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View Full Version : What happens when the flywheel falls off?



Meerkat
01-26-2006, 09:57 PM
UAW is threatening to shut down Delco over it's proposal to halve wages and eliminate (!) healthcare and pension benefits.

This would idle GM.

Figment
01-26-2006, 10:03 PM
would it?

Would GM really put such a proposal on the table without having a fallback source at least tentatively lined up?

Meerkat
01-26-2006, 10:04 PM
GM no longer owns Delco. Spun them off awhile back.

ssor
01-26-2006, 10:10 PM
A lot of people rode on that train but I think it may be headed for a train wreck. We all get to the point when we have to decide to cut our losses and just go. I think that American auto makers are very close.

Remember the prophets curse, "may you live in interesting times!"

Meerkat
01-26-2006, 10:13 PM
That was the Chinese...

My concern is the effect that a GM failure would have on the US economy.

ssor
01-26-2006, 10:23 PM
Remember Chrysler and Lee Iocaoca

Meerkat
01-26-2006, 10:24 PM
Originally posted by ssor:
Remember Chrysler and Lee IocaocaAnd K-cars - no thanks! :eek:

Und dey sprect German at Crysler now...

[ 01-26-2006, 10:25 PM: Message edited by: Meerkat ]

Figment
01-26-2006, 10:40 PM
There's something about the mentality of the big 3 management that just doesn't make sense to me.

In the week following 9/11, when it became completely obvious that tough economic times were ahead and that nobody was spending money on cars, one approach might have been to shift focus to economical vehicles that people could maybe afford to own.

The approach of giving away SUVs at cost with free financing.... well that kinda threw the baby out with the bathwater now didn't it?

Meerkat
01-26-2006, 11:01 PM
Originally posted by Figment:
The approach of giving away SUVs at cost with free financing.... well that kinda threw the baby out with the bathwater now didn't it?All they've done is discount some of the huge markups they get for SUV's. I'll bet they still made money on every vehicle.

Cuyahoga Chuck
01-26-2006, 11:34 PM
A lot of nice theories here about what's wrong. Don't see much concern about the world
apre-GM or Ford or whoever.
All you folks whose measure of the subject is based on an unswerving belief in Adam Smith hear this.
Even if GM was the worst company in the world having it go to a justifiable grave will not end the problem. GM directly employs hundreds of thousands of workers. You may paint them as greedy fools if you wish. But when they are gone they take other hundreds of thousands of ancillary jobs with them. The enormous amount of taxes all these folks pay goes bye-bye. Their purchasing power goes bye-bye. Some of them will end up on the dole. All their retirees (probably another hundred thousand souls) will be likewise made poorer. The whole shot will tear a BIG hole in the GNP of America. We will all be somewhat poorer and economically shakier.
It may make those foreign powers who buy our bonds and notes decide to take their money and go elsewhere.
So even if you wouldn't buy from GM under threat of torture you will still miss it when it's gone.

Charlie

[ 01-26-2006, 11:34 PM: Message edited by: Cuyahoga Chuck ]

Meerkat
01-27-2006, 12:47 AM
I have not seen any theories on this thread thus far? :confused:

Domesticated_Mr. Know It All
01-27-2006, 12:52 AM
The hell with GM, buy a Ford and keep me workin. :D
Depression comin, don't keep all your eggs in one basket. ;)

formerlyknownasprince
01-27-2006, 04:30 AM
You in the capital markets Charlie?

I recall reading that GM's health care costs exceed the cost of steel in each vehicle they produce.

Something's gotta give.

Ian

cedar savage
01-27-2006, 06:55 AM
Originally posted by Meerkat:
UAW is threatening to shut down Delco over it's proposal to halve wages and eliminate (!) healthcare and pension benefits.

This would idle GM.Unless he can post a link, I'll have to say that Meerkat has entered the twilight zone.

GM's 2005 losses "Simply Staggering." (http://www.detnews.com/apps/pbcs.dll/article?AID=/20060127/AUTO01/601270378)

The name of the game at GM and Delphi (not Delco) is "unfunded pension obligations."

[ 01-27-2006, 06:58 AM: Message edited by: cedar savage ]

Victor
01-27-2006, 07:40 AM
As with Chrysler in the 80s, it's also about maximizing profits now at the expense of the future. GM made very little effort to develop marketable fuel-efficient cars while they were happily raking in the profits from their Suburbans and Escalades. Once again, the workers take the rap for management's failures. BTW, average hourly wages in Japan and Germany are MUCH higher than here.

cedar savage
01-27-2006, 07:43 AM
Originally posted by Victor:
BTW, average hourly wages in Japan and Germany are MUCH higher than here.Oh my God! The twilight zone has just turned into a black hole and it's suckin 'em in!!

Run for your lives, unless you really know what happened and what's happening now. Knowledge is your only defense.

Figment
01-27-2006, 07:56 AM
Originally posted by Meerkat:
</font><blockquote>quote:</font><hr />Originally posted by Figment:
The approach of giving away SUVs at cost with free financing.... well that kinda threw the baby out with the bathwater now didn't it?All they've done is discount some of the huge markups they get for SUV's. I'll bet they still made money on every vehicle.</font>[/QUOTE]Right. They ate some profit so that people could be able to buy their otherwise high-markup vehicles.

What they did not do was plan for the years down the road, after the free financing had worn off, when those people realized that the ability to BUY a vehicle and the ability to AFFORD (fuel, insurance, maintenance) a vehicle are two different things.

They did not position themselves to produce vehicles that people could afford in the new economic climate at a long-term profit.

Victor
01-27-2006, 08:07 AM
Last I heard it was about $25/hour in Germany, $27/hour in Japan, $17/hour in the US. Try following your own advice, look it up.

High wages usually lead to capital investment in more productive machinery, don't they? Maybe Norman, the only poster on this forum who seems to have no interest in hyperbole, could answer this question.

[ 01-27-2006, 08:09 AM: Message edited by: Victor ]

cedar savage
01-27-2006, 08:59 AM
Originally posted by Meerkat:
[ I'll bet they still made money on every vehicle.This is what happen's when Meerkat's flywheel comes off.

The fact is, GM lost an average of $1500 on every vehicle it made.

I wish extreme liberals would stay out of economic debates. They're congenitally unable to deal with reality.

Del Lansing
01-27-2006, 09:22 AM
From UAW itself (http://www.uaw.org/barg/03/barg02.cfm) $29.75/hr.
I think the big problem is flexibility. It started in the early '60s when VWs started showing up. "American's don't want tiny lil cars." and are we talking about VW now? Then the Japanese invasion, more "American's don't want tiny lil rice burners." Now Camry is the largest selling vehicle, and not cheap either. People want a reliable, cost effective vehicle. The price doesn't matter if quality is not there. In well over 1/2 million (yes 1/2 million)miles on 3 Toyotas I replaced 1 fuel pump, 1 water pump, 1 radiator. And the radiator was my fault because it was San Fran bay area and I didn't use coolant since it would never freeze; it rotted from the inside out, actually that probably did the water pump too.
An example of lack of flexibility, designs they can't give up or get over from 1976 (http://www.popularmechanics.com/albums?mode=view&album=1976&pic=197607.jpg&dispsize=400&start=0&c=y).
Please note from the early concepts in the cover art they still are up sizing, "Americans don't want no lil vans." Ya gotta go with the flow.

Meerkat
01-27-2006, 02:10 PM
Unless he can post a link, I'll have to say that Meerkat has entered the twilight zone.

[/QB]Interview with UAW regional VP on Frontline on PBS Wed evening. "High probablity of strike." http://www.pbs.org/frontline

If you demur Mr. smart phart, please elucidate us as to what you consider reality! tongue.gif

cedar savage
01-27-2006, 02:26 PM
Extremely secret negotiations are taking place. UAW top brass is meeting with the Delphi UAW contingent in Detroit on Monday. Let's see then if the "shut the company down" rhetoric gets ratcheted up or, my bet, toned down considerably.

I expect much more conciliatory rhetoric from the Delphi UAW maybe as early as Monday afternoon. Delphi has been turning down the threat level of their rhetoric. GM is stepping up to the plate and taking on some of the Delphi pension obligation to the tune of $2.6 billion.

But what those of us who know the auto industry look for is parts stockpiling. And that's not happening.

Meerkat
01-27-2006, 02:33 PM
I'd say it has a lot to do with what kind of a package Delphi comes up with. I'd say what amounts to a 75% reduction in income isn't going to fly.

Where's the state of Michigan on all this?