Should We Taxpayers Bail Out Gm, Ford ,chrysler?

[Patrick H. Crowe]

1. Their consistent, large losses prove beyond any doubt that these companies have been incompetently managed.

2. The non-negotialble premise of any taxpayer bail out has to be that no one at these comapnies can make more than three times what the average worker on the line (who assembles these cars) makes. That's the TOTAL compensatiobn package - - no BS with options, golden parachutes and managements usual crap.

Patrick H. Crowe

 

[pitzerwm]

The biggest issue with GM is that they have 700+ retired people on a big percentage of their old salary and a real expensive health package. Obama and the Dems had the support of the unions, so the odds are that it will bail them out. Is it right, probably not. If we get paid back like Chrysler, that would be a surprise and ok. I figure that it will happen, so I bought 5000 shares of GM and 5000 shares of one of their preferred.

 

[Sequoia]

Although placing restrictions on executive pay might "feel good", it is one of the dumbest and most counterproductive things a company could do. Imagine telling your HR hiring director that you can not pay anywhere close to a competing wage-- so take whatever you can hire instead of trying to find the best.

In 2000, Ford launched project "Blue". It took their brightest minds and assembled them for one task: figure out how to build fuel-efficient cars and compete with the Japanese.

After a long period, the team gave up. Because ford pays far higher labor costs than its non-union Japanese competitors who are building cars in the South, it simply cannot compete.

It would be more intelligent to advocate scaling back worker pay so Ford could compete, not draining the brain trust of the company.

 

[mac]

I find it kind of interesting that the foreign autp makers that have plants here are not looking for bailouts. But wait, they don't have the unions. Must be a coincidence.

 

[rph9168]

I think we are already seeing the effect of the recent election. When Chrysler ran into financial problems the Administration loaned them the money which was eventually paid back. Now GM is in trouble and the solution for the new Administration seems to be to give them the money. I sure hope they are as generous to car wash owners in a similar situation.

 

[Sequoia]

Here is the dilemma:

Ford has already figured out, via project Blue, that it *cannot compete* with the Japanese due to its excessive labor costs from the unions and the UAW- United Auto Workers. The worker pay problem includes initial pay scale, graduated pay scale with promotions, employee benefits, holidays, vacation, sick leave, greivance policies, required employee assistance programs for the alcohol/drug dependent workers, retirement, and much more. This is not my opinion-- it is a fact based on their brightest minds within Ford which were assembled to tackle the problem.

If Mr. Crowe was on point, he would call for solving this structural problem of an excessive wage differential first as a requirement for bailout funding; unfortunately, it would involve lowering union wages from the folks at the UAW to allow Ford even a chance at competing in the global auto market.

Now, guess who is a large contributor was to the Dems and Obama? .... the UAW, of course. Guess who was front and center to endorse Obama? Now, what is the chance this known structural problem of an excessive wage differential compared to the Japanese manufacturers will get solved?

So we as taxpayers are screwed, and it has nothing to do with the upper management of the "Big 3." Trying to bash CEO or upper management pay scales is nothing more than class envy and a distraction from the true problem. Bashing CEO's or high wage earners is not a solution to our problems.

I predict the government will give Ford and others "feel good" bailout money while KNOWING they have no chance to compete based on the wage differential. I also predict they know how to fix the problem for the betterment of America; but, of course, they won't touch it as it involves a detriment to their supporters. So our money will go down, down, down the drain. When the folks spending know it is a lost cause.

Cynical? Or accurate?

 

[Patrick H. Crowe]

Dear Anti Union Folks:

Who signs those contracts? Management did! I was (and am) a union member., Here's the dirty little secret which you folks seem unaware of.

Management signed on. Why? Because they knew for sure the stockholders (taxpayers) would not object to them (management) getting much more than labor. The more the workers got, the more management got - - many times over. Dah? Of course managemnt must put up the APPEARANCE of a struggle but get real about it, PLEASE!

Those of you who seem to think limits on management compensation will hurt these companies merely display serious ignorance. Look at the companies who do that and are models of good management. Try Lincoln Electric. There are so many others. You folks can't seem to recognize GREED when you are faced with it.

Do you think the "management" of unions is ever allowed to make thousands of times - - yes thousands of times - - what the rank and file make? All this demands is reasonavble balance.

My proposal allowed them to make three times as much. The last report I saw on Lincoln Electric interviewed a worker who made about 86K (above average) but the CEO made less than three times that amount - - about 220K. Both were happy and satisfied.

You people can't seem to see why the CEO of a companyu like Ford - - ten years behind Toyota on Hybrids - - should be flat out fired. Lose money year after year and you are toast. At the very, very least could we tie management compensation to PROFITS?

That's what Buffet does for himself. How do you large operators ever make tons of money unless manager compensation is directly related to gross revenues? Mine was always that way. Doesn't sanity demand that?

Patrick H. Crowe

 

[rph9168]

How about tying labor's wages to productivity? When I was in college I worked in a union shop. When one of the company's other nearby plants was closed all the young union workers in the plant I was in were bumped out by older union members due to seniority. In one year the productivity of that plant went down almost 60% while costs increased almost 15% due to increased wages. Hard to show any profitability with that. Three years after the change that plant was closed. Guess what. Those same workers went to another company plant and created almost the same scenario.

There is no doubt that management negotiated some very poor agreements and current management is paying for the past "cave-in's". I read at GM over $1,500 for each vehicle sold goes to pensions and health care for employees that are either retired or no longer work for the company.

Somewhere along the line maybe a bankruptcy and restructuring might be called for in order to make things right. It would certainly cause some hardship for some but right now the bailout seems to be a never ending cash drain. Maybe if unions and management alike realized that it is to both their benefit to work together to make it work things could change. If not both will be out of a job.

 

[Sequoia]

Patrick,

You've graduated from wrong to half-right. So congrats. When you cite who signed the labor agreements by saying "management did", you ignore that the labor leaders signed it as well. So you can't just blame it all on management, who is just one-half of the signatories on the agreement and just one-half who negotiated it.

And you also ignore that the labor leaders, previous to signing, threatened to strike and close down or possibly destroy the companies that employ them. How would shareholders respond to management's handling of the unions by receiving a strike that wipes out or cripples the company?

I also grew up in a union family. When contracts are negotiated things get heated, and many workers set out to destroy the companies-- sometimes within legal boundaries and sometimes not. Picket lines are scary and union threats during negotiations are powerful and very real.

I agree that tying management compensation to performance is a good idea and a good structure, but please admit that arbitrary caps or percentage rules are nutty. Are you really saying that if you could choose between a MUCH more qualified CEO at $250k versus a junior/trainee version for $200k that you would choose the junior one to entrust with a multi-billion dollar company?

In the technology business, the high end of the sales reps make $250k BASE BAY and up from there. They won't even come for an interview if you are not at the $250k level; I know, I have had them refuse me on many occasions as our pay scale was only around $150k per rep. Given that, why would anyone pay all the fees and costs for years of education to receive an MBA from Stanford, Harvard, or other top schools? Why earn less than a sales person while being responsible for billions of dollars of assets and tens of thousands of jobs?

btw, the naivete of the pay caps have infected our political leaders as well. Don't our political leaders believe in the free market any longer?

 

[Greg Pack]

We have to take our medicine from time to time even though it's bitter. Without creative destruction this country will wither away. I say let them go bankrupt and reorganize. I believe under BK they can re-negotiate everything, including retiree benefits.

 

[Patrick H. Crowe]

I think Bill is correct that the health ins costs and pensions are a big expense for the big 3 but that's only part of the problem. A major portion is that they continue to build cars people don't want. Folks percieve their quality as poor and the cars are not efficient. Toyota has had the Prius of over a decade and Ford has finally decided, years later to build one.

To me the bad management does not merit a reward a bail out. It should only be considered if severe limitations are imposed with it, like no lavis salaries, golden parachutes, all management pay based on profits.

If they went Chapter 11 then they could reorganize. Limitations on lavish salaries (no one took up the notion of pay at Lincoln electric) could be imposed, foolish wage contracts voided. Remember this does not mean an immediate shut down. It means they could try real management and cut out making cars which won't sell.

To just hgand them money seems foolish to me

Patrick H. Crowe

 

[pitzerwm]

Problem is Pat that a Chapter 11, will screw the union people out of their just due. Obama can't afford to do that. I'm pretty sure that the bailout will happen, if not before Jan, then surely after.

 

[Patrick H. Crowe]

Bill:

You are 100% right, the union people will take a big hit and that's the part of chapter 11 I like the least.

However, ABC News reported yesterday that each union member, on average, has a total compensation package which costs GM $71 an hour. The comparable cost at the US Toyota plant is $47 - - - rememer these are NOT hour wages but total cost of compensation and that includes benefits, the GM portion of the payroll tax and so on.

Here's the up side: As the reorganization is set up, the union folks can make demands on management - - as well they should. Maximum salaries of no more than 3 times the average line worker, no golden parachutes, no bonuses unless there are profits. In short, both sides suffer but there's a chance for survival.

Let's be very realistic. $71 and hour is far better than $47 an hour, DAH? Still, at $47 an hour a man can feed his family. The pain is lessened when the laborer can see the big shots got cuts, which on a percentage basis, were greater.

You are right about the possible consequences to Obama. I wish there was a way around that but unless these companies can become viable Obama is way too smart to just keep throwing money down a rat hole - - he'll make the best of it - - that's the advantage of BRAINS.

Patrick H. Crowe

 

[ted mcmeekin]

I agree with Pat with one exception--making demands to limit officers pay is fine provided it does not get in the way of hiring the best turn around ceo. Of course there was a time that the best would step up to the plate and do it for our country--that would be great.

Ted

 

[pitzerwm]

Get ready for the Government running GM and probably the others. It won't screw with the unions and they will pour a bunch of money into it, and start making a Yugo.

Hello, name one thing that the government, ours or anyone else runs even remotely efficiently. Gerald Ford said 25 years ago, that if the government was in the beer business a 6 pack would cost $50

When you listen to those pious congress people, it wants to make you puke. Most of them couldn't operate a lemon aid stand.

 

[Sequoia]

If you believe in the merits of pay control, then why stop with just an auto company? After all, if it's appealing for the auto business it should work elsewhere also, right?

We spent billions more on welfare than any auto company bailout could ever command. Maybe a hundred to one or a thousand to one. Why not restrict teachers to earning only three times what a welfare recepient earns? After all, if teachers were more effective we wouldn't be in such a welfare mess, right?

Set two companies side-by-side. Both of them compete globally and do billions of dollars of business. Both are in trouble. One can pay unlimited salaries to hire the best team to try to turn it around, and the other is constrained and can only pay low wages for its executive staff that is far below market value. Now you must choose-- which one are you going to invest in?

 

[Waxman]

The one that builds Hondas.

 

[Patrick H. Crowe]

Bill:

I doubt if you really want to hear about federal government programs which are well run but you asked so here it is.

Remember Sputnick? It showed the USA was behind Russia in space exploration. One major reason was that Russian math and science teachers knew much more math and science than their American counterparts.

The National Science Foundation funded grants to get American math and science teachers to learn more math and science. Some were on Saturdays at local universities. Some were called "Summer Institutes" (a teacher got 6 or 8 weeks on a college campus); some were Academic Year Institutes (36 weeks on campus, called AYI's for short).

The year I got my AYI I was making $4900 teaching. It paid all expenses and $90 a week but the money was tax free so I got almost the same as my take home pay. I learned a ton of math. I'd been to three prior summer institutes and spent two years of Saturdays tring to learn more.

Math and science tend to be "sequential". A person needs at least a couple years of calculus to get to the advanced math and science. Thus in a 4 year program there was limited opportunity to get to equal status with our Russian counterparts.

We got to the moon in under 10 years. There were no scandals. Money very well spent.

Since the USA now ranks 24th in math and science globally we obviously need another such program, not a ten billion a month war.

Patrick H. Crowe

 

[Patrick H. Crowe]

Sequoia:

I don't call it pay control. I'd limit salaries of management. Once management made the company profitable - - - and only then - - they would get bonuses based on their achievement of profits.

Right now these companies are so badly managed they are a joke. How can a company consistently lose money and reward management with big bucks? Isn't that insane?

Let them reorganize. Management can be hired at modest salaries if they see there are potential bonuses for profits. Why not try that. Paying very high salaries in no way assures profits like you seem to suggest; please reconsider.

Patrick H. Crowe

 

[pitzerwm]

Pat, you are right in the past NASA did a good job, apparently now, they are way behind the curve. Private enterprise has surpassed them in efficiency. And there is no doubt that China is graduating 30 engineers to our 1. Why is that, because as a country we are getting fat and lazy. No one is going to change that in our lifetime.