Economic crisis? Detroit?

[tsmooth]

I would like to someone to clarify how $20 an hour is getting rich.

http://www.cnsnews.com/public/content/article.aspx?RsrcID=39499

It is not getting rich, but your total package is worth 3 to 4 times that $20 per hour (average of $70-$75/per hour at the big 3). That is nothing against you and it is great that your union's leadership has been able to negotiate that for you.

 

[timm]

http://www.cnsnews.com/public/content/article.aspx?RsrcID=39499

It is not getting rich, but your total package is worth 3 to 4 times that $20 per hour (average of $70-$75/per hour at the big 3). That is nothing against you and it is great that your union's leadership has been able to negotiate that for you.

Again - I'm not a union worker and never have been... but I think this is a propaganda piece. Probalby a lot of people here get health insurance from their employer... Probably a lot of people here get many other benefits from their employer.... Probably a lot of people here have an HR department whose cost is calculated into the 73 dollar an hour figure.....Don't buy into it.

But - compare that to the companies overseas that do not give their workers benefits / don't give them health insurance / don't give them any type of pension (so we, the us taxpayers do not have to foot the bill when they are old) / don't have additional costs- overhead .... possibly a cafeteria in the plant.... Compare it to plants that do not have to meet OSHA standards.... that can dump waste anywhere they want.... Cheaper,Better, Faster!!!!

These guys DON'T make 73/hr. And if you want to say that they do - then you really need an apples/apples comparison... I don't believe this article is it. The COST (which is what the article states is 73 dollars) of having a worker is a lot different than the amount of money an individual makes.. Can you see the propaganda machine at work yet??? Most union guys in the plants make their dough on overtime... They work 50 and 60 hour work weeks so maybe they can afford a pair of martin logans .

 

[timm]

One more note to prove my point ... here is a quote from the 'economist'

Is it right to tax the average worker making $28.50 to bailout workers whose labor cost is over $73 an hour?” Perry asked. In other words - he is comparing someones pay (28.50) to the average COST of employing someone... that is not a valid comparison.

 

[Len44]

you know Len, the "seeds" to this mess were planted LONG before Bush took over.

Same thing with Hoover? He got the blame, but may have been even more a victim of circumstance / the times...

IMO, when the next set of History books are written we will look back to coming out of the Great Depression, entering WW II, recovering and here's the big one .........good ole' "US of A" rebuilding the war raveged nations only to have the insuing years of supposed prosperity and then the "World Economy" come up and bite us on the arse !

You got that right!!! We (the US) gave away far too much $$$$$ to other countries when we may have been better off investing in our own country. Not an isolationist (well, not since my younger days, anyway), but IMHO we overdid it a bit.

We as a people and a Nation did not forsee and or anticipate this. 10-20 years ago we started feeding our 401k's, had our employers match, enjoyed 15-20% annualized growth and became fat, dumb and happy.

While I am not at all happy with "W" the blame goes waaaay beyond him as ONE person.

Perhaps. But he was certainly in charge, and self-proclaimed, "The Decider" for the past eight years, and oversaw the dismantling of a number of safeguards in order to allow "the market to regulate itself." I will grant you that he may not be the only one responsible, but he is certainly mostly responsible. And he did have some help -- Mitch McConnell, Dick Cheney, Charles Grassley, Tom Delay, Jack Abramhoff, etc.

 

[twich54]

And he did have some help -- Mitch McConnell, Dick Cheney, Charles Grassley, Tom Delay, Jack Abramhoff, etc.

Len, lest we not forget to mention...Alan Greenspan and Robert Rubin, holdovers from another "place in time" !!

 

[tonepub]

One more note to prove my point ... here is a quote from the 'economist'

Is it right to tax the average worker making $28.50 to bailout workers whose labor cost is over $73 an hour?” Perry asked. In other words - he is comparing someones pay (28.50) to the average COST of employing someone... that is not a valid comparison.

This is an excellent point. If you are a worker getting 28 bucks an hour and your health insurance costs your company (assuming one of the big three and they get a lot better deal on insuring you than I have to pay for a single family) about 300 bucks a month. So really they are only giving you an extra 1.50 an hour.

I worked on an assembly line in my younger days and it's tough work. I don't begrudge those guys anything. I just feel bad that the management has sold them out with products that aren't necessarily the right thing for this market. I'm sure every one of those men and women would work just as hard to make small cars that get 35mpg as they do making giant SUV's, it's the same skill set.

As a small business owner, I hate to see anyone's business go under, big or small. I hope they can make something work that is effective.

 

[ALTMAN]

Seems to me that the world is confronting an issue that has not occurred for decades.

Does it seem strange that, in a period of six months, the entire world of finance, and the global economy, is now in a state of absolute chaos?

Given my bias, I would like to think that this Administration is largely to blame, but I can't help feeling that other forces were / are at work.

What are your observations and what are you doing and / or planning to do, in light of the current situation?

As an aside, what are your feelings about the USA car industry and whether they deserve a bailout consideration?

GG

Great topic. I've been a bit busy but as someone with a horse in this race to hell I'll answer.

This situation has been brewing since 2006. My data considers 2006 the peak of irresponsible lending which I view as the root of the problem. Of course, irresponsible lending needs leverage and securitization to make things totally insane and the markets were happy to oblige.

At this stage you have syncronized deleveraging which is depressing the cost of virtually everything. There is also dollar repatriation which is temporarily increasing the value of the dollar against virtually everything else.


ACTIONS TAKEN

1. I have shorted the Canadian dollar against the US dollar and the Euro

2. I have shorted basic material stocks

3. I have shorted oil

4. I have shorted semi conductor stocks

5. I have shorted auto stocks

6. I have shorted natural gas stocks

7. I have shorted the russell mid cap growth sector

8. I replaced my wifes Range Rover with a used wagon the same age... instead of blindly buying a new car...

9. I've begun to add to the portfolio's gold position

10. Daily, I search for small companies with outstanding balance sheets --- currently some companies trade at roughly 2-3 times net cash....

11. I'm attempting to raise small amounts of money (millions not 100's of millions) for a new venture --- picking up some of the pieces that will be left from this tragic global situation.

12. I'm corresponding with regulators on solutions to the problems which confront us etc...

13. I'm aggressively increasing payments to charities.


Please understand none of the financially oriented actions are reccomendations for any of you on this forum, they are submitted for entertainment purposes only.

WHO IS AT FAULT...

I'm, a good Democrat but the genesis of this mess is largely that of ignorant Democratics who somehow believed home ownership is the same as home indebtedness. This was combined with cynical dishonest Republicans who were largely behind the process of pouring gasoline on the problem and exporting it to all parts of the globe.

You may have seen the beginnings of a pr campaign which will encourage most of you on this forum that the worse is behind us and you should begin to replenish your investments...This is mostly a device of the Republican leaning mutual fund/brokerage industry which is the only industry in the world where the average person makes a ton of money to provide you the client with substandard performance...Guess what --- this time it really is a bit different. I see a requirement for more than an additional trillion in stimulus...

The AUTO INDUSTRY

The auto industry is working with your standard medium quality US executive --- no worse, no better. The majority of large US institutions are plagued by similar poor management. The US is going the way of small innovative flexible small companies --- the auto industry is no different. If there is a future US auto industry it will likely devolve to a contract manufacturing system where cars from different companies are actually made in the same plant. (YOU HEARD IT HERE FIRST)

BAILOUT

Since a bailout involves the money of the tax payer --- why waste it...The 25 billion should actually go to the company which feels it can deliver a world class product. In other words, there should be a competition open to all manufacturers including some smaller folks...Why shouldnt some of the money go to Tesla?

A big chunk of the money should go to workers who need to relocate to remain in the industry at plants that will be taking up the slack. In addition there should be tax credits for companies which can buy and repurpose assets of the existing auto companies.

As an aside please note it was mostly Republican red state govs who have offerred lucrative incentives to Honda Nissan TOY etc ,giving these folks a somewhat unfair cost advantage relative to their US counterparts...Country FIRST ???

 

[Gordon]

A large division in the company I work for manufactures aircraft. Our line workers make nowhere near what the UAW line workers make. And when our product breaks, you can't pull over and wait for the tug to pull it back to the hanger. Our line workers make a decent wage and work is steady and fairly secure. They do not have the benefits the UAW "negotiated" for the workers. I believe the UAW have negotiated themselves out of jobs over the years.

I fail to see how 25 Billion is going to make any difference. It is amazing to me to see these sums tossed around as if they were change we throw into the jar everyday when we get home from work. If the Big 3 are not selling the product now, how is a loan going to change that fact? I'm sure they are going to get a bailout and it is only delaying the failure for 8 months down the road. I believe they are going to just flush 25B and then come back for more.

 

[ALTMAN]

Just curious --- do most people know Chrysler is owned by Cerberus...Recently cerberus changed their website with the result that it is more difficult for you to understand that if you bailout Chrysler you are bailing out Danforth Quayle and his buddy John W. Snow. Quayle and Cerberus are so ignorant that when Jerry York and Kerkorian passed on increasing their stakes in Chrysler Cerberus bought the whole company. Jerry York as the former CFO of Chrysler is one of the financial geniuses of our time who has never been given credit for reviving IBM in the 90's.


And yes 25 Billion is probably not enough to bail all these guys out ---

BTW a condition of any payments to the big three should be that all C level managers should put 1/3rd of their personal wealth on the line in the form of an open market equity investment.

 

[Len44]

Len, lest we not forget to mention...Alan Greenspan and Robert Rubin, holdovers from another "place in time" !!

Actually, I think of Rubin as doing some pretty darn good things during the 90's as Clinton's Treasury Secretary. Insisting on paying off the national debt (good plan 'till Bush screwed it up) for real. That lead directly to the lower interest rates we enjoyed for so long.

Greenspan -- never much liked / appreciated him -- ever since his days as Ford's Chairman of the Council of Economic Advisers. Turns out he was less insightful than imagined...

 

[timm]

A large division in the company I work for manufactures aircraft. Our line workers make nowhere near what the UAW line workers make. And when our product breaks, you can't pull over and wait for the tug to pull it back to the hanger. Our line workers make a decent wage and work is steady and fairly secure. They do not have the benefits the UAW "negotiated" for the workers. I believe the UAW have negotiated themselves out of jobs over the years.

I fail to see how 25 Billion is going to make any difference. It is amazing to me to see these sums tossed around as if they were change we throw into the jar everyday when we get home from work. If the Big 3 are not selling the product now, how is a loan going to change that fact? I'm sure they are going to get a bailout and it is only delaying the failure for 8 months down the road. I believe they are going to just flush 25B and then come back for more.

I think the situation is this.... Recently, the union and companied worked out a type of 'tier' pay scale. I think that is kicking in - in the near future 6 - 12 months. What that does is drops the average pay scale to about 14 dollars per hour for the new workers coming on - and for jobs that are not necessarily skilled. At that point, it may be profitable for the companies to build here in the US - Hence the term 'bridge loan'. That is how 25 billion could make a difference now.

Now the alternative - again - is to let them fail - and you - the taxpayer - still will be footing the 25 billion tab. Except we can define the 25 billion as 'humanitarian aid' at that point and feel good about giving extended unemployment benefits to those without jobs. Guess what - I can GUARANTEE - you are not going to get THAT loan back....

 

[FISH_MAN]

maybe if they made a better product and had better service they would not be in this mess. I am surprised they have made it as long as they have

 

[ALTMAN]

To timm's point the lower tier labor costs is a drop in the bucket. Currently the market assigns a value of 5.29Billion combined between Ford and GM. The combined burn rate of Ford and GM is multiples of this value hence the first 25 Billion.

Think of it this way ... suppose you had a neighbor who built a 25,000 squareft addition, leased a jet and had 45 people working for him. He thinks his net worth is roughly zero and his house is now worth 2.5 million dollars.

One day your neighbor says he has spent too much money and you should bail him out or else his 45 workers will ruin the neighborhood. Said neighbor is a bit sketchy on how much money he's spending but knows a big loan of 25 million will help. I'm guessing those of you who want to bail out GM Ford and Chrysler would say ---I dont really care how much money you're spending I'll help bail you out. Lets save the workers.

The best thing you can do for the workers is to help them find a new job working for a responsible employer who knows their costs and has a robust business model.

 

[TomDac]

Food for thought:

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2008/11/14/notes111408.DTL

 

[Gordon Gray]

Thanks for the link, Tom. Food for thought indeed!

GG

 

[risabet]

One of the major tenets of Capitalism (of which I actually am a fan) is that you get rewarded for a product that people want to purchase and you get punished for a building a POS product that people don't want. For the last 20, maybe 30 years, GM, Ford, and Chrysler have built products that people don't want to buy but they maintained the same arrogant attitude of "if we build it they will come" so to speak.

I am completely for supporting the auto industry but only under the following circumstances:

1. Top management is fired with no Golden Parachutes and by top I mean every one from the CEO to the Board to every EVP in the company. The rest will have to prove their worth with limited, renewable contracts of 6 months in length. It is time to put up or shutup.
2. GM and Ford divide the assets of Chrysler, I don't believe that all three can survive going forward and Chrysler is the weakest of the three. I realize that this will lead to a large number of innocent line workers and suppliers losing their jobs but tough times require tough choices.
3. The remaining companies develop realistic plans (e.g. Toyota and Honda and Subaru style) to streamline their operations, build cars people want and develop/implement new technologies to rebuild the lead we once had in auto manufacturing.

 

[timm]

Hey - I can relate to what all of you are saying... I am very close to this situation.... We have a saying ... and I won't mention the company - but you can fill in the blank... 'There is the right way...and then there is the (fill in name of company) way'.... I'm lucky, I have a skill set that I can take to any industry. I don't know if all large companies are screwed up... from what I have heard and seen- they are... Lots of overhead - lot of people doing a lot of nothing and calling it productive... Most of my career I have worked for consulting companies and smaller companies... That is where I really belong, but I have kids and it is very difficult for me to do the travel.

What I find interesting though - is that there seems to be an animosity towards these companies. Maybe rightly so... or again - maybe it has something to do with the costs they have producing in this country...and less money going into R&D improving the quality of the cars you drive. Back to one of my earlier posts - I just don't think the world is a level playiing field for this country to mass produce products effectively and compete. Not with the standard of living we enjoy today at least. If you want to drop our standard of living - we can compete... If you want to send a lot of the jobs overseas - sure we can compete then too....

Political side bar: I don't know if you guys remember one of the first George Bush's agenda. He referred to something called 'A New World Order'. I think what was supposed to happen was this country would use other countries to manufacture things at a cheaper rate - and hence the company makes more money...the stock holder makes more money... Everybody wins... I think we are there... I think we have reached the 'New World Order'... but it is not as envisioned.

I also find the political spin interesting.... Prior to the election, the auto companies were the evil empire and the problem - but, have you heard the latest? I'll paraphrase the president elect...

'The american auto industry is the solution to getting us off of foreign oil and is important to our national security.'

After a statement like that... How do you let them fail?

 

[ALTMAN]

Bailout Chrysler

From what I can tell the average person whose employment affords them the opportunity to build a system around Martin Logans is in favor of bailing out Chrysler.

This is in the face of the fact that Chrysler is owned by a successful private equity company where all the top players are at least centi-millionaires if not billionaires.

Even more stunning is that so many of the American public are prepared
to send money, or financial assistance to Chrysler when they are not required to publicly file detailed financial statements...


Truly this is a great country...

 

[DrJRapp]

2. GM and Ford divide the assets of Chrysler, I don't believe that all three can survive going forward and Chrysler is the weakest of the three.

Today it may be...however, it is the smallest and therefore least likely to burn large amounts of cash moving forward. This is the company to watch.

 

[timm]

Today it may be...however, it is the smallest and therefore least likely to burn large amounts of cash moving forward. This is the company to watch.

Yes - but Cerebrus - which owns chrysler now - is one of those takeover companies that come in suck out the money and leave... kind of like those alien movies where it is us against the aliens???

Anyway - what the facts are is this -- Ford has the best cash position of all 3 - and has been going thru an aggressive restructuring plan - and has increased the quality of their vehicles big time - Ask J.D. Power. Also, Alan Mullaly is a non-automotive person running the company... Given history, maybe that is a good thing Yes, they burned off a lot of cash last quarter - but 60% of that was a special write-off.

When you say - Chrysler is the company to watch - do you mean this is the one that will fail first? Chrysler has been trying to go under since the 80s.