pageok
pageok
pageok
Will Obama Appoint A "Car Czar"?
From Politico.com:
  President-elect Barack Obama wants a high-profile point person to oversee reforms in the ailing auto industry, according to members of Obama's transition team.
  Specifics about the proposal remain unclear. But the transition team says Obama suggested to President Bush on Monday that aid to the auto industry could be coupled with the appointment of "someone in charge of the auto issue who would have the authority" to push for reforms. The details came from a more extended readout of the White House meeting provided Tuesday.
  The person would assist in efforts to create an "economically viable auto industry," a transition aide said -- a move that could alleviate concerns about protecting taxpayer interests if more money is directed to assist automakers.
  I don't know about you, but I really look forward to purchasing my new U.S. Government Model 1 Car when the new models are introduced in 2011. Of course, the Model 1 will be the only car legally sold in America by then, so if you want a car, that will be the only one to buy. (You could try buying a used car, but can you afford the $30,000 fine to be levied if the FBI catches you purchasing a used car?) I am sure the Model 1 will be a great car, though, so no worries. In fact, I found a video of the prototype of the Model 1 here, so see for yourself:

Anderson (mail):
I don't have any clue what to do about the auto industry, so I hope someone who does will explain it all in this thread. It seems that Detroit has calculated that it would go under in the long term &tried to make short-term money building SUV's that it knew depended upon cheap gasoline.

Ordinarily I'd favor letting Detroit crash and burn, but the economic dislocation would be tremendous.

Should we try to get Toyota etc. to buy GM and Ford, who presumably would switch to making cars that people actually want to buy?
11.12.2008 2:29pm
wfjag:
I recall another car produced by a nation that was seeking to create an "economically viable auto industry". It was called "The Yugo".
11.12.2008 2:31pm
David Warner:
See also.
11.12.2008 2:32pm
Bob Montgomery (mail):
"I've had it up to 36 miles per hour, going downhill...


Too funny.
11.12.2008 2:33pm
David Warner:
Anderson,

What we're seeing (among other things) is the long-term effect of not breaking up the UAW cartel. Given the current political climate, it would be difficult to achieve, but going forward competing unions need to be a part of the solution and well as competing automakers.
11.12.2008 2:34pm
Suzy (mail):
Too bad there's no place to park a car on this slippery slope!
11.12.2008 2:35pm
Ex-Fed (mail) (www):
Seems to me that the market is "reforming" the auto industry by eviscerating the companies that produce sucky products or that have bent over for unions.
11.12.2008 2:35pm
astrangerwithcandy (mail):
will this be with the help of Kobayashi?

oh wait, car czar ... not Keyser
11.12.2008 2:37pm
Crunchy Frog:

Should we try to get Toyota etc. to buy GM and Ford, who presumably would switch to making cars that people actually want to buy?

GM tried that with its Saturn division. Then the UAW got involved. End of story.
11.12.2008 2:37pm
Dave N (mail):
For some reason, this post made me think of the Johnny Cash song, "One Piece at a Time," since it sounds like the kind of car I would expect the government to build. The lyrics are here.
11.12.2008 2:38pm
byomtov (mail):
The US auto industry is not viable in its current state, and this is due to long-term mismanagement.

Can the govt fix it? Who knows. Certainly there's ample reason for doubt. OTOH, the choice seems to be to let it go under and sell off what remains to Toyota or someone. I don't know what's best, but it's not clear to me why govt involvement is going to make things worse.

It's not like the guys who have been running things in Detroit have done anything resembling a decent job.
11.12.2008 2:39pm
Hoosier:
Edsel Ford and John DeLorean are both dead.

So whom would he pick?

And will this kill of "Click and Clack"?

--"Hi, I have a 2011 . . ."
--"Yeah! We KNOW what kinda car you have! I wanna die. So does my brother."
11.12.2008 2:40pm
Anderson (mail):
I am always suspicious of the "unions are responsible for everything bad" arguments, but I haven't heard much good about the UAW either. (Living in Mississippi, I find that "unions" sound like quaint prewar artifacts, sort of like "fireside chats" and "23-skidoo." Despite UAW's efforts to unionize our Nissan plant.)

Maybe President Obama will depute Senator McCain to sit everyone down in a room together until they work something out.
11.12.2008 2:41pm
deathsinger:
Anderson said


Should we try to get Toyota etc. to buy GM and Ford, who presumably would switch to making cars that people actually want to buy?

Oh for fruit's sake. GM is either the largest seller of vehicles in the US or the 2nd (behind Toyota) depending on the quarter. How on earth do people get the idea that they build cars that no one wants to buy? Seriously, why on earth do you feel this?
11.12.2008 2:41pm
Hoosier:
(You could try buying a used car, but can you afford the $30,000 fine to be levied if the FBI catches you purchasing a used car?)


For the shade tree-mechanic:

Winston: Under the spreading chestnut tree / I sold you / You sold me.

Charrington: Something old.
11.12.2008 2:44pm
Anderson (mail):
How on earth do people get the idea that they build cars that no one wants to buy?

My bad. They're thriving, then. No problem!
11.12.2008 2:46pm
Tom952 (mail):
It's the UAW and their trans-company power that is killing the US auto industry. David Warner's competing union idea sounds worth a try.
11.12.2008 2:47pm
Hoosier:
A very significant part of the problem isn't directly related to the type of car made. It's the pension obligations that the Big Three have to a retired workforce that is living longer than was anticipated.
11.12.2008 2:48pm
Tom952 (mail):
I was wondering how the Republicans would rebuild their party. Pelosi may have the new Republican platform shaped up before Christmas.
11.12.2008 2:49pm
hattio1:
Orin Kerr,
Wow, I missed where Obama suggested that the government only allow one car. I'm sure there's a reason for that....what could it be???? Jeeze, I just can't think of any reason why I can't find that Obama suggestion anywhere but here. Surely I'm just missing it.
11.12.2008 2:57pm
Malvolio:
it's not clear to me why govt involvement is going to make things worse.
Sure, the government has screwed up the last 900 things they got involved with ... they're due for a win!
11.12.2008 2:57pm
Elliot123 (mail):
The non-union Japanese auto plants in the US seem to do very well, and the employees are happy without a union. One of the aims of the "check card" union forces is to unionize these plants and screw them up just as badly as Detroit. I'm not sure how Obama will rescue the auto industry while rolling out the red carpert for the UAW to ruin it.
11.12.2008 3:01pm
geokstr:
Anderson:

I am always suspicious of the "unions are responsible for everything bad" arguments, but I haven't heard much good about the UAW either. (Living in Mississippi, I find that "unions" sound like quaint prewar artifacts, sort of like "fireside chats" and "23-skidoo." Despite UAW's efforts to unionize our Nissan plant.)

Once the "card check" legislation gets passed, you can look forward to a UAW office near you too.
11.12.2008 3:02pm
Anderson (mail):
A very significant part of the problem isn't directly related to the type of car made.

Okay. I heard on the radio that GM sold 16,000 units last year and is set to sell 12,000 this year. Maybe my info is incorrect.
11.12.2008 3:02pm
Hoosier:
Malvolio:
it's not clear to me why govt involvement is going to make things worse.
Sure, the government has screwed up the last 900 things they got involved with ... they're due for a win!


Wait! An even better idea, right along those lines!

Let's put the Chicago Cubs front office in charge of Detroit. Talk about being overdue!
11.12.2008 3:02pm
Happyshooter:
Time was the union was really needed in the plants. A lot of guys died, a lot lost limbs. Even now a lot of foundry and heat treat guys die of lung cancer, and all the old time paint line guys are dead.

The union got them good wages and health care, and allowed them to retire when they got old and worn out from putting cars together at a fast pace in a plant that was either 120 degrees or 40, no in between.

Then the unions got more powerful, and the pay got better and they didn't have to work as much.

Then they started working less and getting more. Now the amount of money coming in from selling cars is less than what is going out. A big chuck of that are the retirees sucking down huge bucks doing nothing but going to the doctor every week or so.

The solution no one wants to be the one to start is throwing the retirees onto medicare, and dumping their retirements to the government at 50%.

Once you do that US Automakers are just as efficent, if not more so, as japan. The UAW still does some dumb stuff (job bank--aka paying for not working), but they are chilling out and just took a huge bribe to take over current worker's health benefits.

If Barry gives GM and Ford $50 billion or so to get them over the hump, and takes on the retirees, things will be fine. It will cost less than what we are spending on bailing out wall street.

A huge problem will be Barry and the left crew demanding stupid downsizing of cars for the common man (not for them) to save mother gia. I will simply not buy a yugo, which means Barry's conditions on the bailout will force me to buy a jap car.

The we have Boosh. Assuming Barry's report on their private conversation is true, and I think it may be, Bush refuses to help the auto companies unless the dems will enter into a free trade agreement with south america.

For those playing along at home, you will recall that Bush sent his daughter to south america to purchase a family ranch the size of rhode island. Sort of a first big deal out of college assignment for the girl.

He is planning on the area getting hot and wants his family to be able to cash in. Never forget, whenever a Bush tries to run for office, that given the chance to save one million jobs in the US, Bush held his citizens hostage to his latest family get rich scheme.
11.12.2008 3:02pm
Anderson (mail):
I'm not sure how Obama will rescue the auto industry while rolling out the red carpert for the UAW to ruin it.

This is indeed a problem. McCain for Car Czar!
11.12.2008 3:02pm
Norman Bates (mail):
Labor costs per car built by US car companies average well over $1,000 higher than labor costs per car built by foreign companies even if much of of a "foreign" car's fabrication is done by American workers in the USA. The main reason is the UAW. "Foreign" cars built in the US using non-union labor compete quite well against truly foreign-built cars. And non-union auto workers in the USA make good incomes and enjoy benefits comparable with similar workers in other industries. Now let's see the Obama administration take care of the UAW's destructive hold on the American auto industry.
11.12.2008 3:04pm
Anderson (mail):
the red carpert

Carpert = car expert?

But a *red* car expert?

Does Robert Reich know anything about cars?
11.12.2008 3:05pm
Floridan:
Very penetrating analysis of the automotive industry's problems and the potential solutions.
11.12.2008 3:06pm
R Gould-Saltman (mail):
One of the things that will be very interesting to see is the extent to which new infrastructure investment is now made without assuming an infinite supply of cheap gas.

Notwithstanding the willingness of the old-line Republican party, and their oil company owners, to "drill drill drill!"** until the last drop/dollar is extracted and the last SUV grinds to a halt, I think that the majority of Americans might finally be catching on that the "freedom to drive your own car where and when you want" and to buy a house with a three car garage may not be as sweet a deal as it used to look like.

Maybe I'm just biased by a two-week opportunity to compare the Paris Metro, (which runs pretty well, gets you within about a six-block walk of much of Paris, and has substantial middle-class ridership until 1:15 am when it stops for the night) with our own Los Angeles "subway system" as it currently stands, and my ride this AM into, and back out of, the San Fernando Valley via the US 101 Parking Lot. Not quite as impressive as the Tokyo subway system, but Europe just hasn't had quite as long to develop the degree of social conformity to make that happen.

Oh, and those little funny-looking squinchy Smart Cars, and their ilk? They're ALL OVER EUROPE, and they've been there for close to a decade already. Guess what? When the majority of cars in a city are that size, you can devote half as much floor space to parking lots for the same number of cars in a new building. Half as much floor space reduces the amount of ramp space to access those floors, power spent to light and ventilate those floors, number of guards to police and sweepers to sweep those floors, etc.
11.12.2008 3:06pm
nyu.law.libertarian (www):
"The person would assist in efforts to create an 'economically viable auto industry,' ..."

Brilliant!
11.12.2008 3:07pm
Mahan Atma (mail):
"I don't know about you, but I really look forward to purchasing my new U.S. Government Model 1 Car when the new models are introduced in 2011."


Well perhaps you can contribute beside snark, Orin. Tell us:

Would you prefer to let the auto industry fail completely?

If not, do you think the government should give them dozens of billions of dollars with no strings attached?

Would love to here what solutions you have to this problem.
11.12.2008 3:10pm
Houston Lawyer:
Presumably, GM, Chrysler or Ford could walk away from its contracts under Chapter 11. However, unless they can break the stranglehold of the UAW, any reform is pointless.
11.12.2008 3:11pm
PubliusFL:
Anderson: Carpert = car expert?

But a *red* car expert?


"Red" modifies "expert," not "car." As in somewhere to the left of "pink." ;)
11.12.2008 3:13pm
byomtov (mail):
Sure, the government has screwed up the last 900 things they got involved with ... they're due for a win!

Well, I admit that putting Brownie in charge would be a bad idea.
11.12.2008 3:14pm
Ben P:

A huge problem will be Barry and the left crew demanding stupid downsizing of cars for the common man (not for them) to save mother gia. I will simply not buy a yugo, which means Barry's conditions on the bailout will force me to buy a jap car.


I'm not quite sure what you mean by this, but I don't think it would be quite what you're implying.

I think it's a given that even had John McCain been elected we'd be seeing legislation to tighten CAFE standards and related programs.

I seriously doubt Obama's going to drastically rewrite all the car legislation to regulate car production based on size rather than fleet milage. They may raise the required milage to the high 30's, but if car companies stop making SUV's and light trucks altogether it will be because they can't make a profit doing it, not because they've been prohibited from doing so.
11.12.2008 3:17pm
deathsinger:
Anderson,

All the companies are selling less cars this year. So I guess by your logic Toyota should start building cars that people want to buy.
11.12.2008 3:19pm
Anderson (mail):
Well perhaps you can contribute beside snark, Orin.

They also serve, Mahan, who only stand and snark.

We snark -- that we may not weep.
11.12.2008 3:23pm
Anderson (mail):
All the companies are selling less cars this year.

25% fewer?
11.12.2008 3:24pm
q:
We already have an economically-viable auto industry. It just doesn't involve American corporations. BFD.
11.12.2008 3:24pm
Ben P:

Anderson,

All the companies are selling less cars this year. So I guess by your logic Toyota should start building cars that people want to buy.


You've been stretching what he said beyond meaning.

It's a pretty plain fact that until pretty recently the "light truck" market was the profit driver for US Car companies (Ford and GM particularly). They used their higher margins on those vehicles to subsidize the lower profit margins on the compacts etc that they needed to compete with Japanese makers in those fields.

When gas prices spiked over the summer, the demand for "light trucks" of all sorts plummeted much much faster than other brands of cars. Meanwhile demand for gas efficient cars (dominated primarily by foreign manufacturers) had a much bigger cushion.

The fact that they're the world's second biggest automaker and that they're currently "making cars that people don't want to buy" are not necessarily contradictions. That's the very reason they're hemorraging cash right now, they've got a lot of factories that were tooled to make models of cars that are just not in demand right now.
11.12.2008 3:24pm
astrangerwithcandy (mail):
i am at a loss that people are making arguments in favor of the government directing an industry.
11.12.2008 3:30pm
Mike Keenan:
Some 40 years after Studebaker went out of business, their empty factories still sat unused. Maybe now they have finally been put to use? I don't know. It would be a shame, but if the automakers have any useful assets, they will be purchased and put to use.
11.12.2008 3:31pm
q:

Would love to here what solutions you have to this problem.

Let them fail. Use a fraction of the bailout money currently earmarked for the companies to retrain those who are hurt most by this. If people thought bailing out the banks was going to create all sorts of moral hazard, this is even worse given that the government has already done it before. And unlike the financial sector, there is little danger of systemic risk.
11.12.2008 3:32pm
Mahan Atma (mail):
"i am at a loss that people are making arguments in favor of the government directing an industry."


Does that not apply to the financial industry as well?

I don't profess to have easy answers to any of these problems, but perhaps the libertarians here can address the central question: Should the government simply let the banking/auto/other industries fail, regardless of the consequences to the economy at large?

Again, I don't think there's an easy answer to that question, but it seems to me that people ought to at least consider it.
11.12.2008 3:35pm
ForWhatItIsWorth:
Mahan:
"...Would you prefer to let the auto industry fail completely?..." YES, if that is what it takes to get antiquated unions out of the picture. You do realize that these skilled, semi-skilled and unskilled union workers pay dues, right? Imagine..... they stop paying union dues, it's almost like an instant pay raise.

"... do you think the government should give them dozens of billions of dollars with no strings attached?..." NOPE! Not one thin dime. Quite frankly, I think Obama will bankrupt the industry just like he promised the coal industry and for the very same reasons. Too bad, tens of thousands of people out of work and paying no taxes whatsoever.....

"....Would love to here what solutions you have to this problem...." I'd like to hear ANY concrete solution from the left. They ask other people to solve problems, but don't do the same in return. It's like the "we'll raise taxes on corporations" nonsense. You DO know that if you raise their taxes (already at 35 percent) to anything higher, it will NOT come out of profits. It will just be tacked onto the price of everything and they will try to further cut costs..... by cutting jobs. This isn't rocket science. Companies don't grow by giving away any profits.

Speaking of which, yeah, so while we look at auto bailouts, our oh-so-intelligent left has decided that taxing a company to death will fix things at those companies too..... anyone else see a problem here? I see much unemployment in our immediate future and nobody to foot the bill for all of the unemployment insurance. Ah well.
11.12.2008 3:37pm
Thomas_Holsinger:
The real purpose of bailing out GM and Ford is to bail out the profligate UAW pensions. The governmnent is not ready to directly bail the UAW pensions so it will do so indirectly by temporarily bailing out GM and Ford.

Public employee pensions across the country are unsustainable. The city of Vallejo, California, has declared bankrupty because of those, and profligate public employee pay costs.

This is America's future. The Americans who have paid for their retirement will have their retirements taxed to bail out the retirements of those who haven't paid for theirs.

The Democrats propose to start this by eliminating 401k plans.
11.12.2008 3:38pm
Tracy Johnson (www):
What? No Zhiguli?
11.12.2008 3:39pm
Anderson (mail):
Use a fraction of the bailout money currently earmarked for the companies to retrain those who are hurt most by this.

One always hears about "retraining," but seriously, what do you "retrain" thousands of workers in their 40s and 50s to do?

Genuinely curious here, folks.
11.12.2008 3:39pm
Ben P:

Would love to here what solutions you have to this problem.


Isn't this exactly what Chapter 11 is for?

I read an article yesterday (which I can't locate now)where the CEO of GM strongly stated that "bankruptcy is not an option" but at the same time that rating agencies have basically said that GM has little chance of surviving the next 12 months without a multi-billion infusion of cash.

The article made the case that GM is living in the past. Multiple big companies, most notably airlines, have gone into Chapter 11 and come out successfully. Bankruptcy no longer means the liquidation of a company.

There'd be some serious repercussions, pensions would be in danger and there'd be a ripple effect, but we could use a fraction of a potential bailout to better solve those.
11.12.2008 3:39pm
Lawyer:
I, for one, wouldn't mind letting the auto industry fail. Let em' fail. The candlemakers had quite the time of it when the lightbulb was invented, but our country made due. Fact is, there are a glut of cars on the market, and not enough enticement now that financing has dried up. Let the market work, and let the former auto-workers start getting to work on America's crumbling infrastructure.
11.12.2008 3:39pm
deathsinger:
Bullmalarky.

GM's problems stem from profitability more than sales. They have way too much fixed overhead.

Sales are a problem for everyone. Dailmer is off something like 40%.
11.12.2008 3:40pm
Anderson (mail):
Let the market work, and let the former auto-workers start getting to work on America's crumbling infrastructure.

Rebuilding roads and bridges for the Toyotas to drive on.

I like it, poetically speaking.
11.12.2008 3:42pm
Ben P:

The Democrats propose to start this by eliminating 401k plans.


Serously? Come on, this was what a single testifying economist suggested in a single committee hearing.

Rush Limbaugh picks it up and now it's somehow holy writ of the democratic party that they're going to nationalize 401k's. No national politician has proposed any such thing.
11.12.2008 3:43pm
Simon P:
I'm not sure what Obama wants to do with the auto industry, or how he thinks he can make it viable. His policy statements seem to suggest that by encouraging automakers to get more into the business of producing fuel-efficient, low-emission vehicles, they can grab a portion of the market and meaningfully compete for buyers in it. Not that I think that's a viable strategy in the current market; that just seems like the best way to construe what he's talking about. A slightly less friendly interpretation is that he intends to use bailout money to elbow auto manufacturers into implementing costly production changes that will probably bankrupt a good number of them and produce a bunch of expensive vehicles no one will want to buy.

I know you mean the slippery-slope caricature here to be humorous, but I do find it a little unseemly, especially after your repeated tantrums over Greenwald's occasionally unfair criticisms and mischaracterizations of things you've said about Bush policies. That is, here we have a serious issue and a president-elect trying to grapple with it, and you're making nationalization jokes. Are you trying to alienate those of us who took the time to understand the nuanced dispute between you and Greenwald in order to come to a fair conclusion about who was in the right? In other words, why shouldn't I just turn around to Greenwald and accept his characterization of you as within the bounds of fairness?

Anyway, the blame being heaped on the UAW for this is a bit unseemly, too. The UAW has been trying to make concessions for some time, in order to preserve their jobs; it's not like they're blind to their own peril here. The people who contend that the best solution to this problem is to take it out of the hides of the workers are just displaying their ignorance of what it's like doing that kind of work for a living. Is there something wrong with trying to negotiate for a decent living?
11.12.2008 3:44pm
einhverfr (mail) (www):
I suppose he would have to appoint a Car Czar because the 4th Amendment protects us from unreasonable searches and Caesars.....

Sorry... bad joke....
11.12.2008 3:45pm
Happyshooter:
I seriously doubt Obama's going to drastically rewrite all the car legislation to regulate car production based on size rather than fleet milage. They may raise the required milage to the high 30's, but if car companies stop making SUV's and light trucks altogether it will be because they can't make a profit doing it, not because they've been prohibited from doing so.

What do you think CAFE is?

The Barry requirement will be that total fleet MPG must be, say, 40. That is 40 under the new standard measure, which is 46 or so under the old way. To make this make sense, Bush ordered the fleet to go to 35 MPG (new measure) by 2020. That is a huge increase from what was, and Barry wants to go a lot farther.

The US automakers made the current standards, barely, by making the engine as good as they can, given all the emmissions control garbage hanging on it. They have gone about as light as they can go on the engine weight unless ceramic engines work for some reason, the EFI is as good as it gets, and the cars are about as unibody and plastic as they can be.

In order to meet those goals on the way to 2020, they jacked up the prices on cars people wanted, like trucks and SUVs, to 40 or 45k. They then dropped the price on the grand am type mini car darn near to cost. Even then they barely made fleet standards.

Now Barrys' trial balloon squad is floating a big increase. That means the automakers need to skew the lower end sales, and at the same time make them even smaller cars (cause they ain't going to get any more efficent).

I will not put my family into a sub grand am death shoe box. That means I either buy a Lexis or BMW SUV, because BMW already did and Lexis is about to 'opt out' of CAFE.
11.12.2008 3:45pm
darelf:

Okay. I heard on the radio that GM sold 16,000 units last year and is set to sell 12,000 this year. Maybe my info is incorrect.


16,000 units of what? According to their delivery reports, the 1st quarter of 2008 they moved 805,720 units. This is certainly down from the previous year, but I can't for the life of me figure out where your numbers come from....
11.12.2008 3:46pm
astrangerwithcandy (mail):

Should the government simply let the banking/auto/other industries fail, regardless of the consequences to the economy at large?



its not an optimal resolution to let them fail, but we are just postponing the problem by bailing them out. bailing out the company isn't going to make them competitive or have more appealing offerings. this will be the third(?) time the auto industry has been bailed out, right? if the first two didn't stick, why would the third.

also, i watched the Ford family waste the talents of Barry Sanders during his days playing for the Detroit Lions. nothing the ford family touches, works out.
11.12.2008 3:49pm
Angus:
Wow, so much BS in one thread it's hard to know where to start. First, UAW is not the main problem in the U.S. auto industry. Crappy cars are. I've owned 3 American cars in my life and will never buy another as long as I live. The Big 3 have lagged more than a decade behind foreign automakers in terms of engineering and market response. They banked nearly all of their market share on pickup trucks and SUV's, and gave the small car market to the Japanese and Koreans.

UAW has made major salary and pension concessions over the past few years. None of it has done any good because the products are crap. While Japanese autos still have a cost advantage over American autos, it is now very slight -- perhaps as little as $350 per car.

Not that cost matters. People will pay more for a comparable size Toyota or Honda rather than a Ford, GM, or Chrysler car. Sometimes a few thousand dollars more. Why? Quality.
11.12.2008 3:50pm
MarkField (mail):

One always hears about "retraining," but seriously, what do you "retrain" thousands of workers in their 40s and 50s to do?

Genuinely curious here, folks.


That challenge is trivial compared to the challenge of retraining GM management to be competent.
11.12.2008 3:51pm
Horatio (mail):
11.12.2008 3:53pm
JosephSlater (mail):
The UAW had nothing to do with the decisions by the big three to build big gas guzzlers nobody wanted. Unions don't get to bargain about the type of product produced. Although in fact, over the past several decades, the UAW has called for more gas efficient cars.

GM does have significant labor costs in the form of legacy costs from the health care costs of GM's retiriees. The UAW bargained for that, and, in the absence of better health care options, that seemed like a good idea at the time. Note that the Japanese car makers in the U.S. don't have these costs because they don't have nearly as many U.S. retirees, because they haven't been building cars in the U.S. for nearly as long as G.M.

In any case, industries that are heavily unionized have done well, badly, and all places in between in the U.S. I know some libertarians think unions are evil incarnate -- rather odd, given that unions are private organizations and the alternative for workplace regulation and worker protection is more government regulation. But the situation is far more complex.

As to card check, if that actually gets signed into law, it will allow workers to express their preferences without the incredible bias currently allowed in the NLRB election process. And all you folks opposing card checks in the name of worker rights: you all know that card check recognition is currently legal -- at the employer's option -- and has been legal for many decades, right?
11.12.2008 3:54pm
autolykos:
Wow - A lot of bad thoughts in this thread. I don't know what business a person who hears that GM sold 16,000 cars last year and actually thinks it is even remotely close to being correct has commenting about the auto industry, but here we are.

The bar clearly hasn't been set very high in this thread for substantive discussion, so I'm not going to spend too much time, but I'll note a couple of things:

1. For all those who like to lay blame at the feet of US auto management, realize that you're talking about numerous different management groups, including a foreign owner (Daimler), a private equity fund (Cerberus), the Ford family, Jack Nasser, Alan Mulally, Rick Wagoner, Roger Smith, Lee Iacocca and a host of others. The idea that we're dealing with some monolithic management group that hasn't done everything possible to make these companies succeed or made a single set of irrational, bad decisions is ludicrous.

2. GM generally makes money in Latin America, Asia, Africa and the Middle East, roughly breaks even in Europe and loses LOTS of money in North America.

3. There's a lot more to the problem than "they've got a lot of factories that were tooled to make models of cars that are just not in demand right now" The American automakers make and sell lots of small cars in other parts of the world. There are a lot of reasons they haven't been successful here, but lack of effort/infrastructure isn't one of them.
11.12.2008 3:55pm
JosephSlater (mail):
P.S. As to Orin's actual post, we've had a Drug Czar ever since the days of Reagan, and from what I've heard, there are plentiful options regarding available drugs.
11.12.2008 3:56pm
Big E:
Angus has it right, the problem with the auto industry is crappy cars and short term thinking. GM has repeatedly shot itself in the foot, which is why I favor a government takeover rather than a cash bailout.
11.12.2008 3:57pm
Ben P:

I will not put my family into a sub grand am death shoe box. That means I either buy a Lexis or BMW SUV, because BMW already did and Lexis is about to 'opt out' of CAFE.


First, Even though I also personally drive an SUV, you'd do well to look at actual safety ratings. They don't bear the "death shoe box out." I'd have no hesitations about buying a smaller car. I generally choose not to because (1) I can afford it, and (2) having 4wd and ground clearance is useful in some of the hobbies I pursue.

Second, CAFE still applies to cars imported. Even counting their trucks Japanese and European car makers are above US car makers in fleet fuel efficiency even in 2006. If you're making an absolute argument based on engineering constraints it just doesn't fly. It isn't any harder to make a Ford Focus than it is to make a Civic or a Camry. Arguing that car companies are pushing the limits of technology with their current cars just isn't true.
11.12.2008 3:58pm
astrangerwithcandy (mail):

perhaps as little as $350 per car.



perhaps you should find out more definitively the cost difference before you champion UAW
11.12.2008 3:58pm
Calderon:
The person would assist in efforts to create an "economically viable auto industry," a transition aide said.

As someone else has said, the United States already has a perfectly economically viable auto industry. And the US will continue to have a viable industry if GM, Ford, and/or Chysler go into Chapter 11 or even cease to exist.

Let's have a little bit of public choice theory here. When Obama suggests putting "someone in charge of the auto issue who would have the authority to push for reforms," what he means is someone who will protect GM / Ford / Chrysler from foreign competitors for some indeterminate period of time.
11.12.2008 3:58pm
byomtov (mail):
That challenge is trivial compared to the challenge of retraining GM management to be competent.

They shouldn't need it, given what they've been paid to ruin the companies. I hope they saved some.
11.12.2008 4:00pm
Ben Askren:
Assembly-line workers caused the decline of the American auto industry. Under protection of the NLRA, they formed a union. Exerting considerable bargaining power, the unionized workers exacted generous wages and benefits along with work rules that made the Big Three unprofitable.

The workers should have sought lower wages and benefits for the long-term benefit of the industries.

Don't get me started on compulsory unionism.
11.12.2008 4:02pm
astrangerwithcandy (mail):

Angus has it right, the problem with the auto industry is crappy cars and short term thinking. GM has repeatedly shot itself in the foot, which is why I favor a government takeover rather than a cash bailout.


of course, a politician wouldn't make a strategic error. how silly of everyone to think to the contrary.
11.12.2008 4:02pm
Hoosier:
JosephSlater
P.S. As to Orin's actual post, we've had a Drug Czar ever since the days of Reagan, and from what I've heard, there are plentiful options regarding available drugs.

Pure self-deception, Joseph. If you want good heroin, you still have to look to Mexico or China. There just aren't any good American brands on the market.
11.12.2008 4:04pm
Hoosier:
Does Robert Reich know anything about cars?

Only the really small ones.
11.12.2008 4:06pm
MarioB:
As a newspaper columnist (and I wish I could remember who) recently pointed out, the problem would pretty much solve itself if government would allow imported cars to count in a manufacturer's CAFE calculation.

It's fairly simple: American unionized auto producers cannot make a profit on small cars under the current labor agreements, although the now-shunned larger vehicles are profitable.

Allow the big three to import small cars from owned/associated overseas factories and sell them through their franchised dealers. Shrink domestic manufacturing to vehicles that can be profitably produced.

OR, bust the unions and let the domestics enjoy the same labor input costs of the Japanese, Germans, and Koreans currently making autos in this country.
11.12.2008 4:07pm
astrangerwithcandy (mail):

If you want good heroin, you still have to look to Mexico or China. There just aren't any good American brands on the market.


and barry put America's heroine out of business. hey-oh
11.12.2008 4:07pm
Ben P:

3. There's a lot more to the problem than "they've got a lot of factories that were tooled to make models of cars that are just not in demand right now" The American automakers make and sell lots of small cars in other parts of the world. There are a lot of reasons they haven't been successful here, but lack of effort/infrastructure isn't one of them.


Of course the problem is bigger than that, but right now GM has plants making SUV's here that are all but shuttered and they've got plants making small cars that are running multiple shifts. The problem is most of their profit (or the least loss if what you say is true) within the US came from the SUV's, not the small cars. For any number of reasons, they're not competitive in that market with other companies that also make their cars in the US at a price that allows them to make any sort of reasonable profit. I don't think that Honda's selling the civic as a loss leader, but the decline in demand for SUV's and light trucks has forced GM to focus on their small cars where they are losing money.
11.12.2008 4:07pm
Happyshooter:
And all you folks opposing card checks in the name of worker rights: you all know that card check recognition is currently legal -- at the employer's option -- and has been legal for many decades, right?

Come to a union town and ask about 'card checks'. It is the closest thing to mob thuggery that could ever be legal.
11.12.2008 4:08pm
Angus:
I can actually cite a source for the as little as $350. Can you?
Link

What's killing the Big 3 in terms of cost (leaving aside engineering) is symptomatic not of UAW, but of all of the U.S.: health care costs. The health care system in the U.S. may be technologically the best, but it is expensive as heck and getting more so every year. I found this breakdown from NPR, GM vs. Toyota.NPR

Key items: (GM vs Toy)
Avg. hourly wage: $31.35 vs. $27
Vehicle production time: 34.3 hours vs. 27.9 hours
Health care costs per vehicle: $1,525 vs. $201
11.12.2008 4:09pm
tdsj:
hey, hey, we're Adobe! The little car that's made out of clay!
11.12.2008 4:09pm
OrinKerr:
Hattio1 writes:
Orin Kerr,
Wow, I missed where Obama suggested that the government only allow one car. I'm sure there's a reason for that....what could it be???? Jeeze, I just can't think of any reason why I can't find that Obama suggestion anywhere but here. Surely I'm just missing it.
I think you'll find it in the same place where you left your sense of humor.
11.12.2008 4:10pm
JosephSlater (mail):
Happyshooter:

I live in a union town and have worked all my professional life with unions, so don't try those B.S. talking points with me. Also, card check is already legal in the public sector in about 6 states. Haven't heard much about "mob thuggery" there.

Hoosier:

I blame the NLRA and unionized drug dealers in the U.S.!!!
11.12.2008 4:12pm
Thomas_Holsinger:
Legacy costs are primarily what is sinking GM and Ford. Foreign manufacturers like Toyota are hurting in today's market, but the legacy costs are what has turned that pain to imminent bankruptcy for GM and Ford. Chrysler was done in by crappy product.
11.12.2008 4:12pm
astrangerwithcandy (mail):

I can actually cite a source for the as little as $350. Can you?


thats neat, bc you didn't originally, which is what i was pointing out...much to your righteous indignation.
11.12.2008 4:13pm
Ben P:

Assembly-line workers caused the decline of the American auto industry. Under protection of the NLRA, they formed a union. Exerting considerable bargaining power, the unionized workers exacted generous wages and benefits along with work rules that made the Big Three unprofitable.


Here's the problem with unqualified union hatred.

They were generally pretty profitable when the Big Three had a virtual monopoly in the US Market, and they were pretty profitable when US made large cars and US made light trucks dominated the market.

Has the UAW hurt the ability of the Big three to compete? Sure, to some degree. But there's a lot more going on here. Even in areas that arent' related to labor costs the US car companies have typically lagged behind on trends and been less efficient in general than their foreign competition. They've simply been beat at business.
11.12.2008 4:17pm
Nifonged:
"As to card check, if that actually gets signed into law, it will allow workers to express their preferences without the incredible bias currently allowed in the NLRB election process."

Is it free expression when you have Moose and Rocco "helping" all the workers who haven't signed find their pens?
11.12.2008 4:17pm
astrangerwithcandy (mail):
on one side we have the labor folks...who blame everything on the strategic mistakes of management.

on the other we have the free market sorts...who blame everything on the costs of the unions.

neither side willing to say 'hmmm, maybe its both'

and on goes the tribe v tribe mentality of the 2008 election!
all the while, everyone taking themselves too seriously to enjoy a joke.
11.12.2008 4:18pm
Calderon:
Key items: (GM vs Toy)
Avg. hourly wage: $31.35 vs. $27
Vehicle production time: 34.3 hours vs. 27.9 hours
Health care costs per vehicle: $1,525 vs. $201


The first two of those look awfully significant to me. A 16% percent difference in wages and a 23% difference in the time to produce each vehicle? That adds up to a lot of extra cost in each GM vehicle.

For health care costs, is that for all workers worldwide, or only workers in the US? If it's the latter, then both GM and Toyota are facing the same health care system. Toyota's lower costs likely are partly the result of a younger work force, but a gap that big probably means they're managing costs a lot better as well.
11.12.2008 4:22pm
Curt Fischer:
I am really curious to see what entrepreneurs think of the cozy relationship between the Big Three (Two?) and Washington. Does Tesla Motors want to see the US Treasury open its coffers to GM and Ford? What about the various people doing the Automotive X Prize?

Why don't they have a voice in this debate? If GM and Ford were ruined, would it help the little guys get to market faster? If GM and Ford receive buku subsidies from the Feds, does it distort market entry scenarios for the little guys? Or, conversely, do the prospects for the auto-start ups somehow hinge on having a strong domestic auto industry? (For example, maybe the investors at Tesla need a cash-rich GM or Ford to eventually buy the company and keep it going...)
11.12.2008 4:23pm
Brian G (mail) (www):
Bankruptcy, not a bailout, is what would be best for the automakers in the long haul.
11.12.2008 4:26pm
Brian G (mail) (www):

As to card check, if that actually gets signed into law, it will allow workers to express their preferences without the incredible bias currently allowed in the NLRB election process. And all you folks opposing card checks in the name of worker rights: you all know that card check recognition is currently legal -- at the employer's option -- and has been legal for many decades, right?



And you know that workers don't need "card check" to express their preferences, right? If your points were vaild, then why do we need this new legislation? Because of bias? What bias? You mean that employers now get to voice their opinions and position on unionization, so taking that right away from the employers eliminates the bias? Please.

Once card check is passed, it will be a shame of how many people will lose their jobs as a result of forced unionization. Of course, the pro-card check folks won't care, because they will either benefit or they are just another set of leftists who take a position, argue for it, and ignore the practical effects on real people while moving on to some other cause.
11.12.2008 4:32pm
Anderson (mail):
but I can't for the life of me figure out where your numbers come from

The radio. Unlike the internet, you can believe whatever you hear on the radio ... right?
11.12.2008 4:34pm
astrangerwithcandy (mail):
<blockquote>
The first two of those look awfully significant to me. A 16% percent difference in wages and a 23% difference in the time to produce each vehicle? That adds up to a lot of extra cost in each GM vehicle.
</blockquote>

which leads to this stat:

<i>Average Labor Cost per U.S. Hourly Worker

GM: $73.73
Toyota: $48</i>

somewhere along the line the GM workers pick up quite a premium and they are in the same healthcare market.

also, those stats are an aggregate of the requirements for each vehicle they produce. doesn't seem to be a great indicator to me.
11.12.2008 4:34pm
q:

One always hears about "retraining," but seriously, what do you "retrain" thousands of workers in their 40s and 50s to do?

Genuinely curious here, folks.

I don't actually mean direct retraining. Just subsidize whatever education the workers decide to pursue.
11.12.2008 4:34pm
Dan Weber (www):
You can't make health care a free lunch. If the government pays for the health care of US workers, then the businesses will still pay for it. You could try to lower the US's huge health care costs, but that's separate from having the government pay for it.

All the workers in all those factories that make car parts? They're going to continue to work in factories that make car parts, because the US is going to continue to buy cars. The parts end up going into cars with a "Toyota" stamped on the back instead of a "Chrysler," but they'll still work to manufacture cars.

Now, many of those small parts companies work on very thin margins. GM stopping payment to those creditors for a few months could put them under. We might see the government making loans to them in exchange for them agreeing to not go into bankruptcy.
11.12.2008 4:34pm
Kevin Raley (mail):
If Ford, GM, and Chrysler go under, people will still need cars, and I imagine Toyota, Nissan, Honda, Hyundai, et al. will be happy to build new plants in the U.S. to meet some of the demand. Thus, I think the dislocation will be less than anticipated and/or temporary.

Alternatively, if Ford, GM, and Chrysler go through a bankruptcy restructuring and are able to get out from under some of the legacy obligations that prevent them from being able to produce cars that they can sell at a price that earns them a profit, then they may be viable entities going forward.

The interesting thing to me is that the American manufacturers have closed the objective quality gap over the last decade, but have been unable to close the subjective quality gap. I think that is the root problem, and I don't think a bankruptcy restructuring will do anything to solve it.
11.12.2008 4:36pm
Hoosier:
Anderson
but I can't for the life of me figure out where your numbers come from

The radio. Unlike the internet, you can believe whatever you hear on the radio ... right?


Unless you are hearing that "Paul is dead," yes you can.
11.12.2008 4:38pm
q:

Does that not apply to the financial industry as well?

I don't profess to have easy answers to any of these problems, but perhaps the libertarians here can address the central question: Should the government simply let the banking/auto/other industries fail, regardless of the consequences to the economy at large?

As I hinted in the post right above yours, the difference between the financial industry and the auto industry is systemic risk. The bailout of banks is (arguably) justified because of counterparty risk. That simply does not apply to the auto industry. If GM goes down, it won't be taking other companies and industries down with it. Yes, many workers will be out of a job, but there's no reason to favor them over any other industry that's facing job cuts.
11.12.2008 4:38pm
byomtov (mail):
Health care costs per vehicle: $1,525 vs. $201

Does this include both active workers and retirees? The link doesn't say.

To the extent it includes retirees, it is not quite accurate to state it in "per vehicle" terms, since it doesn't vary with the number of vehicles produced.
11.12.2008 4:38pm
Constructively Reasonable (www):
This is Eddie's car from Grounded for Life!

Now, most people have not seen that show (indeed, it is off the air now), but if anyone can find an episode online featuring this car, it is quite funny.

I never though I would see another one in my lifetime (I had assumed it was prop).
11.12.2008 4:41pm
mister nonymous:
you'd do well to look at actual safety ratings

Spot on. This is one of these things that everyone thinks they're an expert on, and they're usually wrong. And if you really can't be bothered to look up safety ratings, go with a mid-size sedan or any Volvo from, oh, the last 40 years. I'm not a big fan of Volvo, really, but their safety engineering has been unparalleled.

And odds are your parents and grandparents did fine in the winter without 4WD or AWD. Not that these aren't worthwhile, but if you're frugal, consider snow tires instead. Or consider all-seasons and driving more conservatively.

But if you just want a big car or SUV, hey, it's still a free country.
11.12.2008 4:46pm
Calculated Risk:
I have to agree with Mahan.

This is a very stupid post by Orin. The problems with the auto industry are very serious affecting millions of people. An actual productive proposal rather than snark is appropriate.

[Ok Comments: Calculated risk, if you are so smart, then surely you can distinguish criticism of one proposal for solving a problem from an argument that the problem is not worth solving. This was obviously an example of the former, not the latter. More broadly, I care passionately about the U.S. auto industry. But I think the productive proposal is clear: The U.S. auto companies should make better cars than their foreign competitors and should make them as inexpensively as possible and then sell them at a profit. They should focus on selling cars at a profit, and if they can do that then they can succeed. However, I don't see how government advice is going to help them, as the government doesn't know anything about selling cars or profits.]
11.12.2008 4:48pm
Hoosier:
The problem with Volvo is that their mpg ratings stink. Which is funny when you note how many of them have some sort of environmentalist bunper-sticker. Though that might be factory standard.

The 2009 model year will not have a single Volvo that gets a combined mpg rating of 25. That ain't good.
11.12.2008 4:50pm
elim:
isn't snark called for when you see the alleged experts and architects of the oh so necessary multi-trillion bailout run around like chickens with their heads cut off. it seems perfectly clear they don't know what they are doing aside from flinging money around like a monkey at the zoo flings feces. now, they are off to rescue the auto makers. as to unions, aren't they doing to the Big 2 1/4 what they have done to educational achievement. I grew up in Michigan and still have family there-I know what benefits and money were made by the auto workers (and how many pitchers of beer they could drink on their breaks from the BOC plant in Lansing).
11.12.2008 4:53pm
Oren:



The interesting thing to me is that the American manufacturers have closed the objective quality gap over the last decade, but have been unable to close the subjective quality gap. I think that is the root problem, and I don't think a bankruptcy restructuring will do anything to solve it.

Seconded.
11.12.2008 4:55pm
deathsinger:
byomtov,

Those numbers are a few years old. From other (similar) numbers it appears to be all costs, including the 400,000+ retirees. Obviously some of that has changed since, but as I stated earlier the real problem in Detroit is fixed costs (which while apportioned per vehicle, don't really change much, so in a declining sales environment really hurt the bottom line.)
11.12.2008 4:56pm
DiversityHire:
Does Robert Reich know anything about cars?

No. But what did Robert McNamara know about making war when Kennedy picked him? What did William "Double-Down" Bennett know about drugs? Look at the amazing job the Dept. of Education has done---I look forward to similar successes with this brilliant scheme: the 2010 Chevy Lada.
11.12.2008 5:00pm
Thomas_Holsinger:
Kevin,

It's not just perceived quality vs. real quality, though I quite agree that the market has a well-justified lack of confidence in Big 3 vehicles.

My wife and I chose a 2006 Ford Freestyle cross-over SUV over a Toyota Highlander several years ago for reasons other than quality. The Highlander had higher quality. We chose the Freestyle because it had greater interior cargo space, which was critical for hauling college students to and from college, and averaged 22 mpg to the Highlander's 19 mpg. The Freestyle was also $3000 cheaper - $24,500 to $27,500, but that was less important than cargo room.

The 2006 Highlander would probably have lasted 150,000 miles compared to the Freestyle's 100,000, but present utility was our big consideration.

And our next-door neighbor had a 2006 Highlander for us to do head-to-head comparisons with. We haven't regretted our choice at all. Both are good vehicles.

For mid-size and smaller sedans, though, Toyota and Honda have it all over any comparable American vehicle.

GM and Ford only have to produce vehicles that are good enough in the price ranges with adequate profit margins. In today's market they simply can't, and CAFE standards amd have nothing to do with that. $4 a gallon gas did, but the growing recession is continuing to tank the vehicle market even after gas prices have come down.
11.12.2008 5:03pm
Mahan Atma (mail):
"If GM goes down, it won't be taking other companies and industries down with it. Yes, many workers will be out of a job, but there's no reason to favor them over any other industry that's facing job cuts."


I think the impact will be a lot more than "many workers will be out of a job". The degree of systemic risk isn't quite that of the financials, but it is certainly non-negligible.

I think many areas around the country will be pretty much destroyed. I don't know if the country as a whole will be hit with a Great Depression, but significant parts of it will.
11.12.2008 5:03pm
Ben P:

I'm not a big fan of Volvo, really, but their safety engineering has been unparalleled.

And odds are your parents and grandparents did fine in the winter without 4WD or AWD. Not that these aren't worthwhile, but if you're frugal, consider snow tires instead. Or consider all-seasons and driving more conservatively.

But if you just want a big car or SUV, hey, it's still a free country.


Oddly enough my first car was a 1984 volvo, and it drove just fine in the snow.

But presently I live in the south, it's not generally snow I'm concerned about but rocks and mud. Of course the driving into the rocks and mud is entirely intentional. Which is why I chose to buy an SUV.

If gas gets above $4.00 again I may consider buying a second car just to commute with, and if I do so it most likely will be a small car, and most likely used.
11.12.2008 5:13pm
Spitzer:
I, for one, hope that our Dear Leader institutes a buggy whip czar to subsidize that great industry, so foully threatened by "new technology." As President Reagan noted, governments like to subsidize failing companies.

As for card check, the principal advantage (other than getting rid of those pesky anti-union votes by workers who, blinded by the cultural superstructure, threaten the inevitable dawn of our Brave New World) is to foist the UAW's monopolistic practices on all car manufacturing within the United States. Let's "level the playing field" by requiring all car manufacturers to abide by the UAW's rules, and let's punish foreigners who won't enact similar rules in their own countries by enacting protectionist measures to "protect workers' rights".

As to why the car companies are demanding the money, I think it's pretty simple. Capitalists are into money, not into the capitalist system per se, and when they hear about the government having $700 billion that's burning a hole in Treasury's pocket, it is frankly rational to move fast to claim your piece of the pie.
11.12.2008 5:17pm
Anderson (mail):
Wow, that Reich joke fell totally flat. I had such hopes for it.

Alternatively, if Ford, GM, and Chrysler go through a bankruptcy restructuring and are able to get out from under some of the legacy obligations that prevent them from being able to produce cars that they can sell at a price that earns them a profit, then they may be viable entities going forward.

I confess that I find this plausible. Bankruptcy and restructuring might be the shock that allows "creative destruction" in the U.S. car industry.

Properly stage-managed, it might even assist with the subjective angle mentioned above.
11.12.2008 5:26pm
Jiffy:

I, for one, hope that our Dear Leader institutes a buggy whip czar

I'm sorry, but in America we have only one "Dear Leader" at a time. You'll have to wait for January 20.
11.12.2008 5:27pm
DudeLooksLikeALady (mail):
"It's the crappy quality, not the unions." But, these are really tightly related. Your compact car can sell for, say, $17,000 (about the cost of a Honda Civic, so if you're Ford selling a Focus, this is your direct competition). Honda doesn't face higher labor costs due to unions forcing higher wages and opposing automation efforts. Honda doesn't have the pension problem that GM has. Therefore, their costs per car are, say $1500 lower. How can you compete with that if you're Ford? There's only one way - you have to cut corners somewhere to save (part of) the $1500, either in the amenities or in the quality of the outfitting. There's no other way to compete. If your cost of manufacturing isn't the same, you're not going to make money.
11.12.2008 5:28pm
first history:
The car companies should do the merciful thing and use Chapter 7 rather than Chapter 11--liquidate!
11.12.2008 5:32pm
autolykos:

If Ford, GM, and Chrysler go under, people will still need cars, and I imagine Toyota, Nissan, Honda, Hyundai, et al. will be happy to build new plants in the U.S. to meet some of the demand. Thus, I think the dislocation will be less than anticipated and/or temporary.


You realize that there are other people who work for the auto companies besides plant workers, right? Hundreds of thousands of them? And that many of these jobs (engineering and design, testing, R &D, etc.) will get shipped offshore if the domestics go out of business? And that foreign automakers use more parts from foreign suppliers than domestic automakers? And that these suppliers also employ lots and lots of people?
11.12.2008 5:33pm
Mark Rockwell (mail):
I'm really glad this was written by a "legal scholar."
11.12.2008 5:36pm
Vermando (mail) (www):
With all due respect, we can't well complain about the government interfering more with this industry when it is the industry itself going to the government for money.

I don't want the government involved here, but if the industry is asking for money, it seems like we need to do something to ensure some accountability.
11.12.2008 5:36pm
autolykos:

With all due respect, we can't well complain about the government interfering more with this industry when it is the industry itself going to the government for money.


Why not? It's the government that established the rules that have made them need the money. It doesn't strike you as absurd that the government can regulate you into bankruptcy and then use that bankruptcy as an excuse to regulate you even more?
11.12.2008 5:43pm
Mahan Atma (mail):
"But I think the productive proposal is clear: The U.S. auto companies should make better cars than their foreign competitors and should make them as inexpensively as possible and then sell them at a profit."


Ah, well then, problem solved. Academia at its best!
11.12.2008 5:44pm
Thomas_Holsinger:
John Derbyshire at National Review's Corner has a post on the subject with a complete reader email on just how badly a straight bankruptcy and liquidation by GM and Ford would hurt the U.S. economy. Here's an excerpt from the email:
"Unlike Wall Street, this is the real economy, where actual things are manufactured and sold. An implosion of the domestic auto industry could take us to the edge of a financial depression.

We're not just talking about engineers and assembly line workers being unemployed. GM spends $85 billion a year on components, and billions more on other equipment and services. It has the largest installed base of personal computers of any company in the world and the Warren Tech Center has supercomputers that are the envy of many governments around the world. If GM folds, it won't just take down their automotive suppliers, it will hit companies like Microsoft, Dell, Cisco and Autodesk (publishers of CAD software), and hit them hard. As the collapse of the Detroit car companies cascades and ripples through the economy, we could see unemployment reach 15 percent or more. All those folks saying to hell with Detroit have no idea how much their own jobs may be imperiled."

Derbyshire's conclusion on the email was:

"Yet the British experience suggests that government support does nothing but postpone the Dies Irae. This looks to me like a problem with no solution."
11.12.2008 5:45pm
zippypinhead:
Hoosier wrote:
A very significant part of the problem isn't directly related to the type of car made. It's the pension obligations that the Big Three have to a retired workforce that is living longer than was anticipated.
I knew it! the actuaries are to blame! Unless, of course its the fault of those darn OSHA regs that tend to keep workers from falling into the fender stamper before they can retire, asbestos remediation rules that cut down on terminal mesotheleoma cases in the industry, and USDA regs that require food to be trucked to Michigan in refrigerated containers so the locals can eat a balanced diet with fresh vegetables and live longer! Curses...
\sarcasm off>

But seriously, legacy retiree costs are essentially fixed costs in the short and medium-run. When unit sales went over the cliff this year, per-vehicle legacy costs quickly increased to the point the companies could no longer make the bottom line add up. In the good old days (2007) when auto sales run rates were high enough to distribute the fixed retirement health and pension costs across a larger number of units sold -- especially profitable SUVs, etc. -- they could survive. Now, not so much...

Possible solution? Same as what the airlines did to get rid of their high pilot and mechanic retirement costs: File chapter 11, abrogate the union contracts, dump the pensions on the PBGC, and stop paying retiree health care. Although given UAW's lock on the labor force and political clout, that would get ug-LY. Both in Detroit and in Washington. More likely political outcome: throwing bazillions of taxpayer dollar$ into the bonfire, and in the end all that will have been accomplished is postponing the inevitable, while making all of us and our children and grandchildren poorer.
11.12.2008 5:49pm
OrinKerr:
Mahan Atma,

I'm curious about something: When you comment, you often seem to be angry and frustrated. You don't give others the benefit of the doubt, but rather seem to lash out. Pardon my curiosity, but why?
11.12.2008 5:50pm
JosephSlater (mail):
Nifonged and Brian G.:

The intimidation is all on the employer side right now. Among other things, employers routinely fire pro-union workers because of their support of unions, even though that's explicitly illegal, because the remedies for this violation are so incredibly weak. Add in stuff like compulsory meetings in which workers are forced to watch anti-union propaganda, illegal threats of plant closure, etc., and the current election system is incredibly tilted to the employer side.

Brian, if you want to oppose card check on the grounds that it alters the rights of employers, as opposed to the rights of employees, that's fair enough (although, for the reasons sketched above, I personally think employers have too much leverage in the process). But many are pretending it that EFCA would alter the rights of employees to ask for an election, and the truth is, EFCA doesn't/wouldn't change that at all.

Again, we've had card check in a number of public sector jurisdictions, and the sky hasn't fallen.
11.12.2008 5:50pm
Elliot123 (mail):
"The people who contend that the best solution to this problem is to take it out of the hides of the workers are just displaying their ignorance of what it's like doing that kind of work for a living. Is there something wrong with trying to negotiate for a decent living?"

It appears the owners of the company are getting hosed, too. No need to think it's just the noble American worker getting skinned. Everybody had a good run. Now it's over. Time to get back to work.
11.12.2008 5:50pm
elim:
snark from Mahan with absolutely nothing that could be called a solution. wasn't that your complaint? isn't that a part of the problem of this particular bailout-money but nothing as to what would be solved? come up with a proposal, MA
11.12.2008 5:51pm
Mahan Atma (mail):
"I'm curious about something: When you comment, you often seem to be angry and frustrated. You don't give others the benefit of the doubt, but rather seem to lash out. Pardon my curiosity, but why?"


Oh I don't think I'm that "angry or frustrated".

I responded that way because I think your proposal is incredibly glib. The problem, as you must sure be aware, is that GM cannot simply change itself on a dime to become profitable. Either the govt intervenes in some fashion, or it goes bankrupt.

Now, maybe Chapter 11 is a way for it to become profitable again. I kind of doubt it, because I think the real problem is that consumers aren't buying nearly as many cars, and won't for a long time. In that case, a hands-off govt policy is going to result is massive misery for a good chunk of American workers (and those tied to them).

So I find the snark of your original post worthy of little more than snark in response.

Does that explain my attitude sufficiently?
11.12.2008 6:00pm
wolfefan (mail):
Hi -

The perceived quality issue may, in some cases, be exactly that - perceived. Mickey Kaus quotes Consumer Reports (!) as follows:

Ford's three brands--Ford, Lincoln, and Mercury--continue to pull away from the rest of the Detroit automakers. Almost all Ford models are now average or better, with the exception of some that are truck-based. Excluding those, Ford's reliablity is now on a par with good Japanese automakers. (www.slate.com, kausfiles, posted 11/10/08 at 1:34 pm.)

I used to sell Dodges and Subarus in Silver Spring, MD and had to fight CR-educated consumers tooth and nail to get a sale. For CR to say this is a remarkable change in the last few years.

A cost-per-vehicle difference of $350 is HUGE. Our bread-and-butter with Dodge was the Grand Caravan (and trucks.) A Grand Caravan had to be priced a couple of thousand lower than a comparable Sienna or Odyssey to give me a shot at a sale. If it costs $350 more to make the Grand Caravan, and D/C has to sell it for $2,500 less, well.....
11.12.2008 6:00pm
Mahan Atma (mail):
"snark from Mahan with absolutely nothing that could be called a solution. wasn't that your complaint?"


Not quite. My complaint is over those throwing snark at people who want to try to do something about the problem.

I've already stated that I don't have any easy answers. But I'm not going to try to make fun of the people who are earnestly puzzling through it.
11.12.2008 6:02pm
Bryan C (mail):
The interesting thing to me is that the American manufacturers have closed the objective quality gap over the last decade, but have been unable to close the subjective quality gap. I think that is the root problem, and I don't think a bankruptcy restructuring will do anything to solve it.

You're right, it won't. A restructured GM might be better off mothballing their current tarnished domestic nameplates. Rebrand the company itself for starters, and then sell cars as Opels or Holdens for a few years. Or maybe under one of the foreign nameplates they already partner with. The "classic" brands can be held in reserve for happier days.
11.12.2008 6:02pm
wolfefan (mail):
BTW -

Re-organization through bankruptcy is not an option for a carmaker. You might be willing to buy a Sony TV through Circuit City because even if CC goes under, Sony is still around for service, parts, etc. If you suspect that GM might go under, you will be _much_ less likely to buy a GM vehicle since GM is the manufacturer itself.
11.12.2008 6:03pm
Mahan Atma (mail):
BTW - It occurs to me that Obama won the election largely because most of the electorate does want the govt to get involved and do something about these problems.

You can scream "socialism" all you want, but frankly, if Obama and his people sat back and did nothing, they'd be violating the democratic will and trust of the folks who put them in power.

So if you don't want to the govt to get involved in these things, get your own people elected next time.
11.12.2008 6:08pm
Glenn W. Bowen (mail):
The breathtaking U.S. Government Model 1 Car- popularly known as the "Michelle", with man-hands and Adam's apple standard.
11.12.2008 6:08pm
Matthew K:
Orin, you're just trying to build up credibility so that people don't call you a leading apologist for the Obama administration when you endorse his socialist revolution.
11.12.2008 6:16pm
OrinKerr:
Mahan Atma,

To be clear, I am referring to your posts over the last 6 months or so, not just your response to me: You are one of the nastier and less substantive commenters I have seen here at the Volokh Conspiracy. You may have arguments, and you seem like a smart guy, but you hide them in sarcasm and dismissiveness and a sense that you have been personally offended at every turn. I was just curious about why you comment that way.
11.12.2008 6:18pm
Nguyen Jones:
Re: Unions. How's about if'n Jane Fonda organized glass or rubber or steel producers to say to the auto industry: We are united, we are family, I got all my sisters wit me. You buy our products at the price we dictate, or we gonna shet downs yo' factories.

"Public policy" matters aside, what is different in this scenario from corrupt union bosses controlling supply of labor?

The foreign manufacturers typically have 15000 applicants for 100 jobs: I'd guess that they'd select the most skilled and willing to work.

The domestics have to take any doped-up, alcoholic, mentally disturbed, lazy moron who is somehow related to the former sister-in-law of the shop steward, and, get this, he can never be fired for any reason!

Nice work if you can get it.

Jeez, I may be an old fart, but can I remember the days when manual workers didn't own yachts anchored off their luxury villas in San Tropez.
11.12.2008 6:24pm
BK:

John Derbyshire at National Review's Corner has a post on the subject with a complete reader email on just how badly a straight bankruptcy and liquidation by GM and Ford would hurt the U.S. economy.


That letter takes such a simplistic view of a Big 3 bankruptcy as to be laughable.

The assets (including PPE, favorable supply contracts, IP, and inventory) and employees of a company do not just disappear in a bankruptcy. Either someone will by buy parts of the company as a going concern or monetize the assets some otherway.


Assuming GM has a market share between 20% and 25% of the US auto market, can anyone actually suggest that there would be no demand for GM's workers, plants, and inventories? Let the Japs buy the plants and hire GM's workers on sane terms. And that's in a nightmare liquidation scenario.

Another possibility is an honest to God reorganization complete with a renegotiation of CBA's.
11.12.2008 6:28pm
Syd Henderson (mail):
Glenn W. Bowen (mail):
The breathtaking U.S. Government Model 1 Car


I'd call it a Folkswagon.
11.12.2008 6:29pm
astrangerwithcandy (mail):


I've already stated that I don't have any easy answers. But I'm not going to try to make fun of the people who are earnestly puzzling through it.


how is appointing a car czar and offering money 'puzzling through it'- that seems like a pretty worn path.

this is also fairly disingenuous comment as you know that the right claims market sensibilities. therefore they aren't going to bluster about puzzling through gov't policies to fix the situation. they are going to say "let the market fix it" ...and you will be there waiting to say "gotcha"
11.12.2008 6:29pm
Mahan Atma (mail):
"You are one of the nastier and less substantive commenters I have seen here at the Volokh Conspiracy. You may have arguments, and you seem like a smart guy, but you hide them in sarcasm and dismissiveness and a sense that you have been personally offended at every turn."


I think you are exaggerating quite a bit here.
11.12.2008 6:30pm
Thomas_Holsinger:
Public perceptions of an automaker's quality is critical during bankruptcy reorganization because it goes directly to reliance on manufacturer warranties. No one in their right mind would rely on GM warranties if it goes bankrupt, and few on Ford's. Toyota and Honda don't really need warranties but they are in no danger of bankruptcy.

I.e., if GM enters bankruptcy, it will essentially be liquidation. Probably Ford too, but certainly for GM.
11.12.2008 6:30pm
zippypinhead:
I used to sell Dodges and Subarus...and had to fight CR-educated consumers tooth and nail to get a sale. For CR to say [that Ford's quality now equals Japan's] is a remarkable change in the last few years.
The change is Ford's, not Consumer Report's. I became one of those CR-educated consumers after our last 2 American cars were hauled away, the final straw being a Dodge Grand Caravan that got so unreliable my wife literally became afraid to drive it. The CR-recommended Hondas in my driveway are both going strong with a collective 234,000 miles between them - and one was assembled in Ohio, the other in Alabama. But if Ford's quality stays up (and the company survives), we'll happily look at them when the time comes. I could easily see a Fusion replacing my Accord.

Quality has been an issue, but one that can be overcome (see, e.g., Hyundai). Fundamentally Detroit's problems are more the result of their structural cost disadvantages, and I really can't see how a Washington-appointed "czar" is going to fix them in a politically-palatable way. Even if the 2011 "Government Model 1" gets 40 mpg and never breaks down, the retirees will still need to eat. And probably not Soylent Green wafers.
11.12.2008 6:33pm
Mahan Atma (mail):
"how is appointing a car czar and offering money 'puzzling through it'- that seems like a pretty worn path."


I'm guessing that the people who are put in charge of these problems are actually thinking about how to go about this. You may disagree with their conclusions, but surely you aren't arguing that they are preceding blindly.

This would be one of the benefits of electing a more "cerebral" executive branch, it seems to me.
11.12.2008 6:35pm
BK:

...if GM enters bankruptcy, it will essentially be liquidation.


I don't know why you would say that. I think a company (GM) with 20%+ market share has some goodwill (i.e., worth more than its assets) given the chance.
11.12.2008 6:39pm
astrangerwithcandy (mail):


I'm guessing that the people who are put in charge of these problems are actually thinking about how to go about this. You may disagree with their conclusions, but surely you aren't arguing that they are preceding blindly.


the auto heads have the benefit of past experience, knowledge of market conditions, and full knowledge of the company's capabilities. this is something the czar would have to learn as he/she goes along. seems like folly to assume that with less experience and knowledge of the decisions faced by each of the automakers individually, a czar would make better decisions.
11.12.2008 6:46pm
Mahan Atma (mail):
BTW, Orin, on further thought to your question:

If I come across as combative at times, it is because it is difficult to be in the ideological minority. I get a large amount of snark/sarcasm thrown my way around here simply because I express a more liberal opinion; that in turn may reinforce my own attitude.

Perhaps you don't pick up on it because you are more ideologically aligned with them, but there are quite a few commenters around here who express a far greater level of negativity than I do. Comparing Obama to Hitler, for example, is a genuinely offensive comment. Have I ever said anything remotely as inflammatory?
11.12.2008 6:50pm
DiversityHire:
...preceding blindly...

The most concise summary of "best-and-brightest" government interventionalism I've come across.
11.12.2008 6:56pm
Mahan Atma (mail):
"the auto heads have the benefit of past experience, knowledge of market conditions, and full knowledge of the company's capabilities. this is something the czar would have to learn as he/she goes along. seems like folly to assume that with less experience and knowledge of the decisions faced by each of the automakers individually, a czar would make better decisions."


But a czar won't be working in a vacuum. If Obama is true to his word, he will generally appoint people who will sit down and talk with industry leaders (e.g. the health care issue). At the very least, I sincerely doubt the govt is going to take total control of the industry.

Besides, I'd have thought that the failure of the industry would imply that its leaders aren't all that wise.

Look, the problem is clear: If the govt does nothing, GM will go bankrupt and very well may fail outright. Now, some people here (who probably don't raise families in Detroit) are apparently willing to let that happen, although I'm not sure they're clear on the magnitude of the consequences.

But you could at least acknowledge that the idea of govt assistance isn't a totally laughable idea, as Orin's post implies. And if the govt is willing to provide financial assistance, it shouldn't do so unconditionally.
11.12.2008 6:56pm
Dick King:

"Everybody knows" that foreign companies can outcompete US companies because our companies pay for health care of their employees. I would like to challenge that assertion.

Consider a unionized industry where the workers make more than average in a nation with a progressive tax system*.

Now how do wages get set in a unionized company? Here is a simple model. Each worker has a living standard, not a specific dollar wage, below which they would vote to strike but above which they would vote to keep working. If they get enough money for one plasma TV they would strike to get a second one, but they wouldn't strike for a third one. Similarly, the company has a dollar cost per worker-year, not a wage figure, above which they take a strike.

If the minimum union demand works out to less than the maximum company payout, the negotiation completes successfully. The bigger the gap, the more surplus there is to distribute. If the minimum demand exceeds the maximum payout, there's an impasse and the company eventually dies.

If the nation adopts a single payer system, ...

1: The company can afford to pay a bit more, 1/100M of the nation's health care bill per employee.

2: Taxes go up. Since the auto workers are reasonably well paid, each one pays more than 1/100M of the nation's health care bill. They want the extra amount the company can offer, and more, to avoid a strike. So the transaction surplus decreases or the transaction deficit increases.

I do realize that the health care for retired employees does matter. That does matter some, and I don't know how much. However, didn't the union take these obligations off the hands of the company a few years back, in return for a one-time fee? Very clever on the part of the union ... a benefit that would have been subject to bankruptcy was taken out from under.

Industries where the average employee is well paid will not do better under single payer than they do under the current system, but low-productivity industries will do better. I for one do not want to kick Boeing and Google and Yahoo and Intel out of the country to make room for bringing back the sweatshops.

-dk

* Yes, it's not as progressive as some people would like. Still, it's clear that an auto worker whose family consists of 1/100M of the nation's population will pay significantly more than 1/100M of the nation's tax burden, while consuming about 1/100M of the nation's health care.
11.12.2008 6:57pm
astrangerwithcandy (mail):
<blockquote>
You may disagree with their conclusions, but surely you aren't arguing that they are preceding blindly.
</blockquote>


got side-tracked. no, they are not proceeding blindly. no one accused them of proceeding blindly. i said that they are not "puzzling through it" or in other words, not coming up with novel solutions. naming a czar and throwing around lots of money is a well tread path.
11.12.2008 6:57pm
OrinKerr:
Mahan,

Thanks for the response. There have indeed been commenters that have expressed more negativity than you. Actually, I think I have managed to ban most of them over time (and most of them were conservative, for what it's worth). I think what's a little different is that it's clear that you're smart: Most of the people who express lots of negativity aren't smart enough to know better.

As for being in the ideological minority, though, I don't see why that is relevant. As an academic, I am usually in the ideological minority: I've even jokingly brought bulls-eyes with me to academic conferences to "make it easier" for the other professors to aim at me. But I tend to think that makes civility all the more important, not less.

Anyway, for what it's worth, I would love it if you could try to me more civil here: I think you could really influence opinion more, which I think is the point of comment threads anyway.
11.12.2008 6:59pm
JosephSlater (mail):
Bulls-eyes? Really? I gotta start going to different law prof. conferences, or maybe pay more attention at the ones I do attend.
11.12.2008 7:04pm
Mahan Atma (mail):
Orin, fair enough, and point taken. And thank you for the kind words. I will do my best.
11.12.2008 7:06pm
Mahan Atma (mail):
"no one accused them of proceeding blindly. i said that they are not "puzzling through it" or in other words, not coming up with novel solutions."


Well so far, Obama hasn't even been inaugurated.
11.12.2008 7:08pm
astrangerwithcandy (mail):


But a czar won't be working in a vacuum. If Obama is true to his word, he will generally appoint people who will sit down and talk with industry leaders (e.g. the health care issue). At the very least, I sincerely doubt the govt is going to take total control of the industry.



i think it is a laughable for precisely what you talk about above. the czar is supposed to make better decisions bc he/she will receive information and consultation from industry leaders? the industry leaders that you think have made so many mistakes. they have had plenty of consultants over the years. adding one person from the government to the mix of the same ideas, isn't really adding anything IMO.


Look, the problem is clear: If the govt does nothing, GM will go bankrupt and very well may fail outright. Now, some people here (who probably don't raise families in Detroit) are apparently willing to let that happen, although I'm not sure they're clear on the magnitude of the consequences.


that isn't the problem. the problem is the Big3 got their behinds handed to them by the Japanese. the consequence is potential bankruptcy. bailing them out and naming a government consultant doesn't fix the problem. forcing them to restructure their business will - to the extent it can be fixed. (FWIW, i grew up in the Detroit area. my grandparents worked in the plants and many of my neighbors growing up still do. my other grandfather was a farmer. government largess defined my youth! :))
11.12.2008 7:11pm
OrinKerr:
Joseph,

I should have said "a bullseye," as I only did it once. Got a big laugh, though, as everyone else at the conference where I presented my paper was on the other side.
11.12.2008 7:13pm
OrinKerr:
Thanks, Mahan. I apreciate it.
11.12.2008 7:14pm
John S. (mail):
i am at a loss that people are making arguments in favor of the government directing an industry

Take this opinion for someone who used to engineer in the auto industry, and now engineers in the aviation industry, for what it's worth.

Planes are pretty technologically advanced, reliable, efficient, and constantly improving on a grand scale. This is largely because of government development money fueling technological innovation for the military, which then gets passed to commercial aviation. This is the primary reason aircraft undergo massive improvements in emissions, noise, and efficiency every 5 years or so.

The auto industry would benefit equally as well from investment in advanced technologies, that could then be rolled into commercial car lines. That would yield a true technical advantage over foreign companies.
11.12.2008 7:17pm
comatus (mail):
Mister Keenan, that Studebaker remark was, hands down, the stupidest comment I've read this month. Every single part of it was factually incorrect. There's a lot to be learned from Studebaker's corporate history, but nobody is going to learn it from you. You are a monumental fool.
11.12.2008 7:18pm
astrangerwithcandy (mail):

Well so far, Obama hasn't even been inaugurated.


i was waiting for that one. i was trying to decide how to answer it without being too snarky...

obama has spent the last 2 years running for the office (his main qualification for the job, btw - i couldn't resist) and in his first meeting with the sitting president to talk about policy and transitions, mentions the auto industry and this idea. his people have been thinking about policy for quite some time. so, i don't think your excuse for him holds. for our sake, i am glad his first serious thought to governance is not the moment when Roberts starts talking to him in front of a million plus.
11.12.2008 7:19pm
Mahan Atma (mail):
I'm not a bankruptcy lawyer, but if GM goes into bankruptcy, doesn't that mean a trustee and/or judge will gain a large degree of control over their business?

How is that form of government intervention guaranteed to be more successful than any other?

I'm not saying it isn't -- maybe it is -- but I haven't heard anyone explain why.
11.12.2008 7:20pm
Mahan Atma (mail):
(BTW -- One might say GM's creditors are also are part of the industry in question.)
11.12.2008 7:21pm
Mahan Atma (mail):
"obama has spent the last 2 years running for the office (his main qualification for the job, btw - i couldn't resist) and in his first meeting with the sitting president to talk about policy and transitions, mentions the auto industry and this idea. his people have been thinking about policy for quite some time. so, i don't think your excuse for him holds."


Come on...

Republicans spent 8 years lowering the bar for Bush. Now you want to raise the same bar impossibly high.
11.12.2008 7:25pm
Robert Farrell (mail):
A few points:

Unions are capitalism in action. It's funny to me how people who are ready to fall on their swords for the holy right of the market to pay CEOs hundreds of millions of dollars in compensation are outraged when employees organize to secure a pension, healthcare benefits, and a wage that buys a house and sends the kids to college. Getting the best price for your labor is presented as a sinister, corrupt enterprise. I guess this is where we see who likes the free market and who just likes corporations.

There are good reasons to be suspicious of government intervention, but the facts do not support the knee-jerk presumption that any action the government takes will result in a Soviet-style transformation to inefficiency, shoddy products, and reduced choice. Joke about it if you want, but it ain't always so. I remember one national government that was deeply involved in their national auto industry; telling them which companies to buy, directing labor negotiations, manipulating the currency to boost exports. The result was the flailing behemoth we know as Toyota.
11.12.2008 7:30pm
BK:

I'm not a bankruptcy lawyer, but if GM goes into bankruptcy, doesn't that mean a trustee and/or judge will gain a large degree of control over their business?


In most large bankruptcies the debtor acts as "debtor in possession," and a trustee is not appointed.


How is that form of government intervention guaranteed to be more successful than any other?


The debtors' management who presumably know more about the company than a court appointed trustee get to make the business decisions with the approval of the court (and on terms usually amenable to a committee of the company's creditors).

Even more importantly, reorganization (and obviously liquidations) is subject to market valuations.
11.12.2008 7:30pm
DiversityHire:
...the problem is the Big3 got their behinds handed to them by the Japanese...

But why did this happen? What makes it so difficult for GM, Ford, and Chrysler to profitably produce cars in/for the North American market? It's not that they're stupid, they make money in foreign markets.

The auto industry would benefit equally as well from investment in advanced technologies

Each of the big 3 has or has had a significant investment in aerospace, why hasn't that technology transferred to their automobiles?
11.12.2008 7:32pm
DiversityHire:
Would love to here what solutions you have to this problem.

Sell the companies to their employees.
11.12.2008 7:40pm
Calderon:
So, a typical line for bailing out GM / Ford / Chrysler is that if they go into bankruptcy no one will buy their cars because they won't know that they'll be able to depend on the warranties. Does anyone have any links or cites to studies of this alleged effect, one way or the other? People obviously buy used cars that are out of warranty, and warranties have a time/mileage limit anyway, so an infinite warranty clearly is not a prerequiste to buy a car.

Also, why would you be so sure that GM can't overcome that problem, such as by contracting with independent dealers, or (more likely) subsidizing customers' effort to contract with dealers to have warranty work done if GM liquidates.

There also the question of whether GM, etc. would be able to establish credibility that it's going to be a going concern in the future. Presumably, as soon as it entered bankruptcy GM would be seeking to push its pension obligations onto the PBGC, and renegotiations with its unions under 11 USC 1113 would also be likely. There's also other cuts that could be made using contract rejections, threats of contract rejection to renegotiate, and so forth. In short, I don't Chapter 11 as inevitably meaning liquidation for GM.

Though I can, of course, see why GM, and even moreos parties interested in GM, would want to portray a Chapter 11 filing as a death sentence, regardless of whether that's accurate or not.
11.12.2008 7:44pm
byomtov (mail):
deathsinger,

Thanks for the response. Of course, retiree costs are fixed also. How much of the health care bill for active workers is fixed depends on what happens during layoffs and so on. To the extent benefits are continued then these are fixed also.

The question of whether fixed costs are the problem is critical to figuring out the best thing to do. If GM, say, can actually make and sell cars at an operating profit, then it needs a financial reorganization, through bankruptcy or some other means. This is where I think it is wrong to say "the government should just get out of the way and let them make cars."

Bankruptcy is, to begin with, government action. And given the complexity of a company like GM, and the impact it has on the economy, it is not irrational for the government to get involved and not simply allow a n-year bankruptcy fight to destroy the assets on hand.
11.12.2008 7:55pm
LM (mail):
Mahan Atma:

Orin, fair enough, and point taken. And thank you for the kind words. I will do my best.

OrinKerr:

Thanks, Mahan. I apreciate it.

comatus:

Mister Keenan, that Studebaker remark was, hands down, the stupidest comment I've read this month. Every single part of it was factually incorrect. There's a lot to be learned from Studebaker's corporate history, but nobody is going to learn it from you. You are a monumental fool.

Apparently incivility abhors a vacuum.
11.12.2008 7:55pm
Thomas_Holsinger:
Calderon,

Warranties are contracts. Contracts are voidable in bankruptcy. You are correct that GM in bankrupty could arrange for all new warranties to be written by third parties, and for GM to subsidize the warranty contracts with payments from new car sales. I got a third party extended warranty for my 2002 Toyota Camry, and it about paid for itself due to an air conditioner compressor failure.

The operative word here, however, is "could", and here perceived reputation for quality is critical. Ford has a much better reputation for quality than GM and so has a better chance of getting buyers with a third party warranty. I.e., buyers of new GM vehicles would be rightly suspicious about the financial viability of a third party warranty provider absent some sort of government guarantee. And the cost to GM of subsidizing third party warranties would likely be substantial - more so than it is today for its standard 3 year/36,000 mile in-house warranty. Costs are the issue, after all.

GM no longer has time to rebuild its disastrous reputation for quality. I.e., its "goodwill" is pretty much shot. All it has left are familiar brand names.

I agree with a comment I read either elsewhere, or way early in this thread, that new car warranties are the real weak point for GM in seeking bankruptcy reorganization.
11.12.2008 8:05pm
Anderson (mail):
one of the nastier and less substantive commenters I have seen here

Well, damn -- *I'd* better pack my bags.

how badly a straight bankruptcy and liquidation

Would a liquidation necessarily follow? Why can't they restructure?

Bankruptcy folks, help out -- wouldn't Chapter 11 enable GM/Ford to renegotiate union contracts &pensions?

-- Another angle is the political difficulty of Obama vs. the UAW. I think he can do this only if it's clear that it's not "Obama vs. the unions" -- the UAW has to be presented something that 80% of the public will accept as reasonable, and they have to reject it. (Of course accepting would be better.)
11.12.2008 8:07pm
Another pinhead (mail):
Robert Farrell: Unions are capitalism in action.

Indeed they are.

Unregulated capatilism can lead to monopolies, which have serious negative consequences for markets. Of the major protagonists in this problem, GM, Chrysler, Ford and the UAW, which one is a monopoly? Is it just a coincidence that the US auto manufacturers that have problems with their business model rely on a monopoly for one of their major business costs? If unions had to compete like the companies they organize, I doubt that they or their companies would be in this predicament.
11.12.2008 8:07pm
Ben P:

Taxes go up. Since the auto workers are reasonably well paid, each one pays more than 1/100M of the nation's health care bill.


I'm not so sure your assumption is correct here.

Based on the quick research I just did, base wages for a UAW auto worker average at $28 an hour. GM states this rises to roughly $38 when all the other benefits are included. (But most of those are not taxed)

If you're making $28 an hour that's roughly $58,000 gross, $44,000 after taxes.

The median annual household income was $50,483, putting a single income family with a UAW worker as the primary earner just above the median. Based on those same numbers, probably less than 60th percentile


If we accept the numbers in those studies used to attack Obama's tax policy as welfare, the top 40% of income earners pay almost 99% of all income taxes paid.

If UAW workers were above the median but below that 40%, their tax burden after refunds probably isn't all that high. Because your healthcare example is hypothetical obviously I can't be concrete, but I'm fairly sure that they'd either be paying less than "their share" or roughly equivalent to their share. Those paying for significantly more than "their share" would be almost exclusively those above them on the income ladder, although they're close to the border.
11.12.2008 8:29pm
Laura S.:
Yes, let us have a strongman. That's always we need. A strongman will solve all our problems.

The Road to Serfdom in Cartoons, skip to page 10, ironically published by GM!
11.12.2008 8:29pm
Ben P:

Bankruptcy folks, help out -- wouldn't Chapter 11 enable GM/Ford to renegotiate union contracts &pensions?


I mainly have experience in individual chapter 7's but yeah, it's exactly what the airlines did.

Regarding warranties the key word is "voidable" not void.

Chapter 11's for large corporations are highly orchestrated and planned affairs. Almost all of our major airlines have gone through Chapter 11's in the past 15-20 years, and each of them continued to operate during their bankruptcies. Further, as a consequence of their bankruptcy they were able to significantly cut wages of pilots and ground crews, who are also represented by unions.

When the airlines went into Bankruptcy, one of the very first things they did was assure consumers that they were still taking every maintenence precaution they did before, and they were scrupulous about honoring consumer perks like frequent flier miles.


If a company the size of GM were to enter into Chapter 11 it would be well planned in advance. The negotiations would be conducted largely ahead of time and the agreements with the creditors would be submitted right away. I seriously doubt GM would fail to honor their warranties and there's no reason they couldn't. The rest is just PR, spinning it to the general public that GM is still GM and there's nothing to worry about quality or warranty service. Many of their creditors are also in the auto supply business so they have every incentive to work with GM on this.

They'd emerge a few months later having shed most of their huge legacy expenses, shed some of their more unproductive units and lines, and little would have changed. I mean how many people say today "I'm not going to fly American Airlines" because they declared bankruptcy a few years back and I'm concerned about their maintenance records.


The one big problem, that someone pointed out earlier, is the UAW. If GM were to threaten bankruptcy as a way to abandon employment debts and pensions, the UAW would pitch the mother of all fits, and it very well could turn ugly.

But the same things are true all the way up from a consumer to a giant corporation. Bankruptcy is a big stick, and GM can go to the UAW and tell them, "if you don't agree, the company goes away" and you're all out of a job and the pensions are gone anyway.
11.12.2008 8:41pm
sbron:
Today's Democrats = 60s 70s British Socialism, with a multicultural flair.

Government takes an increasing stake in British Leyland.

Shortages of bread, electricity, coal.

PM Aneurin Bevan said in the 50s that Britain was an island built on coal and surrounded by fish and would never run out of neither. Ran out of both and more by the 70s.

Thatcher sells off BL in 1980, but plenty of cars are still built in Britain today, except by Japanese companies.

Don't know what the solution is, but nationalization has zero chance of working. Also note that health care costs were not an issue for BL.

Anyway, I thought Pelosi et. al. wanted us to ride mass transit and bicycles, so why does she suddenly want to rescue GM?
11.12.2008 8:44pm
Hoosier:
Mahan Atma,

I'm curious about something: When you comment, you often seem to be angry and frustrated. You don't give others the benefit of the doubt, but rather seem to lash out. Pardon my curiosity, but why?


Clearly sexual frustration. Why should he be any different from the rest of us?
11.12.2008 8:45pm
Anderson (mail):
Bankruptcy is a big stick, and GM can go to the UAW and tell them, "if you don't agree, the company goes away" and you're all out of a job and the pensions are gone anyway.

This reminds me of the A.J.P. Taylor line about Versailles in 1919:

"The Allies, or some of them, threatened to choke Germany to death; the Germans threatened to die."

-- Oh, as for numbers on the radio: NPR's Marketplace claimed that U.S. car sales are down 50% from last year.
11.12.2008 8:53pm
Calderon:
Warranties are contracts. Contracts are voidable in bankruptcy.

I'm well aware that executory contracts can be rejected in bankruptcy. I'm also well aware that companies entering Chapter 11 don't reject contracts with consumer customers (seriously, can anyone think of any example of a Chapter 11 company not in liqudation doing this?) If GM files for Chapter 11, I'll bet money that one of its first day motions is a motion requiring it to honor its existing warranties (filed for PR purposes if for no other reason, though there may be a question of whether warranties are executory contracts or debt which would make the motion legally meaningful). The risk to consumers from GM entering Chapter 11 isn't from GM rejecting their warranties; it's from GM failing to successfully reorganize and not being around to honor its warranties.

You are correct that GM in bankrupty could arrange for all new warranties to be written by third parties, and for GM to subsidize the warranty contracts with payments from new car sales.

One point of my post is there are multiple ways for GM or consumers to get around this issue. GM doesn't need to have all new warranties written by third party servicers (and I'm sure its dealers would be upset if it did that), rather it could design a way for independent repair shops -- or dealers from other manufacturers who would be eager to have GM's customer if it failed -- to step in if GM liquidated. I'd be surprised if clever bankruptcy attorneys and businesspeople could come up with additional ideas.

new car warranties are the real weak point for GM in seeking bankruptcy reorganization.

A lot of people are saying that. The question is whether it's supported by any analysis of bankruptcies from other manufacturers. Or rather the question is are warranties or some other aspect of GM entering Chapter 11 so costly that the government should spend X billion dollars to bail them out.

But I guess since we're all socialists now we might as well. I can only hope that the government will be so generous as to bail out the law firm where I work if things start heading south for us.
11.12.2008 8:54pm
jt007:
"This would be one of the benefits of electing a more "cerebral" executive branch, it seems to me"
I think this is an example of what Orin is talking about. Slow Joe Biden is more cerebral than Dick Cheney? Hank Paulson is a dummy? Colin Powell? Condoleeza Rice?

I can't believe we are still debating the merits of capitalism vs. economic central planning and that is an accurate description of the use of tax payer dollars to invest in failing companies that just coincidentally happen to employ hundreds of thousands of unionized constituents of the Democrat party. I don't know whether the Car Czar would be proceeding blindly, but I am sure that he/she would be just as influenced by politics as by economic and financial considerations. There isn't any doubt that bankruptcy of these American automakers would be painful. It's just that a bailout will not eliminate the pain, it will only prolong it.

Also, the argument that automakers are in trouble because their products are "crappy" fails to consider the fact that costs imposed on US automakers over the last 40 years by the unions and government regulation are one of the primary reasons for that poor quality (although I agree with people who have pointed out that many of those quality issues have been remedied in recent years). As stated above, UAW firms have almost 200% the labor cost per hour of non-union firms and, due largely to collectively bargained work rules, it takes UAW firms more labor hours to produce Both of those facts contribute to poor quality because higher labor costs have to be made up for somewhere else. American cars have fewer features and lower quality materials to make up for higher labor expense (e.g compare the interior of a Volvo S60 with a Ford Taurus). Government regulations like CAFE standards, while conferring certain benefits, also impose a cost. My first car was a 1978 Olds Cutlass Supreme. In 1977, the Cutlass Supreme was the biggest selling model in the US. That model year, it was all steel with chrome bumpers and it was well made. My 1978 was downsized, plastic inside and it was a total piece of crap. One of the reasons it was so flimsy was that they had to reduce weight to meet fuel efficiency standards. The problems facing the auto industry are complex and I don't trust the government as much as I do the bankruptcy process.
11.12.2008 9:04pm
Laura S.:

Based on the quick research I just did, base wages for a UAW auto worker average at $28 an hour. GM states this rises to roughly $38 when all the other benefits are included. (But most of those are not taxed)


An average UAW member gets $86/hr in salary and benefits. Your number includes only cash+immediate benefits, but does not reflect pension fund contributions and post-retirement health-care contributions.
11.12.2008 9:07pm
Ben P:

Also, the argument that automakers are in trouble because their products are "crappy" fails to consider the fact that costs imposed on US automakers over the last 40 years by the unions and government regulation are one of the primary reasons for that poor quality


Fun Fact: Other manufacturers have to deal with those same regulations, and in some cases many more. It's a pretty hard sell that a company based in Sweden has to deal with less government regulation than a company based in the US.
11.12.2008 9:08pm
Thomas_Holsinger:
jt007,

Chrysler products are crap. Its awful reputation for reliabilty and quality, and its imminent doom, are both richly deserved, and related.
11.12.2008 9:13pm
Anderson (mail):
Chrysler products are crap. Its awful reputation for reliabilty and quality, and its imminent doom, are both richly deserved, and related.

My in-laws' Dodge minivan rental suggests that Mr. Holsinger is 100% correct here.

(Their Honda Odyssey was totaled. They decided to buy a slightly less fancy Odyssey rather than a plush Dodge. Not that I'm hugely impressed by *my* Odyssey.)

It's a pretty hard sell that a company based in Sweden has to deal with less government regulation than a company based in the US.

Ha! Comment of the night!
11.12.2008 9:21pm
Elliot123 (mail):
"Besides, I'd have thought that the failure of the industry would imply that its leaders aren't all that wise."

The failure is largely the result of past decisions by past leaders. The fact that someone is experienced in the auto industry is hardly a disqualification. I doubt Obama would insist on someone who knew nothing about autos. If so, would that make them unwise?
11.12.2008 9:36pm
David Warner:
JosephSlater,

"The UAW had nothing to do with the decisions by the big three to build big gas guzzlers nobody wanted. Unions don't get to bargain about the type of product produced. Although in fact, over the past several decades, the UAW has called for more gas efficient cars."

Bullshit.

The UAW is also prime suspect #1 in killing the original Saturn manufacturing model.
11.12.2008 9:56pm
Hoosier:
Anderson
Chrysler products are crap. Its awful reputation for reliabilty and quality, and its imminent doom, are both richly deserved, and related.

My in-laws' Dodge minivan rental suggests that Mr. Holsinger is 100% correct here.


Oh no, Anderson. Not a Chrysler Corp. minivan. (Or perhaps it's a good thing. Do you like your in-laws>)

The transmissions on those are a total disaster. Is the Dodge van ever out of the shop?

We have a Honda Odyssey. Over 90% American-made; mostly in Alabama, which the UAW apparently can't locate. Or perhaps they can, but they've seen Easy Rider. I don't know these sorts of things, really.

But I checked before buying to make certain that the one component imported from Japan is . . . you guessed it . . . the trans.

Excellent, excellent vehicle, by the way. Great for the Hoosierkids, and no problems at all for three years and counting.
11.12.2008 10:08pm
David Warner:
RF,

"It's funny to me how people who are ready to fall on their swords for the holy right of the market to pay CEOs hundreds of millions of dollars"

Make breaking up the UAW contingent on breaking up the CEO's union (no CEO's allowed on Boards of Directors). I'm game.
11.12.2008 10:11pm
docweasel (mail) (www):
[Comment deleted and commenter banned. Docweasel, you are not welcome in VC comment threads. Also, if I can add a political comment, you are an embarrassment to all true conservatives.]
11.12.2008 10:11pm
Hoosier:
Mahan

I get a large amount of snark/sarcasm thrown my way around here simply because I express a more liberal opinion

Well then just stop doing that.
11.12.2008 10:12pm
David Warner:
"mostly in Alabama, which the UAW apparently can't locate"

But of course we all know that Alabamans only vote R because they're all racists. Couldn't have anything to do with labor policy.
11.12.2008 10:16pm
Hoosier:
Point of Language:

I seem to remember only male "czars" in the US government. If a woman were to be appointed, would she be a "czar"? Or "czaritsa"? And am I the only one who would care?

I'm also concerned that "czar" is a "title of nobility." But since the federal paycheck doesn't actually say "Czar services for February, 2007" I guess they're off the hook.

Until that matter is decided, shouldn't we address the czar as "Your Imperial Majesty"? Just to be polite?
11.12.2008 10:40pm
byomtov (mail):
Chrysler products are crap.

A friend once tried to BS a guy about something (all very innocent). Didn't work. The response:

"Next you'll try to tell me a Plymouth's not a sh***y car."
11.12.2008 10:52pm
Thales (mail) (www):
I think we should skip the Big Three and just buy the entire production run of the one permitted car from Borat's country.
11.12.2008 11:27pm
Perfect Sense:
Easy solution.

The government should pay car companies for not building cars, just like the government pay farmers for not growing crops.

At first, some car companies can start off slow. For example, not building 100,000 cars be year. After a few years of experience, they can ramp up to not building 250,000 cars, or even 500,000 cars per year.

Think of the reduction in green house gases!!!
11.12.2008 11:35pm
Mahan Atma (mail):
"yeah, well rightbloggers should be doing everything possible to undermine and damage Obama. Demonize him. Disrespect him. Misquote him. Attribute slips of the lip or gaffes to stupidity and let's get a "given" established that he's dishonest, a cretin, traitorous, criminal and evil. Distort and invent quotes and urban legends to ridicule and discredit him. It worked for the Dems. To anyone who says "let's give him a chance" I say fuck Obama."


Thanks for your honesty, docweasel. I'm saving a link to your comment, so that anytime you criticize Obama, I can impeach you with it.
11.13.2008 12:09am
jt007:
Chrysler products are crap.
I don't necessarily disagree. I haven't owned a Chrysler product but my wife has had two company cars in the last eight years (Ford Taurus and Ford Escape) and they have been surprisingly reliable in the harsh, stop and go traffic of LA. I believe Mickey Kaus has made the point that Ford does better in quality surveys than GM or Chrysler. Also, I compared to Volvo with the Taurus because I also read a Kaus (who is a car nut) entry comparing those two models. Ford Motor Company owns Volvo and the platform for both of these cars is the same (now that I think about it, it may have been the now discontinued Ford 500 but the point stands about the common components and difference in quality). I am not sure how many components were the same, but they were in the same class and very different levels of quality in fit and finish. Also, Volvo has manufactures major components in Sweden and Belgium, but they have assembly plants in China, Thailand and Malaysia. Swedish regulation doesn't affect the plants outside Sweden so, perhaps, that was the basis for Kaus' comment.

Finally, SUV's have been very profitable for American manufacturers. Whatever their problems, they were mitigated by the success of SUV's not exacerbated by them. The gas crunch only began this last year and, right now, auto sales are down across the board.
11.13.2008 12:13am
Hoosier:
Spitzer

Your explanation of the Big Three's reasons for calling for a bailout now is overly cynical and in fact impossible for any rational person to accept.

Not to mention that you have distracted me from the drafting of my Under-Employed Historians' Bailout-Package Proposal. We are seeking between $8-10 billion. Plus job security. And babes. We need more babes.
11.13.2008 12:26am
Hoosier:
jt007

Ford is making some good, reliable cars these days. I myself am rethinking my mid-1980s pledge to never buy a Ford again. GM and Chrysler, on the other hand, have some work to do.
11.13.2008 12:28am
Thomas_Holsinger:
Speaking of gas guzzlers and the gas crunch, my wife and I vacationed in Oregon this summer in our Ford Freestyle cross-over SUV, with a STOP CONTINENTAL DRIFT! bumper sticker and a widdle baby Cthulhu plush toy dangling from the rear view mirror.
11.13.2008 1:14am
John Moore (www):
As for safety ratings of small cars... they don't include actual collisions with other cars.

Injury/death risk is a nonlinear function related to the G forces experienced in deceleration.

So, if you have little vehicle of mass Ml and velocity Vl, and big vehicle of mass Mb and velocity Vb, the following equation will be valid before and after the collision:

MlVl = MbVb.

This means the obvious - a small vehicle colliding with a big vehicle (rear end or head on) will experience a greater change in velocity, and hence greater deceleration. Also, the big vehicle gives more room for crumple zones, which can decrease the acceleration even more than the simple conservation equations give.

Consider a motorcycle running head-on into a semi. The semi driver's coffee might spill, but that's about it. The motorcyle will end up suddenly with a velocity change approximately equal to the sum of its original speed and the speed of the truck. That = death.

I once saw the results of a head-on collision between a small pickup and a semi. The three occupants of the pickup were killed instantly. The only injury the truck driver experienced was psychological trauma from the deaths in the other vehicle (the accident was the fault of the pickup, btw).

These same factors apply with your "safe" little volvo running into my gas guzzler big SUV, just not as obvious.

CAFE is responsible for several thousand deaths per year in the US.

Oh, and as for the car companies... let the market take care of them. As one other poster mentioned, when they go down, they don't vanish. There is a vast resource of facilities, skilled personnel, and the huge ecology of supplies. That resource has value and that value will be purchased by someone, and things will move on. Not the same was as before, but the country's economy will hardly fold.

Intervening would be making the Japanese mistake, which prolonged their severe recession for over a decade. Preventing a highly leveraged collapse in the financial industry is a structural intervention, far different from simply bailing out failing companies.
11.13.2008 1:43am
John Moore (www):
Oops - should proofread. Should be "vast network of suppliers"
11.13.2008 1:44am
Ben P:

This means the obvious - a small vehicle colliding with a big vehicle (rear end or head on) will experience a greater change in velocity, and hence greater deceleration. Also, the big vehicle gives more room for crumple zones, which can decrease the acceleration even more than the simple conservation equations give.


The reality is, which is backed up by safety tests, is that for most common sized passenger vehicles the difference in size and weight is far eclipsed by design and other safety features.

Semi's are and will be a different matter. But then the proper comparison is Car vs Semi compared to SUV vs Semi - one isn't necessarily going to come out many percentage points better.
11.13.2008 2:02am
Anderson (mail):
no problems at all for three years and counting

We've had problems with both automatic doors on the Odyssey, which to my mind shouldn't happen under 100,000 miles.

Naturally these turn out not to be covered under the warranty, a magnificent document which takes many paragraphs to say that it covers "any part or system that you do not actually need or use."

But now that I realize it was probably built in Alabama, the mystery is solved.
11.13.2008 8:19am
Mike Keenan:

Mister Keenan, that Studebaker remark was, hands down, the stupidest comment I've read this month. Every single part of it was factually incorrect. There's a lot to be learned from Studebaker's corporate history, but nobody is going to learn it from you. You are a monumental fool.

Wow, thanks!
11.13.2008 9:01am
JosephSlater (mail):
David Warner:

I expect better from you than typing "bullshit" and linking to an article that doesn't really refute my point. My point was that the UAW, beginning in the 1970s, called for the big three to produce smaller cars. That is well established. Your link shows a dispute in which the main issue was not the type of car produced -- which again, is something unions do not have a right to negotiate over -- but rather what workers would be doing what jobs.

Again, the problems for the big three are related to management decisions to build cars for which the market is shrinking and, especially in the case of GM, legacy costs for retiree health care (a problem the newer Japanese companies don't have because of retirees.

Finally, for all those wanting "competition" for the UAW, any union can compete for those workers. Organizing into a UAW local is not permanent -- under the law, there has to be "open periods" in which other unions or the option of no union, can be voted in.
11.13.2008 9:19am
Orson Buggeigh:
Hoosier:
"I seem to remember only male "czars" in the US government. If a woman were to be appointed, would she be a "czar"? Or "czaritsa"? And am I the only one who would care?"

How about Czarina, which, I think, was the correct female title. Or am in thinking of the title for 'princess?'

Somehow, I think the best choice is to let the market do its thing - US auto makers really can't compete until they address two politically charged issues - the fact that they are now obligated to benefits beyond their ability to pay them; and a unionized work force that refuses to recognize that the company cannot continue to pay any benefits if it goes broke.

The 1950's model isn't viable - Detroit needs to be able to produce a product of quality comparable to foreign cars that will sell at a comparable price. Current work rules and benefit costs simply don't allow that to happen. On the other end of the factory, current pay scales and bonuses for management need to be scaled back to something more in line with what the foreign competitors are paying as well. Plenty of blame to go around.
11.13.2008 9:26am
Ryan Waxx (mail):
Again, we've had card check in a number of public sector jurisdictions, and the sky hasn't fallen.


While it is true that we haven't had any public sector bankruptcies as a result of unionization, pretty much any graduate of polsci 101 could give you a hint as to why.

Try again.
11.13.2008 10:45am
MarkField (mail):

But of course we all know that Alabamans only vote R because they're all racists.


Without commenting directly, I'll just note that 88% of white Alabama voters voted for McCain.
11.13.2008 11:00am
David Warner:
JosephSlater,

I think the article illustrates nicely the mutual boneheadedness of the UAW and its GM brand. Not only did they continually kick the can down the road, they kept loading it with more and more high explosives. It is no wonder it has finally gone boom.

The problem is that the Wagner Act enshrined an adversarial labor relations model without giving future stockholders, managers, or even employees a seat at the bargaining table. Its no surprise that those without a say ended up holding the bag. Defined-benefit plans are fraudulent.
11.13.2008 12:06pm
David Warner:
MarkField,

"I'll just note that 88% of white Alabama voters voted for McCain."

What's the matter with White Alabama, anyway? Clearly card check is in their interest. It was their relatively free markets that made the New South new. I don't blame them for resisting reactionary labor/economic policy.
11.13.2008 12:09pm
NickM (mail) (www):
Based on the government's normal approach, they'll give strong consideration to appointing as Car Czar someone who's currently immediately available and has lengthy executive leadership experience with a troubled organization in Detroit: Matt Millen.

Nick
11.13.2008 12:29pm
DeezRightWingNutz:
I guess I don't understand the overwhelming emphasis on quality here? So what if some American cars have poor quality? You get what you pay for? And look at European cars, aren't they generally below the American manufacturers in quality ratings?

As far as I can tell, management at the Big 3 has been shortsighted -- promising massive benefits in the future to its workers to secure concessions on current wage rates, etc. But you know what, they were probably right to do it given the incentives they faced. Management isn't going to be penalized for running the company into the ground a generation after they're gone. They will be rewarded for keeping current earnings up.
11.13.2008 12:42pm
MarkField (mail):

What's the matter with White Alabama, anyway?


I personally don't know, but perhaps Neil Young lurks here.
11.13.2008 12:54pm
Thorley Winston (mail) (www):

The solution no one wants to be the one to start is throwing the retirees onto medicare, and dumping their retirements to the government at 50%.


That's actually pretty close to the essence of what Obama has proposed with his "pay or play" proposal wherein companies would be required to provide health benefits for their employees or pay a tax based on a percentage of their worker's income to the government to fund their enrollment in Obamacare. Depending on the level of the tax, it might end up being a cheaper way -- from the auto industry's perspective -- to cut its losses with the UAW and dump the cost of their labor contracts onto the taxpayers.
11.13.2008 1:09pm
Thorley Winston (mail) (www):
"I'll just note that 88% of white Alabama voters voted for McCain."


So that means then that 88% of white Alabaman voters are smarter than 52.7% of voters nation-wide.

Could make for an interesting State motto.
11.13.2008 1:11pm
Randy R. (mail):
In Japan, they don't need unions because the companies are very careful to take care of employees. They don't lay them off in a downturn, but keep them on payroll. That hurts them shortterm, but in the long run, it builds intense loyalty to the company, and helps insure that they will build terrific cars.

In the US, carmakers often view their employees as the enemy and treat them as such. And then they don't understand why these guys don't give their all to build the best cars.

Each year, Consumer Reports issues repair stats for the last five years for all makes and models of cars, based on reporting from actual car owners who've used these cars. It isn't JD Power or some so-called independent researcher that just reviews cars. Consistently, Japanese cars to the best, Germans coming in a close second. US cars are all over the place, some doing exceeding well, some doing quite poorly, but most somewhere in between. This has been much been constant since I started looking at them in the 80s.

You would be an idiot to buy a car and not review the repair history of that make and model first, but apparently, many people do not.
11.13.2008 1:27pm
Another pinhead (mail):

JosephSlater: Finally, for all those wanting "competition" for the UAW, any union can compete for those workers. Organizing into a UAW local is not permanent -- under the law, there has to be "open periods" in which other unions or the option of no union, can be voted in.


They are still a monopoly. Has the UAW ever been voted out over the last 70 years? The UAW even represents graduate students and postdocs at the University of California. Monopolies are bad for markets, which is why we prohibit busnisses from engaging in them. Why should it be any different for unions, which are in the business of organizing labor? Do you think that it is coincidental that all of the US automakers who are facing insolvency depend on the same monopoly for labor and the ones that are doing OK don't?
11.13.2008 1:28pm
Nick P.:
These same factors apply with your "safe" little volvo running into my gas guzzler big SUV, just not as obvious.

CAFE is responsible for several thousand deaths per year in the US.

Eh? Unless you are going to have government mandate that everyone drive exactly the same vehicle, there will always be collisions between big cars and little cars. You accrue the most benefit from driving an SUV when most of the other vehicles are smaller. If too many of the vehicles are SUVs, then the benefit of driving one is reduced.

Tighter CAFE standards would, over time, presumably reduce the proportion of large vehicles on the road. That would increase the relative safety of a large vehicle but also benefit the driver of a small vehicle, because he would be less likely to be involved in a collision with a large one.

Looser CAFE standards would probably increase the proportion of large vehicles. That would increase the probability that a small vehicle would collide with a large one, but it would also reduce the relative benefit of driving a large vehicle since the driver of a large vehicle becomes more likely to hit another large vehicle.

It's not obvious to me which approach would most reduce the number of collisions between unequally sized vehicles, but for a selfish SUV driver, the greatest benefit accrues under policies (e.g. stricter CAFE standards) that increase the number of small vehicles. And no matter how gigantic your SUV, you'll still lose against a semi.
11.13.2008 1:31pm
David Warner:
DiversityHire,

"Sell the companies to their employees."

At the current stock price, I'd say a couple healthy bake sales should do the trick.
11.13.2008 2:00pm
DiversityHire:
"no matter how gigantic your SUV, you'll still lose against a semi."

Can you name the truck with four wheel drive,
Smells like a steak, and seats thirty five?
Canyonero! Canyonero!
Well, it goes real slow with the hammer down
It's the country-fried truck endorsed by a clown
Canyonero! Canyonero!
Hey, hey!
Twelve yards long, two lanes wide,
Sixty five tons of American pride!
Canyonero! Canyonero!
Top of the line in utility sports,
Unexplained fires are a matter for the courts!
Canyonero! Canyonero!
She blinds everybody with her super high beams
She's a squirrel-squashin', deer-smackin' drivin' machine
Canyonero! Canyonero! Canyonero!
Whoa, Canyonero! Whoa!
11.13.2008 2:45pm
wfjag:

Not to mention that you have distracted me from the drafting of my Under-Employed Historians' Bailout-Package Proposal. We are seeking between $8-10 billion. Plus job security. And babes. We need more babes.

Hoosier, there are lots of "babes" in history. It's just that most of them have been dead for a few centuries.
11.13.2008 3:38pm
Hoosier:
Orson Buggeigh:
Hoosier:
"I seem to remember only male "czars" in the US government. If a woman were to be appointed, would she be a "czar"? Or "czaritsa"? And am I the only one who would care?"

How about Czarina, which, I think, was the correct female title. Or am in thinking of the title for 'princess?'


No, you're right. "Tsaritsa" is the correct Russian form. But at some point, the Anglicized version shifted to "tsarina." Perhaps following the Italian, though I'm not sure.

But I used the Russian word because EV might be haunting the boards. I didn't want to make him feel sad.
11.13.2008 4:42pm
leogex (mail):
Silly me,here I was thinking that MCain was the national socialist and it turns out Obama's one also.

You just know the big3 would go for it. Big business hates competition and would enjoy the protections of a car czar. Don't forget industry was drooling in love at the NIRA.
11.13.2008 6:56pm
Chem_geek:
astrangerwithcandy:
on one side we have the labor folks...who blame everything on the strategic mistakes of management.

on the other we have the free market sorts...who blame everything on the costs of the unions.

neither side willing to say 'hmmm, maybe its both'

and on goes the tribe v tribe mentality of the 2008 election!
all the while, everyone taking themselves too seriously to enjoy a joke.


Management? Incompetent thieves.
Workers? Clueless dolts.

Sincerely,
Engineering Dept.

:-)
11.13.2008 9:09pm
David Warner:
Markfield,

"I personally don't know, but perhaps Neil Young lurks here."

Freebird!
11.13.2008 10:14pm
David Warner:
What she said.
11.13.2008 10:42pm
Hoosier:
David Warner

Dammit, Pappy! That really was "Freebird"!

Now I'm going to have to bleech-out my ears.
11.13.2008 10:48pm
David Warner:
Hoosier,

"Dammit, Pappy! That really was "Freebird"!"

Yep, complete with Stars &Bars at Cracker Woodstock. No half-measures for the VC.

Disclaimer:: Views expressed in links do not necessarily reflect the views of linker. ::Disclaimer

MarkField's the one who brought up Neil Young. I blame the Canadian.
11.14.2008 12:39am
David Warner:
A more ecumenical selection from the Jukebox.
11.14.2008 2:14am
Elliot123 (mail):
"In the US, carmakers often view their employees as the enemy and treat them as such. And then they don't understand why these guys don't give their all to build the best cars."

This is easy to test. Do we see it with the non-union car plants in the US? Who? Where?
11.14.2008 3:31pm
Hoosier:
"Freebird." Can "Stairway" be far behind? And then . . . God forbid! . . . "American Pie"?!!!
11.14.2008 4:43pm
LM (mail):
David Warner:

I blame the Canadian.

A reliably sound policy.

(A somewhat ironic side note: That was co-written by Marc Shaiman, the author of the anti-Prop 8 theater boycott.)
11.14.2008 9:03pm
David Warner:
Hoosier,

""Freebird." Can "Stairway" be far behind? And then . . . God forbid! . . . "American Pie"?!!!"

Oh, is it request night? Here's mine, featuring a young Karl Rove on lead vocals.
11.14.2008 10:45pm
Hoosier:
David: Thanks for that. It's been a long time since I've heard "War Pigs." Watching this from 1970, you can really see how Sabbath drove a stake through the heart of Hippie/Flower Child/Aquarian Age pop culture.

Imagine Black Sabbath vs. These dweebs:

www.youtube.com/watch?v=WybIhLJjlTY

Geezer Butler would strangle them with their own viscera. And then eat them.
11.15.2008 12:14am
Hoosier:
Although I will spot the Hippies this one:

www.youtube.com/watch?v=NrxL3D2beJ8&feature=related
11.15.2008 12:24am
LM (mail):
Hoosier,

Ozzy Osbourne, Jess Colin Young. Tomato, tomahto. You kids and your rock and roll culture wars. When you're a little more mature, you'll appreciate the artistry of the understated song stylists.
11.15.2008 1:12am
David Warner:
LM,

I think that was Damon's inspiration for his performance here.
11.15.2008 7:25am
David Warner:
Hoosier,

Don't look now, but the Youngbloods are winning. And this 21st Century Schizoid man in one their side. Too.
11.15.2008 7:31am
David Warner:
Yes, there is a bit of a language puzzle in that last one, and yes it was inadvertent. Is on their side.
11.15.2008 10:12am
Hoosier:
LM--

Has anyone ever explained why Shatner did those "spoken-word poems"? I suspect that there's a reason. Right? RIGHT?

When you're a little more mature, you'll appreciate the artistry of the understated song stylists.


You want understated? Here's your understated:

www.youtube.com/watch?v=kZC-EOs_fyA&feature=related

Because the Chicago indie rock scene of the '90s was . . . Well, actually, I can't really remember.

David Warner:

As to the Hippies/Flower Children "winning," I must kill off that myth here and now. (I've come to like you, and I'm very sorry to put you through this. But truth is truth. You must watch the whole vid. The. Whole. Brutal. Soul. Destroying. Vid.)

Behold, The Age of Aquarius:

www.youtube.com/watch?v=gt5vlquFTnM

It should never have come to that.

11.16.2008 12:29am
Hoosier:
This 90s Guy asks you to compare the above Hippie tripe with the simple truth of great art:

www.youtube.com/watch?v=3vwwFiaSXHk
11.16.2008 12:34am
Careless:
American cars have fewer features and lower quality materials to make up for higher labor expense (e.g compare the interior of a Volvo S60 with a Ford Taurus
Looking at the features on the s60, there are 0 significant things it has that I don't have (I've got a 2006 five hundred) and from the description on the volvo website, I've got some things that aren't in the S60. Perhaps they're showing pictures of their featureless model, I don't know. If they are, that's an instance of Ford stupidity. The new Taurus is not.

Oh, and the 500 MSRPed at $7000 less than the volvo, 3 model year difference.
11.16.2008 2:01am
MikeS (mail):
I agree 100% with Dr Kerr; God forbid the government do anything to affect Detroit's ability to design cars that people want.
11.16.2008 3:23am
David Warner:
Hoosier,

"Well, actually, I can't really remember"

It's become increasingly clear that you have managed not only to kill every extraneous brain cell you once had but also to create some strange new ones.

Sabbath is the Bosch of the Rock and Soul Renaissance, Yoko sui generis (Thank Buddha!), and Cobain proof positive that Me Generations make lousy parents.

This latest generation is made of sterner stuff. They're still suckers for their grandparents' culture.
11.16.2008 1:43pm
Hoosier:
It's become increasingly clear that you have managed not only to kill every extraneous brain cell you once had but also to create some strange new ones.

Yeah. I know. It was like being the subject of some big medical experiment. Only without a grant. Or a control group. Or protocols. Or any professional supervision of any kind.

But otherwise more or less like that.


Sabbath is the Bosch of the Rock and Soul Renaissance

Like this?:

www.firstworldwar.com/posters/images/pp_fra_47.jpg


Yoko sui generis

Which is the nicest thing that has been said about her in years.

and Cobain proof positive that Me Generations make lousy parents.

Amen.

This latest generation is made of sterner stuff. They're still suckers for their grandparents' culture.

Which I find disturbing. If we had done that, I'd have spent my college years selling war bonds and kissing sailors goodbye at the docks. And while I'm not exactly sure what it was that I did in those years, I am pretty certain that wasn't it. (No sailors have called me yet, at any rate.)
11.16.2008 7:02pm
David Warner:
Hoosier,

"Which I find disturbing."

I said culture. The Greatest Generation was too busy making the world safe for democracy and putting a man on the moon to mess around with any of that namby-pamby artsy-fartsy culture stuff.

Our task is grimmer even than that of the GG's: to clean up the godawful messes of the Boomers. We've largely accomplished the first step: raising a decent generation of kids. Step two: X-er administration.
11.16.2008 8:40pm
David Warner:
Anyway, resistance is futile. Prepare to be assimilated.
11.16.2008 10:29pm
Hoosier:
The Cardigans' version of Sabbath Bloody Sabbath . . . ?
I have no adjectives. I think the best I can do is Oh. My. Dear. God. In. Heaven.

I had never heard of this . . . "band" before. Do they do any Musak renditions of Black Flag songs? Perhaps an album of lullabies by Stiff Little Fingers?

There must be some quote by Victor Frankenstein that's on point here.

"X-er administration"?

This I will fight with every fiber of my being. The idea that Obama is an X-er is even funnier than the idea that he is qualified to be president. Is this why we can't see his birth certificate?

I renew my challenge made two weeks or so ago: I will proclaim that Obama is Gen-X just as soon as someone can post a picture of him, in his younger days, wearing a "Mudhoney" t-shirt. (Preferably the one from the "Superfuzz Bigmuff" tour.)
11.17.2008 3:12am
LM (mail):
Hoosier:

It should never have come to that.

Proving what? The "lesson of Yoko" is just not to make major life decisions on drugs. That John Lennon had to spend half his life living with one is about the least remarkable thing about him.

That said, I do know good musicians who think Yoko's a serious artist. (Go figure.) William Shatner, not so much.

The answer to your Shatner question is of a piece with the explanation for his Captain Kirk "performances." He was under the impression he was acting. The talk-singing? He really thought it was good. I'm told that after decades of defending his debut effort as serious conceptual art that was unfairly ridiculed by cultural ignoramuses, he did a 180 and claimed to have been in on the joke all along. Right. He's a real Andy Kaufman.

The point being (not that I had a point when I started) that the baby boomers didn't invent narcissism any more than gen-xers invented irony. And your refusal to use the Link button is very Greatest Generation.
11.17.2008 5:18am
Hoosier:
LM--What's really Greatest Generation: I can use the link button at work, but I can't figure out how to use it at home, where Dr. Mrs. Hoosier has a Mac. The "Insert Link" pop-up doesn't have an "edit" tool (or any toolbar at all, actually-- and Macs don't right-click.

So on weekends, I don't "link."

Any idea how to do that? Because I'm out of ideas.
11.17.2008 10:05am
Hoosier:
The point being (not that I had a point when I started) that the baby boomers didn't invent narcissism

Yeah. But they let people film it.
11.17.2008 10:31am
David Warner:
Hoosier,

"I will proclaim that Obama is Gen-X just as soon as someone can post a picture of him, in his younger days, wearing a "Mudhoney" t-shirt."

My rule: if '68 happened before you hit puberty, you're (at least an honorary) X-er. That, and if you're as ripped as Rahmulus and Mandela are in that photo. Ozzy-chin, not so much.

Coming of age in the culturally post-apocalyptic 70's was like Hannah Montana does Mad Max. I remember my dad getting me miniature beer bottles so I could drink along with him at 4 and asking my uncle how a water pipe worked at 6. I mean, how do you smoke water? These are the tame vignettes.
11.17.2008 2:33pm
David Warner:
Hoosier,

This is how GG's and X'ers roll. Boomers are off building their own damn sand castle, free from patriarchal oppression.

Note: I don't think that kid in the background really wants to find out what happens if he hits the Obamanator with that stick.
11.17.2008 2:54pm
David Warner:
LM,

I wouldn't take all this generation-bashing all that seriously, and I admit to leaning too heavily on the Strauss and Howe, as they say nicer things about muh-muh-muh-muh-my generation than most. Then again, they've been pretty prescient so far, and the President Elect and his Chief of Staff strike me as being fully grown men in a way that few Boomers have yet managed.
11.17.2008 3:09pm
Hoosier:
David

So what you're telling me is 'No Mudhoney t-shirt'?

I think these generational categories can be delineated in terms of drug preference.

Silent Gen/Beatnik: Pot.

Early Boomer: Acid

Late Boomer: Cocaine

Gen-X: Heroin. Aerosol cans. More heroin. (Can't afford cocaine.)

Which raises the question that I didn't see answered in Obama's autobio: Where'd he get the coke money?
11.17.2008 5:25pm
David Warner:
Hoosier,

I've never touched a (non-electronic) drug in my life. See: less tame vignettes. Seared, seared into my memory.

"So what you're telling me is 'No Mudhoney t-shirt'?"

No, but check the chin-height in this dork brigade (I would have been right at home in the third row). Definitely high-grade X-er irony levels going on here. Obama's already got his Barry White vibe going on, but he's guilty of X-ness by association.
11.17.2008 7:03pm
Hoosier:
So what are "electronic drugs"? I find it odd that I've never even heard of these; I only had my power shut off once in the '90s, and that for a relatively short time.

See: less tame vignettes.

Hey, me too. (Never touched the aerosol. Seemed pathetic. If only Layne Staley had thought the way I did!)

For the record, I don't see too much irony in Obama's school pic. But it is pretty cool that he was sitting next to Warren Zevon.
11.17.2008 9:29pm
LM (mail):
Hoosier:

Any idea how to do that? Because I'm out of ideas.

Beats me. I'm Luddite through and through (albeit from the Neo-Unabomber-Boomer school, not GG)
11.17.2008 9:30pm
LM (mail):
... especially re: Macs.
11.17.2008 9:32pm
LM (mail):


David Warner:

I wouldn't take all this generation-bashing all that seriously,

If by seriously you mean personally, thanks, but not to worry. I'm a liberal lawyer living in Los Angeles, and most of the commentary I read is from conservative bloggers. In order to get through a day with my sunny disposition intact I set my cultural firewall so high you'd have to do a lot worse than bashing a whole generation for me to even realize I was being insulted. You can also attack my astrological sign without fear of offending.

Re: Strauss and Howe, I'd just caution against confirmation bias.
11.17.2008 9:35pm
LM (mail):
(yours, not theirs)
11.17.2008 9:36pm
David Warner:
LM,

"If by seriously you mean personally"

No, I meant seriously. I'm one of those throwbacks who defines prejudice (e.g. racism, etc..) as judging an individual on the basis of group characteristics. I never had any individual in mind, let alone you.

I figured you for the Lost Generation, actually.

Anyway, I'm not just bashing the Boomers, I'm also acknowledging their cultural genius. It's just that artistes make lousy, say, accountants. And generals. And parents, by and large.
11.17.2008 11:15pm
David Warner:
Hoosier,

"So what are "electronic drugs"?"

I believe that this was the entry drug. I found the easter egg* by my own self.

* - I called it the "speck"
11.17.2008 11:24pm
David Warner:
Hoosier,

"Any idea how to do that? Because I'm out of ideas."

Type the tags by hand. Use ctrl-c and ctrl-v for cut and paste. Using the link button above shouldn't require right-clicking anyway.
11.17.2008 11:26pm
David Warner:
Hoosier,

"I don't see too much irony in Obama's school pic."

Hello? Affleck at 1 o'clock!
11.18.2008 1:49am
LM (mail):
DW

I'm one of those throwbacks who defines prejudice (e.g. racism, etc..) as judging an individual on the basis of group characteristics.

I took that for granted (re: Hoosier too). And to the extent you two may be judging the group on the basis of characteristics of a large yet unrepresentative sampling of prominent individuals, I take it neither seriously nor personally.

That said, I have to admit that the sound of "Lost Generation" does appeal to my Boomerish narcissism.
11.18.2008 5:39am
Hoosier:
David

I pulled a few Pongs when I was in high school. But it never went beyond that: I had heard about people getting hooked on Super Mario. And it's only gotten worse. Kids out here in Indiana are hooked on something called MMORPG!

Never touched the stuff. Smoked some black tar. Maybe. But I was afraid to try that stuff! It'll kill ya!
11.18.2008 3:26pm