I see many reasonable comments that chapter 11 wouldn't be a bad thing. That's normally true, but not for this type of industry. That's because the customers enter into a long term agreement with the automaker when they purchase a car. Obviously that's very scary to buy from a company on chapter 11. This would kill GM instantly.
@Nitrous Oxide: I think the point you are making is very important. These pre-programmed bankruptcy types aren't a good fit here. What needs to occur is a special bankruptcy format with protections for stock (so people will want to buy and hold a piece of the company) for buyers (so people will buy the cars and be able to expect warranty protection) and a wage floor for workers, based on the average of all non-unionized auto workers nationwide.
There also needs to be regulatory relief on the production of vehicles, so that European models can rapidly be converted to US markets, because that is more than half of the burden which Detroit is dealing with here.
Simply giving loans isn't the answer. There needs to be an automotive New Deal.
Atlanta has gone from 3 Assembly plants (GM Lakewood closed in the 1980's, GM Doraville closed this year, and Ford Hapeville closed in 2006) to none. Ford had a plant in Atlanta since they started putting together Model T kits in 1910's or 1920's. Really Lockheed is the only big manufacturing facility left in the Atlanta area, everything else is service jobs or much smaller scale manufacturing.
Rome burns while Nero Bush fiddles. Sad, really, that Paulson felt it necessary to reward his richest friends rather than the people who actually still know how to manufacture things besides securitized debt instruments of mass destruction.
But it probably doesn't matter what Paulson or Bernake does in the short term. The crisis has gone beyond the control of even the fed at this point, and life support now is likely only to prolong the agony.
No matter what financial deals are struck, significant portions of all unsustainable industries, including many parts of the auto industry, are going to be axed. Overstretched personal budgets worldwide are going to prioritize keeping a roof overhead rather than buying more automotive bling. NO COMPANY OR INDUSTRY CAN CONTINUE TO MAKE WHAT THE CUSTOMER ISN'T BUYING.
Nothing like a recession (or depression?) to remind all of us to live within our means.
Superior Industries International, in Van Nuys, CA, supplies many major automakers for OEM aluminum cast and forged wheels. Back when GM was building Camaros/Firebirds in Van Nuys, they had that very local market. That former GM plant is now a collection of big-box shops.
Superior as moved many jobs to Mexico, but the small remaining Van Nuys entity would be in jeopardy if more domestic sales falter or fail.
Well, if only one of the Big 3 goes down, that wouldn't take out all the push pins. And anyways, someone else would probably buy the factories to build something, so not quite as many jobs lost as the doom-and-gloomers are crying about.
Anyways, if it happens, I think somehow we'll all survive. I just don't see what's happening different now that will make the Big 3 profitable, even with a massive cash infusion to tide things over.
What about the Canadian plants? They'll be hit just as hard.
GM has active plants in Oshawa, Ontario; Windsor, Ontario (until 2010); and the CAMI plant in Ingersoll, Ontario. Not sure about the other two companies.
@slowinthefastlane: Doesn't GM also have an engine plant in St. Catherines? After that, Ford's got Oakville and St. Thomas (along with an engine plant in Windsor), and Chrysler's got Windsor and Brampton.
Maybe failure is what the auto industry needs so it can reinvent itself as a success. Innovation in Detroit is something that has gone missing a long time ago. For the last ten years the answer has been make it bigger, give it more BHP, and stuff it full of electronics. Maybe there is this need for a car that is dependable, won't rust after a few years, the electronics won't start crapping out in three years. I don't need a car with 27 way power adjustable seats. I need something that will start every morning and not show me a check engine light when someone in front of me farts.
I am surprised that someone has not tried sticking fins on cars again as an answer to the problems. It is really easy to compete with Toyota, Nissan, and Honda. Copy and steal everything they do. Hyundai did this and in 20 years went from being a joke disposable car to high quality and low cost.
The big three need to change and just throwing money at them to keep doing what caused the trouble is not going to fix anything.
@adp113: You forget that what you claim Detroit shouldn't have done is exactly what the consumers wanted. (except the crappy electronics, which apparently German car buyers now completely ignore)
And holy crap, if Detroit copied what Toyota did, those engineered being laid off should feel glad, otherwise they'd end up dead from overworking.
I can't remember the last time a massive conglomerate actually managed reinvent itself successfully after being completely bankrupt. Can you?
@Parkington spends more time on Gawker Media than at anythin...: They aren't completely bankrupt. Their stock values tanked. Real assets still exist. So total value can be represented as bankrupt, but that isn't the real deal. Regarding conglomerates, they work like the rock after which they are named. Pieces within the soft matrix holding them together may be harder, so that when the large structure disintegrates, they are just fine. Think of it like breaking up a huge turd so it can go down the commode. Some of it will dissolve in the water. But that undigested corn is going to hang around for eons.
@Parkington promises to stop changing his name every day: Actually, what I'm talking about, is that certain manufacturing units can switch to producing for VW or some of the other manufacturing enterprises still expanding. And also, If factories and property are sold, that generates capital for the remaining more profitable segments. rather than consider this possibility, what we get is "Save our existing structure' arguments. The economics of that isn't sound. Capitalism has to deal with excess capacity by allowing less productive units to be cannibalized for growth of the more productive. Intervention in that schema will screw EVERYTHING up. Let the dissolved shit settle to the bottom of the pond. It will indeed reform into compacted sludge...
And who would be BUYING all of these shiny new GM/VW buggies?
Sales are already down 40-50%. And that's not going to instantly ramp back up with new investment in old infrastructure, nor are tight credit markets going to help transferred workers buy what they're now making for some new company.
And a lot of those "less productive units" include people who were PREVIOUSLY buying cars - who will now have no jobs at all to do so.
I think you need to do a little research on Henry Ford, and the economics that he balanced to make sure he had CUSTOMERS within his employee base, so he could actually sell what he made.
@ROCKYLIFE: You are overestimating the immediate economic importance of the Big Three's employee base buying cars, in at least two ways.
First, over-extension of credit recently has glutted demand, so people can afford to put off major durable goods purchases for a while. They are likely to remain on the sidelines until a compelling reason to purchase comes up, like more efficient and affordable vehicles, or like it did in computers, a new energy paradigm forces the purchase of a new car that works with the new system. Demand at that time will have to ramp up, and it will happen sooner, if artificial intervention in the markets doesn't allow the dinosaurs to continue to feed.
And most of the displaced workers are relatively skilled individuals who have other economic potential, so assuming that they will be unable to purchase vehicles when the demand spike hits, is not logical.
Besides, this isn't about only the autoworkers. The housing downturn is actually much more important to the health of our economy. When people felt flush on the strength of their home's appreciating value, they bought vehicles. There was also considerable lateral movement in sale of homes, so people could move from one job to another fluidly. These factors will limit durable goods sales, and also make it harder for families to sell their house, and move from a place where they lost a job, to a new place where one is available. That ACTUALLY is a more important factor to the well-being of those autoworker households than artificially propping up a dying sales model.
The push pin for the Chrysler engine plant in Keosha WI is missing also.
You could put a half a pin in for the Janesville SUV plant also but they are set to close Dec 23rd.
The collapse of the American auto industry will also affect my company (I work in engineering at an American motorcycle manuf) by making the prices of components we purchase increase. We are a small customer to most of the suppliers and if they manage to stay in business they will pass the buck to us.
There is also the chance that Delphi goes under (We buy a lot from them) and our test track is owned by a one auto mauf and we are set to move to a facility owned by another in the near future.
Things are going to get ugly for a lot of America as well as the rest of the world if the toilet gets flushed.......
@d0nut: I was going to point out the missing Kenosha pin too, but you beat me to it. My old stomping grounds - I graduated from Carthage College in Kenosha.
I work for a mid-sized family owned manufacturing business...we have already frozen hiring, suspended merit increases for 2009, and are taking every other measure we can think of to avoid layoffs.
@dontknoa: Let's see, tooling, labor, material, and development costs are shared, how long do you think Toyota would keep that plant open without GM? GM goes down, that whole line moves to the cheap south.
@dontknoa: Toyota? Really. You'd think that whatever takes out GM, Chrysler, AND Ford wouldn't affect Toyota at all? The word is that Toyota's going to cut projected spending by 40% next year. That's right. No one is safe. Welcome to the Financiapocalypse.
@DoctorNine of Se7en: and it only stays in the cheap south if the balance of dollar v yen v yuan v peso, labor cost, maquiladora benefit, local supplier base, government regulations, VAT and shipping charges all stay in place to makes the south a cheap manufacturing market.
@jduffy13: There's no such thing as just simple "capitalism" anywhere in the US or world. It's a theory. There are some elements of it in most economies but to say the US was/is capitalism is way too simple. In fact, one could argue the failure we're seeing is the failure of imperialism, i.e., strong countries going to weaker and less developed ones for cheap materials, including labor.
Not every business that fails is poorly run. You're slamming on thousands of hard workers whose businesses are faltering because their clients have less/no money.
I'm looking at this, and a lot of these plants are already slated to close. The Grand Rapids stamping plant is right down the street from where I work, and we rely on a lot of the guys there fixing their cars with the money they make from building new cars. Behind us, there's a three-mile stretch of road that's all industrial, with a huge portion of it being devoted to automotive suppliers, and a growing number of the buildings becoming empty day by day.
It's not just the factories that'll shut down, it's guys like me who work at parts stores that fix their project cars, it's the guys who run the restaurants that feed us, the schools that teach our children, the bars that serve to drown the sorrows in these last few good days. We all depend on the money that comes from this manufacturing sector, and moving the production overseas has already hurt, this is just going to hurt more.
I don't want to sound all gloom and doom, but look at some of the pictures on DetroitYes.com (where the lead picture is from) and see what happens when plants close. See the ruins left behind in search of a quick buck. Yes, I think they've screwed up big time, but I don't think that all of us should suffer that badly.
Look at this as an investment in our country, an investment in our future, and our children's future, and their children's future. Is it worth it?
Incompetent and poorly run companies and industries fail all the time. eToys? CompUSA? Circuit City? Cotton mills? The entire US steel industry?
Yes, I'd feel bad about all the out of work people. But that is life. Those people should be able to move on to find other jobs. Or is everyone saying that they are so stupid and poorly skilled that they can't find work in any other industry?
@rip: Wow, you must be some kind of economic genius to be able to identify two, and only two, factors responsible for the failure of textiles and steel in the US. You have a future in Washington.
@rip: If another map were covered with pins representing homes construction, and where that is going to disappear with this downturn, then this map will seem like peanuts. Everyone is talking about Detroit, because the UAW is the base Democratic constituency. But the larger economic impact won't even be talked about because of this dog and pony show.
@DoctorNine of Se7en: Well, it's a dem base, but it's also an engine of industry, consuming vast quantities of industrial materials and technological components.
This goes very far into the industrial base, consider as an example that the largest consumer of microprocessors is not the computer and cell phone market, but the auto industry. Intel, IBM, and texas instruments would be in the hurt too if anybody takes the fall.
And lets be clear. The reason Detroit is in Washington for a loan is that they can't get a loan from a private bank, they can't get one from a bank because the credit markets are shit, the credit markets are shit because the American people overextended themselves on mortgages that were commoditized after the government deregulated the derivatives market. If you want a root cause analysis, you'll never get it, the problem is too complex, but regurgitating thinly thought out bumper sticker slogans about "bad management" (which nobody was complaining about when they sold SUVs by the millions and were hugely profitable, and everyone was cashing in on high stock values and healthy dividends), the UAW labor and benefit costs, and the price of tea in china (or $0.12 an hour labor in toxic environments, as it were) does nothing for the overall conversation.
@Mad_Science: Sadly, yes, that is the case right now. Which is a major issue with this current financial climate: the scope and complexity.
Having said that, US automakers have been pathetically run for, oh, the past 30 years. GM is a case study of how not to run a large company.
I also think, should GM and/or Chrysler fail, someone eventually will step in and take over those factories. UAW workers will probably take pay cuts. But some pay is better than no pay. Though given past UAW actions, they might actually starve and go homeless just to spite the world.
I don't think Ford will fail. Worst case, they could just shut down US operations and become a European company.
And frankly, I don't want to see GM or Chrysler fail. But they have such ruinous decision-making I find it hard to support them. It's giving money for food to a crackhead. And I want bankruptcy, not failure. It would give GM a chance to completely restructure itself and hold off creditors for awhile.
@rip: Yes, cause planning and implementing a product portfolio that would have been successful at $2/gallon gas, then launching products into a $4 /gallon market then having a 40% drop in demand in the span of three months is "ruinous decision making."
You'll notice the concentration in the midwest is also why they're getting such a callous response from the population centers on the east and west coasts.
That whole "One in Ten jobs is related to the auto industry" figure (which I still find dubious) is definitely not evenly distributed. It's more like 7/10 in the midwest and 1/50 on the coasts.
That means when most of us are thinking of The Auto Industry, it's the UAW and a handful of executives, not Bill down the street who's a mechanical engineer for Dana-Spicer.
@Mad_Science: Have you ever heard of an "automotive dealership"? Many towns have one or two. An "automotive service center"? I hear that there are a few of those about. What about the local fast food places where the sales people from the dealership and the techs from the service center eat lunch? How about where their wives and/or girlfriends eat/shop/get their hair done? The latest I heard was 1 in 14 jobs are related to the automotive industry, and that's after all the recent layoffs. Let's not try this and see if it's true.
@Placebo: Explain to me how autos will stop needing service if GM goes under.
Explain to me how used car sales diappear if GM goes into Chapter 11.
Both of these grow if the supply of new cars goes down.
Don't get me wrong. I recognize there will be a terrible ripple effect if GM shuts down, but I still think everyone's new favorite statistic gets stretched a bit.
12/11/08
12/11/08
There also needs to be regulatory relief on the production of vehicles, so that European models can rapidly be converted to US markets, because that is more than half of the burden which Detroit is dealing with here.
Simply giving loans isn't the answer. There needs to be an automotive New Deal.
12/11/08
12/11/08
But it probably doesn't matter what Paulson or Bernake does in the short term. The crisis has gone beyond the control of even the fed at this point, and life support now is likely only to prolong the agony.
No matter what financial deals are struck, significant portions of all unsustainable industries, including many parts of the auto industry, are going to be axed. Overstretched personal budgets worldwide are going to prioritize keeping a roof overhead rather than buying more automotive bling. NO COMPANY OR INDUSTRY CAN CONTINUE TO MAKE WHAT THE CUSTOMER ISN'T BUYING.
Nothing like a recession (or depression?) to remind all of us to live within our means.
12/11/08
12/11/08
12/11/08
Ya had a nice little point going there, then you had to interject with the "making cars people aren't buying" stupidity.
The Big 3 still design, build and sell somewhere north of 60% of ALL cars sold in N.A.
But you're not off by "much"... ; )
12/11/08
12/10/08
Superior as moved many jobs to Mexico, but the small remaining Van Nuys entity would be in jeopardy if more domestic sales falter or fail.
12/10/08
12/10/08
12/10/08
12/10/08
12/10/08
Anyways, if it happens, I think somehow we'll all survive. I just don't see what's happening different now that will make the Big 3 profitable, even with a massive cash infusion to tide things over.
12/10/08
12/10/08
GM has active plants in Oshawa, Ontario; Windsor, Ontario (until 2010); and the CAMI plant in Ingersoll, Ontario. Not sure about the other two companies.
12/11/08
12/12/08
12/10/08
I am surprised that someone has not tried sticking fins on cars again as an answer to the problems. It is really easy to compete with Toyota, Nissan, and Honda. Copy and steal everything they do. Hyundai did this and in 20 years went from being a joke disposable car to high quality and low cost.
The big three need to change and just throwing money at them to keep doing what caused the trouble is not going to fix anything.
12/10/08
And holy crap, if Detroit copied what Toyota did, those engineered being laid off should feel glad, otherwise they'd end up dead from overworking.
I can't remember the last time a massive conglomerate actually managed reinvent itself successfully after being completely bankrupt. Can you?
12/10/08
12/10/08
Then how the hell is Volvo still in business?
Sorry, guys, I love you (I've got a 244) but my grandmother's '00 XC70 was nothing but aggravation. Lovely car, though.
12/10/08
12/10/08
12/11/08
12/11/08
And who would be BUYING all of these shiny new GM/VW buggies?
Sales are already down 40-50%. And that's not going to instantly ramp back up with new investment in old infrastructure, nor are tight credit markets going to help transferred workers buy what they're now making for some new company.
And a lot of those "less productive units" include people who were PREVIOUSLY buying cars - who will now have no jobs at all to do so.
I think you need to do a little research on Henry Ford, and the economics that he balanced to make sure he had CUSTOMERS within his employee base, so he could actually sell what he made.
12/11/08
First, over-extension of credit recently has glutted demand, so people can afford to put off major durable goods purchases for a while. They are likely to remain on the sidelines until a compelling reason to purchase comes up, like more efficient and affordable vehicles, or like it did in computers, a new energy paradigm forces the purchase of a new car that works with the new system. Demand at that time will have to ramp up, and it will happen sooner, if artificial intervention in the markets doesn't allow the dinosaurs to continue to feed.
And most of the displaced workers are relatively skilled individuals who have other economic potential, so assuming that they will be unable to purchase vehicles when the demand spike hits, is not logical.
Besides, this isn't about only the autoworkers. The housing downturn is actually much more important to the health of our economy. When people felt flush on the strength of their home's appreciating value, they bought vehicles. There was also considerable lateral movement in sale of homes, so people could move from one job to another fluidly. These factors will limit durable goods sales, and also make it harder for families to sell their house, and move from a place where they lost a job, to a new place where one is available. That ACTUALLY is a more important factor to the well-being of those autoworker households than artificially propping up a dying sales model.
12/10/08
You could put a half a pin in for the Janesville SUV plant also but they are set to close Dec 23rd.
The collapse of the American auto industry will also affect my company (I work in engineering at an American motorcycle manuf) by making the prices of components we purchase increase. We are a small customer to most of the suppliers and if they manage to stay in business they will pass the buck to us.
There is also the chance that Delphi goes under (We buy a lot from them) and our test track is owned by a one auto mauf and we are set to move to a facility owned by another in the near future.
Things are going to get ugly for a lot of America as well as the rest of the world if the toilet gets flushed.......
12/10/08
I work for a mid-sized family owned manufacturing business...we have already frozen hiring, suspended merit increases for 2009, and are taking every other measure we can think of to avoid layoffs.
Tough times, and the worst is yet to come.
12/11/08
First Parker Pen, now GM...goddamn the decline of American manufacturing is sad.
A service economy won't work. This country is fucked long term. Mark my words.
12/11/08
12/10/08
12/10/08
12/10/08
12/10/08
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12/10/08
Say hello to capitalism.
12/11/08
Not every business that fails is poorly run. You're slamming on thousands of hard workers whose businesses are faltering because their clients have less/no money.
12/10/08
It's not just the factories that'll shut down, it's guys like me who work at parts stores that fix their project cars, it's the guys who run the restaurants that feed us, the schools that teach our children, the bars that serve to drown the sorrows in these last few good days. We all depend on the money that comes from this manufacturing sector, and moving the production overseas has already hurt, this is just going to hurt more.
I don't want to sound all gloom and doom, but look at some of the pictures on DetroitYes.com (where the lead picture is from) and see what happens when plants close. See the ruins left behind in search of a quick buck. Yes, I think they've screwed up big time, but I don't think that all of us should suffer that badly.
Look at this as an investment in our country, an investment in our future, and our children's future, and their children's future. Is it worth it?
12/10/08
12/10/08
Yes, it is. Even with this map.
Incompetent and poorly run companies and industries fail all the time. eToys? CompUSA? Circuit City? Cotton mills? The entire US steel industry?
Yes, I'd feel bad about all the out of work people. But that is life. Those people should be able to move on to find other jobs. Or is everyone saying that they are so stupid and poorly skilled that they can't find work in any other industry?
12/10/08
Unfortunately, no one is hiring right now.
No businesses are growing. That means even if you're qualified and competent, the payroll budget's just not there at your next employer.
12/11/08
12/11/08
12/11/08
This goes very far into the industrial base, consider as an example that the largest consumer of microprocessors is not the computer and cell phone market, but the auto industry. Intel, IBM, and texas instruments would be in the hurt too if anybody takes the fall.
And lets be clear. The reason Detroit is in Washington for a loan is that they can't get a loan from a private bank, they can't get one from a bank because the credit markets are shit, the credit markets are shit because the American people overextended themselves on mortgages that were commoditized after the government deregulated the derivatives market. If you want a root cause analysis, you'll never get it, the problem is too complex, but regurgitating thinly thought out bumper sticker slogans about "bad management" (which nobody was complaining about when they sold SUVs by the millions and were hugely profitable, and everyone was cashing in on high stock values and healthy dividends), the UAW labor and benefit costs, and the price of tea in china (or $0.12 an hour labor in toxic environments, as it were) does nothing for the overall conversation.
12/11/08
Having said that, US automakers have been pathetically run for, oh, the past 30 years. GM is a case study of how not to run a large company.
I also think, should GM and/or Chrysler fail, someone eventually will step in and take over those factories. UAW workers will probably take pay cuts. But some pay is better than no pay. Though given past UAW actions, they might actually starve and go homeless just to spite the world.
I don't think Ford will fail. Worst case, they could just shut down US operations and become a European company.
And frankly, I don't want to see GM or Chrysler fail. But they have such ruinous decision-making I find it hard to support them. It's giving money for food to a crackhead. And I want bankruptcy, not failure. It would give GM a chance to completely restructure itself and hold off creditors for awhile.
12/11/08
12/10/08
That whole "One in Ten jobs is related to the auto industry" figure (which I still find dubious) is definitely not evenly distributed. It's more like 7/10 in the midwest and 1/50 on the coasts.
That means when most of us are thinking of The Auto Industry, it's the UAW and a handful of executives, not Bill down the street who's a mechanical engineer for Dana-Spicer.
12/10/08
12/10/08
12/10/08
Explain to me how used car sales diappear if GM goes into Chapter 11.
Both of these grow if the supply of new cars goes down.
Don't get me wrong. I recognize there will be a terrible ripple effect if GM shuts down, but I still think everyone's new favorite statistic gets stretched a bit.