The Big 3

[isadorah]

All wages should reflect the company's performance. You cant take a failing company and say the wages should be as high as a successful company of the same type.

 

Some money is better than no money. The cost of living is all relative to the type of person you are. A pay cut is reducing your current pay. The agruement cannot be won on your side.

 

 

That is your humble opinion and since this is a matter of opinion there is no right or wrong answer. If a gallon of milk cost $2 one year and then $4 the next year and you are earning $12 an hour for both years, then indeed, you do not have as much money the second year as you did the first. Cost of living is relative and it factors into pay or there would be no such thing as cost of living wage increases.

 

Yes, having income is good. But it is never as cut and dry as you make it out to be in regards to which is better a cut in pay and keeping your job or losing your job. There are cons to both options, but to say taking a cut in pay is the answer to company financial woes is short-sighted in my opinion and not always the best answer. Also, I have to completely disagree that wages for workers are directly connected to a companies performance. Wages in this country are based on an arbitrary value system relative to the work being performed. Yes, a company that has a better bottom-line can afford to pay workers higher or lower than the average of other workers doing the same job. But at the end of the day slashing workers pays to fix the bottom-line fixes nothing.

 

We will have to agree to disagree.

 

I agree with JUDE's post. and about the UAW and that indeed the issues it is "taken to task" on are indeed very real and do need to be addressed. the Big 3 situation is clearly a no-win situation. I just think that a broad general statement implying that pay cuts are the way to go and have no further consequence are not the answer. it sounds like JUDE's company is looking at all angles and ramifications to a pay cut and what those implications mean (by reducing hours and creating work-sharing programs). simply cutting pay doesn't fix anything. hiring freezes usually come along with pay cuts. pay cuts mean people leave, positions don't get filled, people that stay work the jobs of multiple people, their hours get cut, but their work load and expectations stay the same. looking at the bigger picture and finding an over all solution to the financial problems, management problems, and ways to have all people in the company share the burden of the tough times would be a better approach, then simply saying cutting everyone's pay to reflect the companies performance will solve the problem.

[bjorn_skurj]

Not really labor's finest hour, this.

[John Smith]

The biggest reason why it didnt pass Senate was that the UAW didnt want to cut wages until 2011 when current contracts expires. It seems like a game of chicken, because it is better to have a job with less pay than no job. For now, the UAW won.

 

 

The UAW is a big reason why the companies are struggling thus why the wage cuts. Wouldnt you take a pay cut to keep your company alive to perserve your job? Shouldnt your wages reflect how well your company is performing? If you want to borrow billions, wages need to be reduced.

 

Should the president and his people be earning less and less as the country performs poorer and poorer?

 

Why doesn

[bobbob1313]

didn't the executives offer to work for a $1 next year?

[MattZ]

If something isn't done, and done quickly, and if that something doesn't work, I've got news for everyone. We will all be taking pay cuts. It's called deflation.

[Spawn's dad]

"If you give me 25 billion dollars so the stock I'm heavily vested in, due to my high level company position, doesn't totally shit the bed, I'll work for $1 for the next year.'

 

Pretty moving plea.

[MattZ]

The salaries of CEOs, and their chosen method of transportation to Congress, are not the cause of the problems we face and reducing their salaries (or forcing them to drive Hybrids to Congress) will not solve the problems we face.

[bobbob1313]

"If you give me 25 billion dollars so the stock I'm heavily vested in, due to my high level company position, doesn't totally shit the bed, I'll work for $1 for the next year.'

 

Pretty moving plea.

 

That was just in response to someone saying the CEOs should take a pay cut. I know it doesn't matter what their salary is.

[John Smith]

didn't the executives offer to work for a $1 next year?

 

 

This is one of those things that is probably heavily hedged. I'll bet they take their actual salary from whatever it is down to $1, but keep their Stock Options and other incentives in full.

[MrRain422]

I think the whole "The execs should take a paycut" argument wasn't really meant by anyone (okay, at least not by me) as a real fix to the problem, just to point out how unfair it was to pin the whole thing on the laborers. The fact is, neither cutting employee wages nor cutting executive salaries will fix the problem -- the problems run a lot deeper and are more complex than that. But if sacrifices are going to be made, it's only fair that they're made fairly across the board -- the onus shouldn't be put on those least responsible for the problems and least able to deal with cuts.

[bobbob1313]

I realize it's a totally empty gesture. Just saying.

[Spawn's dad]

Anyone wanna make a guess at what the Dow closes at today?

 

[Edie]

Excuse me southern lawmakers? The problems in the auto industry are trickling into your backyard too.

 

Toyota Motor Corp., with its sales plunging in the United States, is freezing its plan to build the Toyota Prius in a new plant near Tupelo, Miss. For how long? The automaker doesn't know. Toyota's board in Japan reached the decision late today to halt the project "due to the steep decline" in U.S. sales. Sales of the hybrid car have softened in recent weeks as gasoline prices dropped from a summer spike of more than $4 a gallon. The Prius sold 8,660 units in November, down from 16,737 in November 2007. Total Toyota sales in the United States fell 32 percent in November. This is the second time Toyota has changed plans on the $1.3 billion Mississippi project, which already has begun to draw component suppliers to the area.

 

In February 2007, Toyota announced it would spend $1.3 billion there to produce a new generation of Highlander crossovers. But after Toyota broke ground, SUV sales began to soften. In July of this year, Toyota said it instead would build the Prius there. A spokeswoman for Toyota's North American manufacturing operations says the company will continue constructing the building, which is about 90 percent complete. The company made its decision today before it had begun ordering the equipment that would go into the plant. Toyota has no timetable to resume the project, the spokeswoman says, but it will remain a Prius factory whenever the project restarts.

[explodo]

Excuse me southern lawmakers? The problems in the auto industry are trickling into your backyard too.

This is not true. Unions have caused and continue to cause all of America's problems.

[John Smith]

This is not true. Unions have caused and continue to cause all of America's problems.

 

It's obvioulsy the fear of potential future unionization throughout the south that has Toyota sales falling.

[ZenLunatic]

Auto Industry still needs money and no money is planned yet. It's a big political game. I think we all should start throwing our shoes at our elected officials because they suck.

 

There is a revolution coming. This is just the beginning of America's downfall.

[Duck-Billed Catechist]

I thought you were against the auto bailout.

[ZenLunatic]

I thought you were against the auto bailout.

 

I am against all bailouts. Didnt mean to sound like I was for it.

 

I also hate all the manipulation of government money and talk. You cant even trust what they say they will do. Bait and Switch. Change the rules and make them up as they go. I hate all the non-clarity of everything out there. We need some rules and structures that we can rely on to be there no matter what. How can we count on anything if the rules are constantly changing and nothing is set.

[Duck-Billed Catechist]

Well, they are queasy about giving a bailout or not giving a bailout. Can't say I blame them either way. That's why they are each trying to get some other branch to do it.

[ZenLunatic]

Well, they are queasy about giving a bailout or not giving a bailout. Can't say I blame them either way. That's why they are each trying to get some other branch to do it.

 

With great power comes great responsibility, Spiderman. It's politically bad to say to the people we need to suffer the forces and rebuild, but it is economically correct. Not many has the balls to deal with reality now. Not even Obama. Everyone just keeps selling bad ideas for hopes of temporary glory.

[MattZ]

but it is economically correct.

 

There is no correct answer here. That is the problem. This isn't a test with an answer key that the teacher has in her desk. I assume you are speaking loosely, and mean that this is just your opinion. But, I do think that a big problem here is that people -- on both sides -- have convinced themselves that there is a correct answer.

[Edie]

Just in case if you all thought that the non-US carmakers are smacking their lips over this

 

Why Toyota wants GM to be saved

A GM failure would cause production problems, crush already weak demand and potentially open the door to low-cost competitors.

By Chris Isidore, CNNMoney.com senior writer

 

Last Updated: December 16, 2008: 9:53 AM ET

 

NEW YORK (CNNMoney.com) -- Detroit's Big Three aren't the only automotive companies that want to see the government step in with some much-needed financial help.

 

Overseas automakers, most notably Toyota Motor, all endorse some form of federal aid to keep General Motors (GM, Fortune 500), Chrysler LLC and possibly Ford Motor (F, Fortune 500) out of bankruptcy.

 

The Senate killed an effort to get the automakers a stopgap loan last week and now the Bush administration has said it is looking at providing the automakers help from the $700 billion approved to bail out banks and Wall Street firms.

 

"We support measures to help the industry," said Toyota Motor ™ spokeswoman Mira Sleilati. "We just want a strong, competitive healthy industry."

 

This may seem surprising at first, especially considering that much of the opposition to the auto bailout was from senators from Southern states that are home to auto plants operated by Asian auto companies, such as Alabama and South Carolina. But the Asian automakers insist they never lobbied against such help for the Big Three.

 

And this makes sense after taking a closer look at the dynamics of the auto industry and the intertwined fates of its companies.

 

Here's why Toyota, Honda Motor (HMC) and other Asian auto manufacturers clearly believe they are all better off if GM and Chrysler survive.

 

Collateral damage

The overseas automakers, who between them produce more than 3 million vehicles a year at U.S. plants, all worry their production would be hurt if one of the U.S. automakers went under. That's because a Big Three failure would likely lead to widespread bankruptcies in the auto parts supplier industry.

 

Erich Merkle, lead auto analyst with the consulting firm Crowe Horwath LLP, said there is much overlap between the automakers' suppliers. Since most parts in an automobile have only a single supplier producing them, the disruptions in production will be severe and prolonged.

 

"It could take months for a Toyota to work through that and resume normal production," he said.

 

Merkle said the current network of auto suppliers, manufacturers and dealerships has worked well for the overseas automakers, who have posted steady gains in their U.S. market share during the past few years.

 

Besides sharing suppliers, many dealers sell both U.S. and overseas brands. So the failure of a U.S. automaker could hurt the overseas manufacturers' dealer network and their sales as well, Merkle said.

 

"There would be a severe disturbance in the force," he quipped.

 

Economic shockwaves

A collapse of one of the Big Three would also probably cause an even more severe hit to the U.S. economy. That would further eat into demand for U.S. auto sales, which hit a 26-year low in November.

 

"The U.S. economy would be in shambles," Merkle said. "The robust U.S. economy that Toyota and the others depend on would suddenly not be as lucrative."

 

The overseas automakers agree that the last thing they need is for the U.S. economy to slow further. The U.S. is the largest market for Toyota, Honda and Nissan (NSANY). All are expected to report lower U.S. sales this year for the first time ever.

 

"We want to get the economy back," said Michael Stanton, CEO of the Association of International Automobile Manufacturers, which represents most of the Asian automakers with plants in the U.S. "Everyone is hurting at this level of sales. Everybody is either cutting back or shutting down."

 

The latest cutbacks came Monday, when Toyota announced it was putting plans to open a new plant in Mississippi on hold indefinitely, even though it is about 90% complete. The plant was set to start building the first domestically produced Prius in 2011.

 

While the overseas automakers would be certain to eventually pick up more U.S. market share if a U.S. automaker stopped doing business, Merkle said the need to sell off the inventory of the failed automaker at fire-sale prices would depress all prices in the industry in the short term.

 

Enter new competition

The final concern for the overseas automakers is a longer-term problem. The failure of a U.S. automaker could open the door for a Chinese or Indian automaker to buy up the assets of the failed company and create a new low-cost competitor in the U.S.

 

"You could open the door for foreign companies to buy distressed assets at rock-bottom prices," he said. He pointed to India's Tata (TTM) and China's Geely as two automakers in the developing world that are already on record as being interested in expanding into western markets like the United States.

 

"Tata and Geely would be incredibly open to brownfield sites," he said, using the term that describes companies that buy discarded industrial facilities.

 

Toyota and Honda have already felt the effects of competition from other upstarts firsthand in the U.S.

 

Korean manufacturers Hyundai and Kia have eaten into the sales of Toyota's and Honda's small, inexpensive vehicles, but that growth has taken decades.

 

Merkle said it might take a year or more for a new competitor to get off the ground. But by grabbing U.S. automakers' assets, vehicle designs and dealerships, an incoming Indian or Chinese manufacturer could quickly become a low-cost threat much quicker than the Koreans.

 

The established automakers like Toyota and Honda are also unlikely to look to buy the distressed assets themselves because they have never used acquisitions or purchases of other companies' assets as a method of growing.

 

Instead, they have always built their own facilities from the ground up in order to expand. Merkle said that is unlikely to change, even if the more productive facilities of U.S. automakers were put up for sale by a bankruptcy court.

 

While companies such as Tata or Geelyare likely to eventually enter the U.S. anyway, Merkle said the vacuum caused by the failure of GM or Chrysler could jumpstart those efforts and bring them to the market years earlier than expected.

 

First Published: December 15, 2008: 4:05 PM ET

[ZenLunatic]

http://biz.yahoo.com/ap/081215/budget_deficit.html?.v=1

 

This is the big picture many people are overlooking or pushing aside. This problem will not go away and it will hit us harder the more we spend and put it off. We need to start dealing with this problem now. It will be tough but there is no way around it. This is what I want to see get fixed. If it means we dont bailout companies, then we have to figure out how to get by. Maybe some people need to hit rock bottom before truely understanding the situation because thats where we are headed.

[cryptique]

Nobel prize-winning economist Joseph Stiglitz weighs in:

 

Chapter 11 Is the Right Road for US Carmakers

 

_{By Joseph Stiglitz, The Financial Times}

_{Posted on December 13, 2008, Printed on December 16, 2008}

_{http://www.alternet.org/story/112456/}

 

The debate about whether or not to bail out the Big Three carmakers has been mischaracterised. It has been described as a package to help the undeserving dinosaurs of Detroit. In fact, a plan to bail out the carmakers would benefit shareholders and bondholders as much as anybody else. These are not the people that need help right now. In fact they contributed to the problem.

 

Financial markets are supposed to allocate capital and monitor that it is used to good effect. They are supposed to be rewarded when they do that job well, but bear the consequences when they fail. The markets failed. Wall Street's focus on quarterly returns encouraged the short-sighted behaviour that contributed to their own demise and that of America's manufacturing, including the automotive industry. Today, they are asking to escape accountability. We should not allow it.

 

What needs to be done is to help the automakers get a fresh start and allow them to focus on producing good cars rather than trying to juggle their books to meet past obligations.

 

The US car industry will not be shut down, but it does need to be restructured. That is what Chapter 11 of America's bankruptcy code is supposed to do. A variant of pre-packaged bankruptcy - where all the terms are set before going before the bankruptcy court - can allow them to produce better and more environmentally sound cars. It can also address legacy retiree obligations. The companies may need additional finance. Given the state of financial markets, the US government may have to provide that at terms that give the taxpayers a full return to compensate them for the risk. Government guarantees can provide assurances, as they did two decades ago when Chrysler faced its crisis.

 

With financial restructuring, the real assets do not disappear. Equity investors (who failed to fulfil their responsibility of oversight) lose everything; bondholders get converted into equity owners and may lose substantial amounts. Freed of the obligation to pay interest, the carmakers will be in a better position. Taxpayer dollars will go far further. Moral hazard - the undermining of incentives - will be averted: a strong message will be sent.

 

Some will talk of the pension funds and others that will suffer. Yes, but that is true of every investment that has diminished. The government may need to help some pension funds but it is better to do so directly, than via massive bail-outs hoping that a little of the money trickles down to the "widows and orphans". Some will say that bankruptcy will undermine confidence in America's cars. It is the cars and carmakers themselves - and the dismal performance of their executives - that have undermined confidence. With industry experts saying $125bn (94bn, 84bn) or more will be needed, with bail-out fatigue setting in, why should US consumers believe that a $15bn gift will do the trick of a turnround?

 

It is more plausible that confidence will be restored if the industry is freed of the burden of interest payments and is given a fresh start. Modern cars are complex technological products and the US has demonstrated its strength in advanced technology. US workers, working for Japanese carmakers, have shown their hard work can produce cars that are desirable. America's managers too have demonstrated their managerial skills in many other areas.

 

The failure lies with the managers of US carmakers and America's financial markets, which failed in their oversight and encouraged short-sighted behaviour. The "bridge loan to nowhere" - the down payment on what could be a sinkhole of enormous proportions - is another example of the short-sighted behaviour that got us into this mess.

 

As the bailouts continue, numbers that once looked huge are starting to seem almost normal. Hundreds of billons are being given to banks and insurance companies. AIG got $150bn. Compared with that $34bn, or even $125bn, for the automotive industry seems a modest request. Even so, we should not forget that a few months ago, President George W. Bush said there was not enough money for health insurance for poor children although it cost just a few billion dollars.

 

Joseph Stiglitz was awarded the Nobel prize in economics in 2001. His latest book is the Three Trillion Dollar War, co-authored with Linda Bilmes (2008).

[Guest Jules]

that article fails to mention the "fucking of all vendors" aspect of Chapter 11.