Gary North on GM's Problems

Discussion in 'Politics, Religion, Social Issues' started by Desertrat, May 6, 2005.

  1. Desertrat macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    This commentary is an email, so because of length it's in two parts. Any comments oughta follow Part 2.

    Anybody run across the comment, "Today, GM; tomorrow, GE."? While GM's plight is obviously egregious, it's a matter of degree, not style.

    Gary North's REALITY CHECK

    Issue 444 May 6, 2005


    DETROIT (AP) -- Standard & Poor's Ratings
    Services cut its corporate credit ratings to junk
    status for both General Motors Corp. and Ford
    Motor Co., a significant blow that will increase
    borrowing costs and limit fund-raising options
    for the nation's two biggest automakers.

    Shares of both companies fell 5 percent or more
    after Thursday's downgrades, and the news sent
    the overall market lower.

    "New York Times"
    (May 5, 2005)

    All of a sudden, without warning, the investment world
    is talking about the looming crisis at General Motors. Its
    pension fund obligations and health care obligations now
    appear to threaten the future of the company.

    The decline of its stock price from $55 in January,
    2004, to today's $30 range has revealed a loss of
    confidence in the company by investors. To see this
    decline in action, click here:

    I have no objection to the experts' pessimism
    regarding the future of General Motors. I happen to share
    it, and have for years, precisely because of the pension
    issue. What astounds me is that investors and financial
    columnists have only just begun to regard the company's
    pension obligations as a significant factor in the future
    profitability of the firm. Why now? Why not in 2003 or
    ten years ago?

    The United Auto Workers' officers and GM's senior
    managers decided decades ago to agree to high pension and
    health benefits in exchange for reduced increases in wages.
    Health care benefits are tax-free income for workers. Even
    retired workers are covered. It seemed like a low-risk
    deal for GM. Nobody thought about the price effects on
    health care of Medicare.

    The health care market, like all markets, is a giant
    auction. If bidders get their hands on more money, they
    will bid up prices. All over America, workers are bidding
    health care prices. So are retirees.


    Alan Sloan, a financial columnist for "Newsweek," has
    painted a stark picture. He begins with a description of
    how GM got into this pickle.

    Lower salaries meant that GM reported higher
    profits, which translated into higher stock
    prices -- and higher bonuses for executives.
    Commitments for pensions and "other
    post-employment benefits" -- known as OPEB in the
    accounting biz -- had little initial impact on
    GM's profit statement and didn't count as
    obligations on its balance sheet. So why not keep
    employees happy with generous benefits? It was a
    free lunch. Besides, GM's only major competitors
    at the time, Ford and Chrysler, were making
    similar deals.

    This is the free lunch mentality: something for
    nothing. As with all free lunches, people eat more than
    they normally would. The price is right!

    Now, as we all can see, pension and health care
    obligations are eating GM alive. The bill for the
    "free" lunch has come in -- and GM is having
    trouble paying the tab. In the past two years, GM
    has put almost $30 billion into its pension funds
    and a trust to cover its OPEB obligations. Yet
    these accounts are still a combined $54 billion

    Note the phrase, "as we all can see." But nobody saw
    it until about February, 2004. Sloan says the problem by
    then had been building for over half a century.

    GM began its slide down the slippery slope in
    1950, when it began picking up costs for medical
    insurance, pensions and retiree benefits. There
    was huge risk to GM in taking on these
    obligations -- but that didn't show up as a cost
    or balance-sheet liability. By 1973, the UAW
    says, GM was paying the entire health insurance
    bill for its employees, survivors and retirees,
    and had agreed to "30 and out" early retirement
    that granted workers full pensions after 30 years
    on the job, regardless of age.

    These problems began to surface about 15 years
    ago because regulators changed the accounting
    rules. In 1992, GM says, it took a $20 billion
    non-cash charge to recognize pension obligations.
    Evolving rules then put OPEB on the balance
    sheet. Now, these obligations -- call it a
    combined $170 billion for U.S. operations -- are
    fully visible. And out-of-pocket costs for health
    care are eating GM alive.

    I report this because of the delay factor. This was
    all built in, Sloan says. He is correct. It is why I
    counselled small businessmen in the late 1970s not to set
    up health plans and pension plans for their employees. The
    legal liability was too great, I warned them. But I was
    almost alone in this view. Not now.


    We are told that the stock market discounts the future
    rationally. This means that the best and the brightest
    investors use their best estimates to buy and sell.
    Today's prices therefore include all of the relevant
    information, as judged by experts who bought or sold. Any
    unexpected price changes must come from new information or
    new perceptions that had not operated before.

    With respect to GM, it's "new information, no; new
    perception, yes." The information was there for many
    years. All of a sudden, investors' perception changed.
    Down went GM shares. Yet the basics had not changed.

    By tying stock pricing theory to information, and by
    relegating changed perceptions to the footnotes, economic
    commentators can then tell us that good times are coming,
    that bad news will be more than offset by good news. After
    all, isn't the stock market rising? Anyway, it's not
    falling. "Don't argue against the stock market!"

    Here is the reality of stock market pricing: seriously
    bad news is not discounted until it threatens the survival
    of the company. Optimism usually prevails among investors.
    Only toward the end of a bear market does investor
    perception change.

    With respect to pensions and health care, optimism is
    government policy. The government has assured us, year
    after year, that "pay as you go" works just fine for Social
    Security and Medicare, smart people believed the spiel.
    They carried the same attitude with them when they looked
    at GM's pension/health obligations. They refused to factor
    in the estimated numbers.

    At the end of last year, GM says, its U.S.
    pension funds showed a $3 billion surplus. GM's
    pension accounting, which assumes that the funds
    will earn an average of 9 percent a year on their
    assets, is highly optimistic. But things are
    under control -- as long as GM stays solvent.

    By contrast, OPEB is out of control. At year-end,
    OPEB was $57 billion in the hole, even though GM
    threw $9 billion into an OPEB trust in 2004.

    Consider these numbers in relation to GM's market
    capitalization of about $17 billion. The company is deeply
    in debt: around $300 billion. ( It
    had to sell $17.6 billion in bonds in 2003 to meet its
    pension obligations. Yet in January, 2004, its share value
    peaked. Optimism still reigned supreme.

    The best and the brightest missed what should have
    been obvious. It could happen again. Next time, it could
    happen to a lot more companies. The worse the news out of
    Medicare, the less optimistic the outlook of investors.

    End Part 1.
  2. Desertrat thread starter macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    Part 2.


    Political columnist George Will has described the
    plight of GM as the common plight of the welfare state, in
    an article, "The Latest welfare state? It's General

    Who knew? Speculation about which welfare state
    will be the first to buckle under the strain of
    the pension and medical costs of aging
    populations usually focuses on European nations
    with declining birth rates and aging populations.
    Who knew the first to buckle would be General
    Motors, with Ford not far behind?

    GM is a car and truck company -- for the 74th
    consecutive year, the world's largest -- and has
    revenues greater than Arizona's gross state
    product. But GM's stock price is down 45 percent
    since a year ago; its market capitalization is
    smaller than Harley Davidson's. This is partly
    because GM is a welfare state.

    Will's angle is a nice touch. A journalist looks for
    a hook to snag readers, and the current discussions about
    the demographic train crash of the Western world's
    retirement and medical programs serve as a convenient hook.
    Statistically, it's the same problem: the bills are coming
    due, and there is no money set aside to pay them.

    But GM is not a state. It is run by profit-seeking
    managers on behalf of profit-seeking investors by means of
    serving consumers who have a choice to buy or not to buy.
    Why should GM's managers and investors make the same
    mistake as politicians?

    For politicians, it never was a mistake. It was a way
    to get each era's voters to hand more money over to the
    politicians, whose careers would end long before the
    demographic day of reckoning arrived. It involved
    hoodwinking the voters by promising them future goodies.
    The voters who saw through the sham could not sell their
    shares. There are no shares to sell. The system is
    compulsory. GM's shareholders can sell, and have.

    The problem is, the managers at GM seem to have acted
    in the same short-sighted, self-interested way. So did a
    generation of investors in GM stock. Yet we free market
    advocates like to believe that things are different in free
    markets than in political affairs. Are we wrong? No. But
    we have to understand how the system works.

    The problem has been building for a long time. The
    tax code has treated the funding of future benefits as
    deductible expenses to a company, but not taxable events
    for the employees. Labor union saw the advantage. They
    could claim victories in their negotiations with
    management. This is true across the board, in company
    after company.

    What has been in it for senior management? Stock
    option profits. It is legal for managers of American
    companies to reward themselves by investing workers'
    retirement money in corporate shares. This raises the
    value of managers' stock options. This is what Enron's
    senior managers did. It is a widespread practice.

    Profit-seeking people respond to incentives. The tax
    code has created incentives for pension fund payments. The
    tax code has also provided incentives for stock options:
    long-term capital gains, taxed at a lower rate than
    salaries. Government-authorized accounting practices have
    added to the illusion of future wealth: assumptions
    regarding estimated future investment returns based on the
    post-1982 stock market boom-era. GM expects to earn 9% per
    annum in its pension fund. How?

    The federal government has created business in its own
    image with respect to pension funds. The bills are now
    coming due.


    The cost of health care plans for GM workers is now
    over $5 billion a year. This is now affecting GM's ability
    to compete. Writes Will:

    GM says health expenditures -- $1,525 per car
    produced; there is more health care than steel in
    a GM vehicle's price tag -- are one of the main
    reasons it lost $1.1 billion in the first quarter
    of 2005.

    But it's not just GM.

    Ford's profits fell 38 percent, and although Ford
    had forecast 2005 profits of $1.4 billion to $1.7
    billion, it now probably will have a year's loss
    of $100 million to $200 million. All this while
    Toyota's sales are up 23 percent this year, and
    Americans are buying cars and light trucks at a
    rate that would produce 2005 sales almost equal
    to the record of 17.4 million in 2000.

    Foreign auto companies are steadily eating into GM's
    profits. GM's market share keeps dropping. So is the
    market share of the other members of the Big Three.

    In 1962 half the cars sold in America were made
    by GM. Now its market share is roughly 25
    percent. In 1999 the Big Three -- GM, Ford,
    Chrysler -- had 71 percent market share. Their
    share is now 58 percent and falling. Twenty-three
    percent of those working for auto companies in
    North America now work for companies other than
    the Big Three, up from 14.6 percent just five
    years ago.

    The number of Big Three employed workers has fallen by
    134,000 since 2000.

    Then these is the issue of who should pay for these
    benefits. The free market's answer is clear: consumers.
    Their money determines what should be produced. If
    consumers say, "No; your price is too high," this leaves
    GM's management with bills to pay and no income to pay

    When the bills come due, those receiving them start
    looking for other people to share the burden. The bills
    are coming due for GM.

    GM says its health care burdens, negotiated with
    the United Auto Workers, put it at a $5 billion
    disadvantage against Toyota in the United States
    because Japan's government, not Japanese
    employers, provides almost all health care in
    Japan. This reasoning could produce a push by
    much of corporate America for the federal
    government to assume more health care costs. This
    would be done in the name of "leveling the
    playing field" to produce competitive "fairness."

    In short, because taxpayers in Japan are required to
    pay for health costs of Japanese auto workers, American
    firms want you and me to dig a little deeper into our
    wallets and our futures, in the interest of fairness.

    It doesn't sound fair to me. I didn't sign those
    long-term contracts with GM's workers. I didn't lower my
    costs of production by making promises instead of paying
    higher wages.

    Then there are GM's retirees: "Health care for
    retirees and their families -- there are 2.6 of them for
    every active worker -- is 69 percent of GM's health costs."

    Up, up, up go medical costs. Down, down, down go GM's

    We think of GM as an auto company. But its auto
    division is small potatoes. About 80% of GM's profits come
    from GMAC, its in-house loan company: consumer credit and
    mortgages. It profited greatly during the mortgage boom.
    But this source of profits has begun to taper off.

    Now what?

    (Ad snipped)


    This report is about GM, insofar as GM is
    representative of a mindset. Managers have treated GM as a
    career investment vehicle. Workers have treated it as a
    rich uncle who will always be there with money. Investors
    have treated GM as if the company were not subject to the
    reality of long-term increases in medical care costs.

    In retrospect, the experts say all of this was visible
    years ago. But the share price of GM indicates that nobody
    paid any attention until it was too late.

    This is why I am not impressed by economists who
    assure the public that Social Security/Medicare are not out
    of control, that there is time to maneuver.

    Nobody in charge ever seems to maneuver until the
    investment vehicle goes into a skid on an icy road in the
    mountains. Bad news is dismissed as irrelevant.
    Statistical reality is deferred by investors until they
    finally start unloading shares. Then there is not much
    that the people in charge can do to solve the problem.

    If highly sophisticated investors are this naive about
    where their money is being invested, why should we expect
    politicians to tell us the truth about the looming
    insolvency of Social Security/Medicare?

    -- 30 --

    Note that nothing is said about fuel efficiency or quality control or looks or advertising or any of the usual commentaries about any automaker's reasons for success or failure...


  3. Xtremehkr macrumors 68000


    Jul 4, 2004
    Did Management at GM pay this guy off or what?

    Sounds like they are trying to squirm out of a deal they made a long time ago.

    I could have told you 10 years ago that making crap cars is not a good business model.

    Not only that but the executives paid themselves bonuses, and let's be honest about who these bonuses actually went to, when they knew they had future commitments to meet.

    The problem with GM has been the management, they have no vision, no plan and don't seem to really care about the product that they are producing.

    The management treated the public like a Woman at a Mechanics shop, where expect her to believe everything she is told and buy it.

    Even the Koreans are producing higher quality vehicles than GM is now. They turned their operation around in a few short years.

    GM needs to start making better cars. That is the only way they will retain and recapture market share. Screwing their employees is not going to fix the fundamental problems that exist at GM. The product is crap.

    Lower the price to squeeze a few more years of profitability out of the company and in the end you still don't have a solution. They continue to lose market share and will eventually implode.

    Time for management to take some cuts, improve efficiency and work on making a car than is better than a Toyota.

    The longer it takes for investors to realize this, the worse it is going to get.

    I have a feeling that if Krekorian buys into GM he is either going to gut the company or replace the management.
  4. Desertrat thread starter macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    "Did Management at GM pay this guy off or what?" Duh? North has been hollering about emperors' lack of clothes in many major corporations for years! Just like this go-round with GM...

    "Time for management to take some cuts..." Problems: The amount of money is insignificant insofar as operating overhead. Second, you don't find more competent, more astute people by lowering pay. For somebody new to come into a GM and try to turn it around is very risky. Competent people don't take risks without high reward.

    Doesn't matter, anyway. What's happened is that overall, the cost for any given GM/FoMoCo/Chrysler car is higher than for other car companies; Toyota is the obvious example. There is no one cause for this; I already cited things like hours per car, comparative wage scales, etc.

    Regardless, the UAW and the Big Three colluded in providing what they all thought would be the proverbial Free Lunch, as North pointed out. But, as usual, TANSTAAFL.

  5. Sun Baked macrumors G5

    Sun Baked

    May 19, 2002
    Many public corporations and public utilities have been using bankruptcy reorganization to get rid of pension and retirement healthcare obligations.

    The experts have been hinting that this is a possibility, if GM cannot get large concessions from the union.

    GM has been saying that they won't do it...

    The experts say, it's this or the big 3 will cease to exist.
  6. mactastic macrumors 68040


    Apr 24, 2003
    Regardless, the company now owes the workers a lunch that they agreed to provide. Even if it kills the company. Right?

    You're so worried about all those folks who run up huge amounts of debt with the foreknowledge that they will be filing for bankruptcy that you supported Bush's so-called Bankruptcy Protection Act with no comment on any 'collusion' between the credit card companies who provide cards to people with little or no proven method, nor track record, of making payments. Yet you'll hold the CC users accountable and not the CC companies, correct?

    How is that very different from what GM et al. has done here?

    Seems to me that even if GM has to work the rest of their days to pay their obligations, that's the way the cookie crumbles. That's what the Bush administration is saying about CC holders.
  7. Desertrat thread starter macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    "you supported Bush's so-called Bankruptcy Protection Act with no comment on any 'collusion' between the credit card companies who provide cards to people with little or no proven method, nor track record, of making payments."

    No. I have no sympathy for those who ran up bills for vacations to Cancun. I question why I'm supposed to be sympathetic to folks who happily glom onto every credit card offer that comes in the mail. Neither you nor I are responsible for the financial foolishness of anybody. Ya wanna play, ya gonna pay.

    I objected to the defeat of amendments which would have recognized problems stemming from such as high medical bills. I'm not sure I believe the claims from studies that allege a high percentage of credit card problems result from medical bills. That doesn't jibe with what I've read, heard and seen over the last twenty or so years. But, I favor a different and less harsh treatment of those with that sort of problem.

    Regardless: A corporate medical program is a deductible item for a corporation, but it is not considered taxable income for the employee. The same holds for retirees. This is all well and good when times are good and corporations are profitable.

    Again: The Big Deal, right now, is the US car companies. What's not being talked about--yet--is that many other large corporations have the same problem. Much of this is tied to the same issues that cause outsourcing.

    From the article: "At the end of last year, GM says, its U.S.
    pension funds showed a $3 billion surplus. GM's
    pension accounting, which assumes that the funds
    will earn an average of 9 percent a year on their
    assets, is highly optimistic. But things are
    under control -- as long as GM stays solvent.

    By contrast, OPEB is out of control. At year-end,
    OPEB was $57 billion in the hole, even though GM
    threw $9 billion into an OPEB trust in 2004."

    So where is that $57 billion gonna come from? I'd find it interesting to see how many of the Fortune 500 have similar problems. I'd bet the totals would be astounding.

  8. takao macrumors 68040


    Dec 25, 2003
    Dornbirn (Austria)
    the real bummer for me is that just as Opel is on the right path with it's new looks, the good selling astra , way better quality than in the past and getting away fro mthe old Kadett image GM wants to shut them down because of their financial situation

    (ford and GM debt is higher than the whole austrian budget of 2005 ... :rolleyes: )

    this whole thing is almost as bad as Hyundais sold under the chevrolet badge over here... yeah becase _that- will increase sales ... Chevro Nubira
    (*grasp* who gonna buy such a car ? ...seriously ...)
  9. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    I suspect GM is "too big to fail." If they can't get the concessions they want from the unions, they'll probably get what they need from Congress.

    Then everyone sitting around the board table will get bonuses and stock options.
  10. Ugg macrumors 68000


    Apr 7, 2003

    Yep, I agree. There will be a government bailout of their pension plan along with Ford's and UAL's and AA's etc. There is absolutely no other way. They have put themselves in a corner that they can't get out of.

    You're right about the upper classes, they'll be praised and rewarded while the lower classes get their pensions cut along with reductions in their SS as well as having their jobs shipped overseas because the US isn't "competitive" enough.
  11. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    I don't know about a bailout per se. But I wouldn't be at all surprised if GM (and other corporations who want relief) get some legislatively manufactured wiggle-room on how they address their pension fund obligations. I'm sure Congress would be more than willing to agree with the proposition that it's all the fault of greedy union workers.
  12. Desertrat thread starter macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    IJ, I imagine all of us agree there will be enough hot air on the issue to lower a winter's heating bills.

    But, look: If you'd been a UAW laborer way back when, which would you have wanted: More pay, to cover your medical bills with tax-paid money? Or the company to provide the medical coverage so you pay no income tax on that higher wage? If you'd been part of managment, would it have made any difference to you whether the company paid the health insurance or instead paid higher wages? After all, both are deductible business expenses.

    I don't see where "greed" is an applicable word to the UAW decision to call for the company to provide the health insurance coverage. That decision kept the workers in a lower tax bracket. Minimizing your legal tax obligation is highly approved of by IRS; it sez so in your 1040 book they send out every year.

    It seems to me that all these changes in the way business is done around the world have led to changes in the amount of success in various corporations. Those on a downhill slope are in trouble or are going to become troubled.

    The times were different when Lee Iacocca turned Chrysler around. That sort of loan guarantee setup isn't possible, nowadays, I think. (And remember, the guarantees were never called.) Iacocca did two things: The first was that he made it clear to the UAW than a 20% pay cut was better than a 100% pay cut, and was believed. The second was that he got better folks in the design departments and produced a better product.

    Looking at today's cars, I find it a bit hard to envision out-designing those now on top of the heap. Equaling, yeah; but I don't think that's good enough.

    Back in the late 1970s, remember Mazda's "GLC"? One of the mechanics at the local dealer commented, "Anybody brings one of these things in at 100,000 miles for more than a valve job, he's been abusing it." At that time, you couldn't say the same for a Toyota or a Datsun or an Audi.

    And say what you will about American Big Iron; you don't see much foreign-made stuff pulling trailers, be they livestock, flat-bed or recreation.

    But I've said before: Change is not something that only happens to somebody else...

  13. Xtremehkr macrumors 68000


    Jul 4, 2004
    Some cuts? How about a thorough replacement of the management and management culture at GM. You pay people according to their ability, and right now, that is the weak spot in the company. It would be in their interests anyway, to save a sinking ship that if righted can reward them again.

    I have seen some numbers posted, but nothing implicitly saying that what The big 2 pay their workers in the highest of all car companies.

    The Unions agreed to a pay cut, so that they could have their pensions later. Which means the money should have been deferred in order to cover that.

    They are just fighting for what they bargained for and received.

    Lowering the price of a GM vehicle slightly is not going to change the fundamental problem with the company. The products are crap. The quality is poor, the models are outdated and the reliability sucks.

    If American workers can put together a Toyota, they can put together a good American product. Though, that depends on whether the product was well designed in the first place or not.

    The drive for profit replaced product quality a long time ago at GM and it is starting to show. You can't do that if you want people to continue buying your product.
  14. takao macrumors 68040


    Dec 25, 2003
    Dornbirn (Austria)
    and that's the problem:
    how many US (designed) cars do see over here ? very , _very_ few

    i see more FIAT pickuptrucks than all US pickups _combined_

    that's the whole problem with some US manufactures: they design cars and don't offer them in the first place overseas/or can't hit the market
    if you wan't to be in business world wide you have to be either stronger i nthe home market (like mercedes having the best selling truck in whole europe: the 'Actros' , often forgotten that some european brands make more than small cars ;) .. same for Renault)

    and why the hell does ford keep their high prestige cars out of the european market like the mustang ? for god sake it's one of the most famous US sportscars over here as well and they don't offer it ... and nobody knows why..

    2 good selling models (Focus, Fiesta) is simply not enough and on the other side they are completly overcharing for some models... i mean if you had the choice beween a ford mondeo and a Mercedes C class with less HP what would you choose ? the Ford ? you gotta be kidding

    and for GM : their us cars look all to generic too me .. al lthe same jsut different badges some times ( and for the love of god: please use better high quality plastic if you put plastic in the dashboard.. even the french learned that)

    i actually suspect the situation will be getting worse for both: peugeot/PSA is rumoured to be re-entring the US market ... and that might spark the interest of Renault again...
    with their current designers (look at the 407 ,1007, C4, C6, VelSatis, Megane and Espace *grasp* that's what i call interior _design_) it could be very dangerous to the small cars and sedans GM and Ford are selling

    and most trailing pulling cars are mercedes diesels (mostly C-Es .. nobody with a S is going to pull a trailer ;) ) audi Avant TDIs, grasp or even Opels with TDIs
    nobody over here is going to buy a big 'truck' fueled by normal gasoline engine .. a lot of US cars simply failed because they didn't offer a diesel version like the PT crusier for example unill they offered a diesel it was a complete 'flop'.. and now it'S selling a lot better
  15. Xtremehkr macrumors 68000


    Jul 4, 2004




    Shocking! Our privatized medical system is the most expensive in the world and doesn't rank anywhere near the top. And now it is starting to affect the economy.
  16. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    It has been hurting the economy for a long time. Any time you've got a system that's the most expensive in the world to run and one of the least effective in delivering services, it's going to cost the economy dearly -- first in less obvious ways (hospitals closing, many without access) and now more clearly with the debacle in the auto industry. The day when we get universal health care is drawing closer -- meaning, the day when corporate America demands it is near.
  17. Xtremehkr macrumors 68000


    Jul 4, 2004
    After all those years of fighting against it, they will end up fighting for it.

    I wonder where we would be if we didn't have to do so many things the hard way.
  18. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    "For years I thought what was good for our country was good for General Motors and vice versa. The difference does not exist."
    -- Charles E. Wilson, President of GM (1952)
  19. Ugg macrumors 68000


    Apr 7, 2003
    United Airlines is trying to be the first to get out of its pension obligations.


    Welcome to the world where businesses have gotten too big to fail, where their employees are the ones who pay the price for poor management and the CEOs get bonuses for salvaging their own mess.
  20. mactastic macrumors 68040


    Apr 24, 2003
    And I have no sympathy for a company that willingly took on an agreement that was viewed as a 'free lunch'. They were smart guys, I'm sure someone explained the different scenarios to them. And I don't want to be responsible for the financial foolishness of anybody, yet I'm going to be by the time Congress gets through with this and you know it. You can claim all you want that this is different, but it's not. It's the same damn principle: Pay what you owe.

    And that's the system that was in place previously. Now it's been changed so there is 'zero-tolerance' loan default. But will a Big Company with big ties to Congress get called onto the carpet like the little guy? Nope. Taxpayer money will be handed over to them in some form, and the guys around the table will all pay each other on the back and pass out bonuses. And then they'll go do it again. It's human nature.

    The same could be said for regular debt holders. All is well and good when times are good and the person is prospering. But when it's a corporation you seem more than willing to forgive and forget than you do with any individual.

    I'm sure it will be astounding. But does that change anything about the underlying problems? It comes down to personal responsibility and honoring the commitments you made. If the people in charge don't like it then they can step down and let someone else handle it in a responsible manner. I don't want my tax money rewarding these guy's bad business practices.
  21. pseudobrit macrumors 68040


    Jul 23, 2002
    Jobs' Spare Liver Jar
    I don't think it will happen. I think the corporations will simply begin to drop health care from their employee benefit packages.

    They'll eventually orchestrate a structured transition to individual healthcare insurance.

    The health insurance industry will look much like the auto insurance industry. There will be premium increases for claims. People with chronic illness and expensive prescription needs will be priced out of coverage, much like a repeat DUI offender is priced out of car insurance.

    At that time, I will no longer be able to afford to live in this country.

    That's why I'm moving to Canada.
  22. IJ Reilly macrumors P6

    IJ Reilly

    Jul 16, 2002
    I wouldn't say it couldn't happen, but I think my scenario is more likely. Health care will continue to be a management-labor issue which the corporations can't wish away no matter how much they might like to. The corporate habit of going hat-in-hand to Washington every time they've got a problem (and getting what they want) is so deeply ingrained, I suspect they'll at least try that route. The right wing, which now calls universal health care "socialism," will change their tune in a Washington minute once they see who's feeding the jukebox. A coalition for universal health care could appear like spontaneous combustion once the corporations are on board.
  23. Ugg macrumors 68000


    Apr 7, 2003
    To paraphrase the quote from the GM guy who said what's best for GM is best for the US, I would say that they also think what's best for the US MUST be best for the rest of the world and if the rest of the world doesn't buy, it's their loss not GM's. Of course, even Americans aren't buying American cars so....

    About the only major market for US cars that I know of is Saudi Arabia, they've got to do something with all those petrol dollars!

    When I drove from Munich to Bratislava four years ago, I was amazed at all the Jeeps and Chryslers on the road. There were a few Euro Fords, but not very many, and although I was in an Opel, I don't think I've ever seen a newer US GM product in Europe.

    Sure, Ford and GM have invested heavily in Europe but only by buying other companies. I too am surprised that they don't take advantage of the Euro market. Chrysler products don't have any significant advantage over GM and Ford's.....
  24. takao macrumors 68040


    Dec 25, 2003
    Dornbirn (Austria)
    yeah the chrysler voyager and the jeeps are pretty popular.. chrysler actually has a assembly line in Graz so they slap on a additional "made in austria" badge :rolleyes: and real offroad cars are also likede so people are buying jeeps and Mercedes G(which got a somehow a premium product the last decade) quite a lot

    the family of a friend has both a jeep and a chrysler voyager...and a mercedes E and an additional small car :rolleyes: they bought the jeep because they had trouble reaching their second house in winter ;)
  25. Desertrat thread starter macrumors newbie

    Jul 4, 2003
    Terlingua, Texas
    I first "met" European cars in the era of the Citroen 2CV, the Renault 4CV, and the "gangster car" called the Citroen 6-15. That was around 1956.

    Back then, the average age of a Frenchman when he bought his first car was 35 years.

    One thing stood out: US highways were wider than those of Europe. And except for really older US cities, our streets were much wider.

    So, with cheap gasoline and long distances between Points A and B, there was no incentive to build other than Bargemobiles. In 1965, Ferry Porsche came to the Porsche Parade in Aspen, Colorado. He arrived in a Ford Galaxie, much to the horror of the Porschephiles there. His comment was that the Ford was built for US highways; Porsches weren't.

    The 1950s to the early 1970s saw the growth of both European and Japanese car companies. The early Japanese stuff was junk. Fiat never really got it right, either. And there's no such thing as a good used Audi of the 1970s. Obviously, things changed. Well, except for Fiat. :)

    The Japanese have been called the world's best students. They look, they listen, and they damned sure learn. They have the most highly roboticized plants extant, except, possibly, Mercedes. This means fewer employees per car produced--which has been a management/labor problem in the US since robotics first started.

    For a given sales price of a car, it is physically--or financially or legally--impossible for a US car company to equal a Toyota. I don't care who you hire to replace existing management at GM or FoMoCo.

    mac sez, "It's the same damn principle: Pay what you owe."

    Hey, that's the way I've lived my life. But I had the money to pay. The question is, whaddaya do when you're broke?

    And I'm dubious that anybody in the 1950s really foresaw the multitudes of changes ahead: The aging of our population due to increased longevity, for one thing. The degradation of the buying power of our currency, for another. The rise in numbers of and costs of government programs, with the tax burdens at all levels of government, for another. And, not least, the development of industrial capability in countries other than Europe and Japan.


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