(quoted from post at 08:08:12 11/21/08) Its been building up to this point for last 40 years.Poor management--Overpaid workers---and a product that is poor quality compared to what others are making equals bankruptcy for any company
There's plenty of blame to go around. But the immediate problem was caused by the "perfect storm" that hit the industry:
1 - We were in a recession already. These are cyclic events that test the resiliency of ALL companies.
2 - Gas went sky-high because of WALL STREET SPECULATORS causing houselholds to cut back on purchases, including new cars. SUV sales fell through the floor.
3 - Poor mortgage decisions brought on by Federal government (CRA), WALL STREET GREED caused a credit crisis so people could not get loans, auto sales feel by over 25% instantly.
The auto-makers responded to the loss of sales in Big SUVs and trucks by adjusting their production schedules. But any company that sees sales fall month after month on a grand scale would be hard-pressed to continue. The Big 3 just can't cut costs fast enough.
Now, I am in agreement that the UAW is overpaid with lavish benefits unlike any unskilled worker group in the nation (including the unbelievably wasteful jobs bank). They are a big reason the Big 3 can't respond to a drop in revenue like most companies. The costs of laying UAW people off or closing a plant are HUGE due to the contract restrictions.
Auto exec pay is high, no doubt, but look at Wall Street execs and other Fortune 500 companies in comparison and it's probably average. Not saying I agree with it, just that it's not extremely out of whack.
That being said, the issue is fairness. We have an industry that is burdened like no other with government regulations on product performance (CAFE standards, safety regulations, emissions, etc) and has been hit with an unprecedented triple whammy and all they are asking for is a "BRIDGE LOAN", not a handout. Yet, you didn't hear the same outcry when Wall Street execs came to Congress. Yes, there was a little story on how much Lehman Bros ceo has made in the last few years (obscene compared to what the auto execs get) but that didn't threaten to hold up the $700 billion bailout of Wall Street.
The hullabaloo over the private jet issue is crap. Most Fortune 500 companies have corporate jets, leased or purchased. The Big 3 jets are also used to fly engineers and parts to the far-flung plants as well. I know. I've flown the Chrysler shuttle jets many times. It's just not used for execs.
Being a supplier, I see all the problems the Big 3 have, but I think that if GM is allowed to go into Bankruptcy at this time, the shock waves will ripple through the economy and make any recession longer or even slide into a depression faster than we are going now.
Supplier bankruptcies will follow within hours or days and the courts will be overwhelmed with cases. Every supplier is skating on thin ice now. If their payments are held up even by a day or two let alone wait for a bankruptcy judge to ok payment, their suppliers will be hurt, etc., etc. down the line. The dominos will fall fast and furious.
The Big 3 and economists in general do not expect us to pull out of this recession until at least 2010, late 2009 at best. If the bridge loan is not approved, look for a 5-10 year recovery period.
The foreclosure crisis has and will continue to be the biggest obstacle to a recovery. Until the housing market stabilizes and the glut of foreclosed homes works its way out of the market, new housing starts will not happen. And even then, people won't buy goods of any kind, let alone a house or car if they think their job is in jeopardy. That means carpenter, electricians, plumbers, etc. are not working and buying cars/trucks, etc. That means retailers are laying off clerks who are not buying goods, etc.
Yup, we've got a long way to go, but letting the Big 3 go under is not part of the solution.
^D
