay me now, or pay me later' comes to mind.

Whatever Congress decides to do, it is clear that GM was turning the ship around and was on the right track to profitability, until the wheels came off the economy.

The GM of today is not the same GM of even a decade ago. I, for one, would like to see how this hand plays out. (And this is coming from someone who could easily move to Brazil tomorrow and become a house-husband!)

[balthazar]

>>"If the Detroit 3 weren't paying $75 an hour to employees"<<

Average employee wage at GM is $28/hr.

>>" They cut annual R&D spending to about $5 billion or perhaps less. Toyota spends $8 billion a year, over 3 years that is a $9 billion dollar gap."<<

Shockingly remeniscent of your equating of vehicle quality with vehicle price, it's interesting to note that for all that toyota supposedly invests in R&D, that their products are only mid-pack in anything you care to grade them on. It begs the question; where does all that R&D money actually show up in the vehicle itself ??

[smk4565]

Toyota has a 6-speed too, Lexus has 8. Toyota is going to have a plug-in hybrid like the Volt, plus a smart For2 competitor, plus a new 60+ mpg Prius, a Lexus version, etc. The stuff GM is coming out with now isn't anything everyone else isn't doing as well. IF GM has to pay $2500 more in labor per car, then they better be able to charge $2500 more for a Malibu compared to a CamCord, and they aren't able to do that.

I don't think they can be profitable with the UAW, it is a failed business model. I want to see GM back on top again, but I think they are at the point where they need to go into chapter 11, blow it up and start over.

[smk4565]

>>"If the Detroit 3 weren't paying $75 an hour to employees"<<

Average employee wage at GM is $28/hr.

>>" They cut annual R&D spending to about $5 billion or perhaps less. Toyota spends $8 billion a year, over 3 years that is a $9 billion dollar gap."<<

Shockingly remeniscent of your equating of vehicle quality with vehicle price, it's interesting to note that for all that toyota supposedly invests in R&D, that their products are only mid-pack in anything you care to grade them on. It begs the question; where does all that R&D money actually show up in the vehicle itself ??

GM base wage is $28, with OT and other extras it is $39. PLUS healthcare costs at $33 per employee, that puts them at $72 and hour, which was their 2007 average.

I would never buy a Toyota, I see them as appliances. The money is going into making a car that can park itself, a 6-speed on their pickup rather than a 4, hybrid technology, and a lot goes into 5-6 year product life cycles. I'd actually be interested to see how they break down their R&D spending, and how much goes to each brand.

[Chicagoland]

The late 40's, 50's and 60's was when GM was rolling in $$$$. The 70's was the begining of the slide. First the 1970 strike, then 73 OPEC embargo, Chevy Vega issues, the rest is history.

[gm4life]

Good read. Very good read.

[biff]

What's interesting about Japan is it seems like they've put it all on the line for a piece of the American Pie. They have the highest debt to GDP ratio of any industrialized nation. I didn't realize this until recently, here's the link.

[haypops]

IF GM has to pay $2500 more in labor per car, then they better be able to charge $2500 more for a Malibu compared to a CamCord, and they aren't able to do that.

A Malibu does cost $2500 more than a Camry.

[prinzSD]

The scary part is I just read an article that was saying the Republicans don't want to give the loan to Detroit because it will give Obama a victory. their logic is by not giving out a loan,when Obama takes office in January he will be starting off in a major negative. Problem is that we may not have an auto indusrty left by January-February to save. If in fact the Republicans are attempting this political move, then they will lose 2 Republican voters (myself and my wife). There is no more time for the Pubs to be pulling this bullsh*t. Our elected politicians need to play ball with each other instead of party politics.

[Camino LS6]

Our elected politicians need to play ball with each other instead of party politics.

A hard lesson they must learn if the country is to recover at all.

It is time for pragmatism.

[Chicagoland]

"saying the Republicans don't want to give the loan to Detroit because it will give Obama a victory"

And they wonder why they lost so many races. Keep this up and they will be Dinosaurs instead of Elephants.

[CARBIZ]

A Malibu does cost $2500 more than a Camry.

?????? Not around here. The Camry is easily $2,500 more than a similarly equipped Malibu. If you factor in the Impala (standard V-6), then the gap widens considerably.

[haypops]

?????? Not around here. The Camry is easily $2,500 more than a similarly equipped Malibu. If you factor in the Impala (standard V-6), then the gap widens considerably.

The regional differences in pricing is fascinating.

Edited November 18, 2008 by haypops