Federal-Charity Forever
by David Benzion · 12/01/2008 7:13 amWeekends are “catch up with the Wall Street Journal” time in the Benzion household, and here’s a little gem I spotted yesterday from Holman Jenkins’ Wednesday column.
The wrong folks were in the witness chairs in last week’s congressional hearings on auto doom. A fantastic moment was Massachusetts Rep. Stephen Lynch assailing Rick Wagoner about whether GM was asking China for a bailout too. The implication seemed to be that GM can’t afford its inflated UAW pay packages because it’s squandering money to build cars in China.
Mr. Wagoner mildly answered that GM’s China operations are profitable. They actually help to underwrite the massive losses in the U.S.
Mr. Lynch showed no sign he was actually listening, having illustrated his disapproval of foreigners. He didn’t ask the obvious question: If GM can make cars profitably in China, why doesn’t GM import them to the U.S.?
For that matter, any of the brainpans on the Hill might have asked why Ford and GM managed to build viable auto businesses all over the world but not in North America.
You don’t need the Hubble telescope to tell the answer: The UAW is present only in the U.S., not all over the world.
Keep that foremost in your mind as all this auto-industry bailout talk moves forward–the Big 3 can turn a profit making cars everywhere else in the world… except in their own hyper-unionized home-state.
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Still waiting for any of the so-called Big 3 to file bankruptcy like any other business would do to survive when business turns south. Just think by filing for bankruptcy they can shed those bloated union contracts and reorganize. And since they are profitable overseas, what a perfect example to impliment here to be profitable. Any bailout or so-called “loan” would only prolong the inevitable. And if the top executives really cared, they would take a salary cut since their decisions haven’t actually helped their companies very much.
I’d say that the UAW has finally managed to kill off the Goose that was lining the pockets of the Union Thugs and the DemocRATic Party. I’m afraid that they will get bailed out and stretch out the problem for a few more years. The worse thing about a bail-out is that the Idiots in Washington will want them to build ONLY cars that are tiny, electric/hybrid. Of course, nobody will buy them.
Back in the ’20’s and ’30’s the unions were needed to stop the abuses of “big industry”. But with all the laws and espeically with the instant availability of the news to get out, there aren’t any more “labor abuses” that would make it past the first 4 hours.
What saddens me the most is that there are an unusually large group of people who REFUSE to see what the problem is. You can’t continutally pay people $40/hour for years and decades to do a $15/hour job. And then pay them when they aren’t working either.
Another thing - how can Hyundai, BMW, Toyota, et al. make a profit by making cars IN the US to sell in the US? (In states like KY, TN, and even TX) It’s not just an “in the US” problem now is it. It’s something every 5th grader should be able to figure out. You have a group of companies that all make the same (similar) products. Some of them are profitable and others aren’t. If some aren’t profitable, then it must be the “way” the make the product that’s not profitable - no that can’t be it because they all use good assembly lines that are for all essensal purposes, the same. So what could it be that makes some profitable, and others not? Hmmmm? Anyone? Bueller? Bueller?
Who is John Galt?
The congressional hearings were all sound and fury signifying nothing. The proceedings were just a smoke screen to make it look like they were doing their job before they roll over and sell our future further up the river. Now that the ceremonial tongue lashing is complete, rest assured the Big 3 will get their bailout, the unions will continue to bleed them dry, and GM, Ford, and Chrysler will default on the loans and then come begging for more.
Since the whole Big-3 bailout talk started, it has been apparent to me that it is nothing more than a bailout of the UAW.
File Chapter 11, get their costs in line, let them and the UAW succeed or fail on their own merits.
If any one company is “too big to fail” it should be broken up into pieces that are not “too big to fail.”
The Democrats owe to much to the UAW to allow the big 3 to fold without at least trying to blame everything on the top management.
If the Big 3 do not get the bailout and have to go through bankruptcy it will only be because enough citizens are watching and objecting to the bailout and after congress have placed the total blame on management and absolved the UAW of any blame what so ever.
Whether mom and pop or multi-bazillion dollar corporations: “Sometimes you eat the bear, sometimes the bear eats you.”
#4
LOL
Up until 2006, it was pretty evident that clearly you can. I don’t recall too many politicians telling Detroit they had to change the way they do business, the day of reckoning was almost upon us.
Did the cars stop selling because they were priced to high? Or did the cars stop selling because the economy tanked and they were too expensive to operate. As was pointed out, other product lines by other manufacturers are still selling.
Shamaal - again, you’re missing the point. It has nothing to do with the price of the cars themselves. It’s the price of the cars compared to whether the company is making a profit or not.
The “Big Three” would have to price their cars WAY above the current market price (and the past few years market prices) to be able to have made a profit. That’s the problem. The other car companies aren’t having to go backrupt when the economy drops. They make a profit when the sells more cars - they ALSO make a profit when the sell less cars, because they are making a PROFIT on all the cars they sell (and NOT just an “accounting” profit). The Big Three have been losing money when they sell a lot of cars and when they sell few cars. (including the “most profitable” styles the SUV’s - they were barely braking even on those and it was never covering the losses from all their other products)
shamaal #10
When 2 companies make basically the same product, sell it for the same price, and one makes a profit while the other does not, WHAT IS THE CAUSE?
CLUE: One of the companies spends more to make the product than the product sells for.
davewolfgang says
You’re kidding, right? ShaWiki has never and will never miss a friggin’ point!
That’s the rhetorical question I posed. It’s not the price and profit per vehicle. It’s the product line.
True, and subject to the same faulty reasoning behind selling lemonade for $500 a cup, sales are few and far between but you only have to sell one. GM was hit hard in their GMAC business, which with the easy availablity of credit back then was red hot.
Profits in 2006 were $2.2B against revenue of $207B. 2006 was also the year that GM rolled out their new of full-size SUVs. I believe North America took a loss.
In 2006 GM signed a new contract with the UAW that removes health care costs from GM and the UAW assumes $20B in obligations. I would submit that even if GM dropped their labor costs even more significantly, if the customer don’t want the product they will not do well.
SUVs have peaked and the other companies are selling cheaper trucks. I doubt very seriously that the government can run the companies better. It’s interesting that one party is tagged as not letting the company’s fail, when both party’s are pushing bail out plans.
I’ve never bought into the concept that Republicans giving away $150B of my money, is somehow more preferable to Democrats giving away $150 of my money.
#12 trl3
Name the companies you are referring to and I’ll be glad to explain it. Toyota and GM have different product mixes and differing revenue streams. GM was hit hard by their financing arm GMAC getting sucked into the credit crunch.
Wow? When did GMAC get into the Home Mortage market?
GMAC Mortgage was one of the larger subprime lenders in the last 10 years. They plundered what was once a very profitable auto financing subsidiary of GM. There were years when the profits from GMAC were the only thing that kept GM in the black.
LOL
DAMN THAT LOGIC STUFF! Logic always gets in the way!
#17
#16 was serious?
Sorry, I thought it was sarcasm.
texpat is correct. FWIW GM sold 51% of GMAC to Cerberus. GMAC took hits on their mortgage exposure and their leasing financing.
And I would submit that you can’t sell cars to people that don’t want them.
The driving quid pro quo behind the deal to merge Chrysler and GM was this:
Cerberus owns 51% of GMAC and wanted to buy the remaining 49% from GMAC.
GMAC didn’t want to sell what had been a great source of profit in the past and they figured would be in the future.
However, GM is burning through its remaining cash at a rapid pace and desperately needed cash.
Cerberus also owns Chrysler which has 10s of billions in cash stockpiled.
GM buys Chrysler and gets much needed cash and Cerberus dumps a liability (Chrysler), but ends up with all of GMAC which they hope to revive with federal help.
The deal had nothing at all to do with producing cars and trucks. It was a survival tactic for a bunch of people who had painted themselves into a very small corner.
I am very glad it didn’t succeed.
shamaal
The big 3 auto makers SHOULD NOT receive a tax payer bailout! It does not matter who is charge.
#23 trl3
I agree
It doesn’t matter whether they should get a handout. They will, and then they will default and come back for more. And there’s not a damn thing we can do to stop it.
I put up a bet that the Big 3 would get their bailout (a six pack of my home-made beer against a stale bottle of Lone Star, I think). Nobody offered to take it. And I make darn good beer.
#25 Maltboy
I disagree that we cannot do anything about the bailout. I think that if the Citizens put up a big enough stink that congress will think twice about bailing the auto makers out.
But it absolutly depends on the CITIZENS speaking up and letting their Representitives know they do not want a bailout.
Maltboy, what do you have brewing these days? I’m trying to figure out what to make to celebrate the impending birth of TotZilla.
Holy cow. Apparently I’m not keeping up. Congrats, Matt!
#27 matt
Try brewing some mead. It ages like a wine, so you can open a bottle on each of the little fella’s (fella-ette’s) birthdays. I’ve got a batch going now, along with a batch of apple cider.
#27 Matt
I’m going to brew a Belgian Wit this weekend with a buddy (yes folks, I have one). It’s a great style because it’s ready to drink in less than a month. After that I’m doing a standard Bitter. You should brew a Barleywine with a ton of hops if you want to lay it down for a few years. Wagonburner is right about the mead. If you need something sooner, you might consider a Celebration Ale clone. You’ll need a loan for the hops though. They’ve gotten VERY expensive.
trl3 - I’d like to think so too, but look at what they did with the $700 billion. They got a ton of resistance from us and passed it anyway. They know they can get away with it, and now they’re behaving accordingly.
Please explain: Is it Cerberus that has billions in cash or Chrysler? If the latter then why would Chrysler need a bailout? Outside of their Dodge trucks Chrysler doesn’t have a much of a product line to appeal to the consumer.
#32 whitetop
Cerberus owns Chrysler AND 51% of GMAC. Sorry if I didn’t make that clear.
Isn’t it more accurate to say “outside of Detroit” where the UAW doesn’t exist?
http://www.toyotageorgetown.com/
http://www.capmag.com/article.asp?ID=4590