The state of the US auto industry...

[Gerry]

Odd that both of these headlines are appearing at the same time on MSNBC.com

http://www.msnbc.msn.com/id/17966830/
Kerkorian offers $4.5 billion for Chrysler
Makes bid via Tracinda Corp., it’s contingent on new deal with UAW

Did you ever see the movie or read the book Barbarians at the Gate? These are the ruthless bastards that in the 1980s destroyed a company and many livlihoods in the buyout and subsequent shredding of RJ Reynolds as a company. At the same time, they made countless millionaires out of the factory workers when their stock rose to $125 a share

They Pay $25 Billion for RJR and destroy that company. Now here they are offering a paltry $4.5 Billion for Chrysler. Pathetic as it is this is perhaps what the company is worth. This is also the same group that tried to get their hands on Chrysler before the DaimlerBenz got it in 1998. Kirk Kerkorian then sued to block this and claimed he had been cheated out of billions but he lost.

Meanwhile, in other US auto industry news...

Ford CEO paid $39.1 million for four months
Exec’s compensation comes after automaker lost $12.7 billion in 2006

http://www.msnbc.msn.com/id/17965096/

Soon, I have to wonder if there will be any US owned automakers. If Kerkorian gets his hands on Chrysler, they will cease to exist as we know it. And if we continue to pay execs $160 mil a year to run a losing company and close factories and lay off people by the tens of thousands...

 

[Duckinla]

From an Economists point of view, this was predictable 5 years ago. Right after 9-11, US auto makers started offering huge incentives to sell their cars. So basically people who might have bought in 2003 went ahead and bought in 2002. But then what happens in 2003? You have to offer even bigger incentives. And then again in 2004. By 2005 you have such a glut of used cars on the market that they sell for less and it's even harder to sell any new cars. The whole spiraling situation was created with the first round of incentives offered in 2001.

 

[BidNo]

I think the history of the American auto industry would be written totally different if engineer or salesman with passion had been selected for leadership over the bean-counters of recent years.

Also think executive compensation has reached obscene levels. Executive pay should be capped at a multiple of the lowest guy on the totem pole (100x1?). They only get rich when everybody is doing well. The current system has the CEO picking the board of directors who then determine the CEO's pay (and the CEO then awards the board of directors with perks). The current situation is one of leaving the fox to guard the hen house (and we're the hens).

The richest continue to get richer, the middle-class continues to shrink, the poor are left without basic human needs such health care, etc., we continue piling on records debt to be paid by our children and grand-children and proceed to destroy our planet and environment. Whatever happened to trying to leave the world a better place for our children?

It's time for everybody to get their heads out of the sand, do some serious soul searching about where we are headed and make their voices heard and their votes counted.

 

[Gerry]

I think the history of the American auto industry would be written totally different if engineer or salesman with passion had been selected for leadership over the bean-counters of recent years.

Also think executive compensation has reached obscene levels. Executive pay should be capped at a multiple of the lowest guy on the totem pole (100x1?). They only get rich when everybody is doing well. The current system has the CEO picking the board of directors who then determine the CEO's pay (and the CEO then awards the board of directors with perks). The current situation is one of leaving the fox to guard the hen house (and we're the hens).

The richest continue to get richer, the middle-class continues to shrink, the poor are left without basic human needs such health care, etc., we continue piling on records debt to be paid by our children and grand-children and proceed to destroy our planet and environment. Whatever happened to trying to leave the world a better place for our children?

It's time for everybody to get their heads out of the sand, do some serious soul searching about where we are headed and make their voices heard and their votes counted.

Accountability and responsibility. They don't seem to be held to any standards anymore.

 

[AlienGG]

The US Auto industry is a symbol of scam and fraud nowadays - rendered by their sophisticated sales teams.

 

[Duckinla]

The US Auto industry is a symbol of scam and fraud nowadays - rendered by their sophisticated sales teams.

I think it's just typical of a cyclical industry. When the cycle is good they make tons of profit and everybody is happy, workers are even over-paid in my opinion. When the cycle is bad, they lose tons of money, they don't give an inch to the unions and everyone screams about fraud and corruption.

 

[Gerry]

I think it's just typical of a cyclical industry. When the cycle is good they make tons of profit and everybody is happy, workers are even over-paid in my opinion. When the cycle is bad, they lose tons of money, they don't give an inch to the unions and everyone screams about fraud and corruption.

the last I heard, I believe a typical assembly line worker in the US auto industry was paid $38 per hour? Is it any wonder why Amercian cars cost so much that they have priced themselves out of the market?

 

[AlienGG]

the last I heard, I believe a typical assembly line worker in the US auto industry was paid $38 per hour? Is it any wonder why Amercian cars cost so much that they have priced themselves out of the market?

The fact is even worse.
They have to pay some workers for doing nothing, absolutely nothing, to get away with the unions. Nothing means the payees get the money and the only thing they do is to enjoy their own lives.
Every country has something very strange to talk about. In the US, it's not just strange, but also funny, not humor but stupidity.

 

[Duckinla]

the last I heard, I believe a typical assembly line worker in the US auto industry was paid $38 per hour? Is it any wonder why Amercian cars cost so much that they have priced themselves out of the market?

That's just the start. You would be amazed at some of the details in Union contracts. Very expensive medical, very expensive pension, Buyouts rather than layoffs, etc. Don't know the number but some huge percentage of profit on every american car sold goes to pay for medical and pension. I understand that individual execs are overpaid, but that cost is insignificant compared to the total labor cost.

 

[Gerry]

Buyouts rather than layoffs, etc.

I am aware of this. As a matter of fact, even with the shut down of plants, the employees are still paid up to a year and a half until the new contract is negotiated, renogotiated, or negated. Now it has been awhile since I read that story and so I am not sure when that exact year and a half timeline is up (later this fall?) but that is why many have questioned...why in the hell shut down plants and put people out of a job when you are still paying them their regular wage? Reason? No inventory parts to stock, no raw materials. They figure spending a few hundred million to save a few hundred million is an pretty good tradeoff.

I need lawyers like this to write my contracts. It's a win-win-win for me.

 

[Steen]

Also think executive compensation has reached obscene levels. Executive pay should be capped at a multiple of the lowest guy on the totem pole (100x1?). They only get rich when everybody is doing well. The current system has the CEO picking the board of directors who then determine the CEO's pay (and the CEO then awards the board of directors with perks). The current situation is one of leaving the fox to guard the hen house (and we're the hens).

The richest continue to get richer, the middle-class continues to shrink, the poor are left without basic human needs such health care, etc., we continue piling on records debt to be paid by our children and grand-children and proceed to destroy our planet and environment. Whatever happened to trying to leave the world a better place for our children?

I think you are way off base.

The reasons the big three are suffering is labor costs, poor designs and poor marketing of poor designs. Quite simply they aren't able to compete with their Japanese counterparts who are building vehicles on US soil.

Executive pay doesn't make a dent in the losses of US automakers. That is not to say these highly paid executives are doing a great job.

From a shareholder point of view the high wages and cost of benefits are infinitely more important to the future of these companies.

You make it sound like the rich executive team are screwing over the poor little employees. I say poor shareholders. From what I have read the wages paid by "workers" (staggering amounts sit around all day- thanks UAW) are very generous.


EDIT: To clarify, the "sitting around all day" was with regards to the job bank. I doubt many GM employees enjoy getting up in the morning to wait to see if they will be reassigned or bought out. Surely they would prefer a more productive day.

 

[Duckinla]

Remember the SUV boom? GM and Ford were sitting pretty with Explorers, Tahoes and Escalades selling as fast as they can make them. They could give away the farm and still make huge profits. In fact they were somewhat obligated to give away the farm to the unions. Now with the slowdown it all comes home to roost. The problems with unions is that you can rarely go backwards. Each line you cross with wage or benefit increases just gives them a new further target to push for. When business goes bad, there is no recourse for the company. They probably need to find a way to tie wages and benefits to pre-overhead gross profit ( gross profit per vehicle times number of vehicles sold).

 

[dnalias]

They probably need to find a way to tie wages and benefits to pre-overhead gross profit ( gross profit per vehicle times number of vehicles sold).

Would you take that deal if you were in charge of the UAW?

 

[BidNo]

I think you are way off base.

The reasons the big three are suffering is labor costs, poor designs and poor marketing of poor designs. Quite simply they aren't able to compete with their Japanese counterparts who are building vehicles on US soil.

Executive pay doesn't make a dent in the losses of US automakers. That is not to say these highly paid executives are doing a great job.

From a shareholder point of view the high wages and cost of benefits are infinitely more important to the future of these companies.

You make it sound like the rich executive team are screwing over the poor little employees. I say poor shareholders. From what I have read the wages paid by "workers" (staggering amounts sit around all day- thanks UAW) are very generous.

You listed poor designs and poor marketing as two of three cause. I opened with:

I think the history of the American auto industry would be written totally different if engineer or salesman with passion had been selected for leadership over the bean-counters of recent years.

I think you and I agree.

And I do stand by what I said about executive compensation. It is obscene and grossly unjustified at the levels described above. Throwing that much money at someone becomes meaning less; why not 10x or 100x or 1000x the amounts discussed. There is no basis in reality and the money looses incentive effect. It's not like the executive can now suddenly buy something he really needs or wants but couldn't buy before. Hell, it might as well be poker chips; "my stack is bigger than your stack". It becomes only a marker when it reaches those sums.

And yes, to my other point, while more and more wealth accumulates into fewer and fewer hands, we live in a country where many children go to bed hungry, and those without insurance are denied basic health care. I'm very blessed to be in the top 25% of incomes in this county, but that doesn't mean I think it's right that this country turn a blind to other citizens. Who was it that said, "A country should be judged by how it treats the poorest of it's citizens"?