Redstate

it's costs of production are higher than the costs of production for equivalent cars from other makers (chiefly Toyota). This makes the cars from Toyota with similar quality cheaper or cars in the same price range more desirable due to extra features. Most of that difference in cost of production is due to labor and benefits costs. GM is suffering from similar problems.

So how did Ford and GM do so well 4 years ago? They had the same labor costs then. If anything their labor costs were HIGHER.

And why are Toyota's production costs cheaper? Could it be that they are a more efficient company in general and that they have less bureaucratic overhead and better time to market capabilities?

Everytime US auto makers slump, Conservatives look to blame the unions. It's just not that simple.

"There are those who look at things the way they are, and ask why... I dream of things that never were and ask why not." George Bernard Shaw

In labor and benefits costs compared to Toyota. That's a HUGE competitive advantage for Toyota. If you can get an equivelent car from Toyota for $1500 less than Ford, or a better car from Toyota for the same price, which are YOU going to buy? Ford and GM have been able to charge a little premium based on brand preference, but that premium is slipping.

But to answer your question, what's the difference in the past 4 years? There are several differences. In manufacturing there are both fixed and variable costs. The fixed costs are there no matter how much you produce. Fixed costs are for things like the buildings, machinery, security, a minimum of utilities, base levels of payroll, etc. The variable costs change depending on the level of production. These are materials, labor, power used in production, maintenance and replacement of machinery, etc. There are various combinations of price/production/sales levels that are profitable and if you drop below that level you are losing money. The domestic manufacturers have been losing market share (mostly due to price differences) at the same time that their fixed and variable costs have been increasing. They have dropped below the point where their sales can cover their fixed costs and they're not able to drop their prices because their variable costs are too high (it does no good to increase sales if you price below your variable costs).

And I didn't mention unions. I stated that Ford and GM's labor and benefits costs are higher than their competition. YOU are the one who placed the blame for than on the union.

You didn't mention unions. Praytell where were you going with your line of reasoning? How is Ford Motor Corp going to solve their woes?

The domestic manufacturers have been losing market share (mostly due to price differences) at the same time that their fixed and variable costs have been increasing.

No. They are losing market share because their pick-up and SUV business is failing through the roof. Since that was their core business and most profitible business line, they are getting killed right now.

So they are looking to become leaner and meaner but the problem is that they still are not nearly dynamic enough to compete in the world market.

Could you tell me where you got that $1500 overhead figure from?

"There are those who look at things the way they are, and ask why... I dream of things that never were and ask why not." George Bernard Shaw

Again, I didn't blame the unions, you're the one who tied my factual statement of higher labor and benefits costs to the unions.

I'm stating that Fords costs are too high to match their current sales. You mention that their SUV and light truck sales have dropped. That's true. But where has that market share gone? Toyota has cut into their market BIG TIME.

http://www.theepochtimes.com/news/6-10-4/46647.html

"Toyota Motor Co emerged as the surprise beneficiary of a rebound in U.S. sales of trucks and SUVs in September, posting an industry-leading 20-percent gain in vehicle sales."

The $1500 figure was from memory based on news reports from a few months ago. But since you asked, I did a little googling and found that I missremembered what the figure referenced. The $1500 is the amount that GM pays per car for RETIREE's pension and healthcare benefits. Again this is a cost that Toyota hasn't built up because their work force hasn't reached such a high level of retirees. But GM (Ford's UAW contracts are usually very similar to GM's) is paying roughly $5 per hour more directly for labor than Toyota (plus associated costs that are based on wages such as FICA, unemployment insurance, workman's comp., etc). Here's a reasonable overview of cost differences (though it's not the tag line of the story):
http://www.washingtonpost.com/wp-dyn/content/article/2006/07/19/AR200607...

I've worked in the auto industry and it is a strange business.

It has been particularly difficult for GM and Ford to adjust to their falling market share. These are companies that were so big, that in their heyday they could build a vehicle to target a particular market segment.

Now they are just constantly scrambling to catch up to the Japanese.

GM and Ford were making huge profits off of the SUV market. They could make $10,000 per vehicle off those loaded trucks.

They don't make nearly that much profit off of cars.

Plus they are getting hammered by their legacy costs. They are paying for retirees that stopped working 20 and 30 years ago. The japanese companies don't have that cost.

Generally speaking, I'm a big proponent of free trade. But watching what has happened to our domestic auto industry has me concerned.

I understand the concept of globalization, but something in me tells me it is important to keep some basic industries and manufacturing here. Heck in WWII we used the auto plants to build planes and tanks.

I don't see a national security issue with not manufacturing TVs and stereos in the US. But I do think there would be a national security issue if all of our iron and steel industries and autos were built offshore.

but methinks there are more cars made in the US today than ever. It's just that the production facilities are NOT in Michigan and they are Toyota, Nissan, BMW, etc facilities instead of GM & Ford.

With respect to national security, there is just no way that an automobile assembly line could be retrofitted to manufacture an M1A1 or an F22.

With respect to Ford and GM (especially GM) adjusting to their falling market share, they've had almost four decades to adjust. Doesn't look like they're gonna make it, huh?

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If "pro" is the opposite of "con", what is the opposite of "progress"?

They made bomber planes in WWII at a factory that had been making refrigerators.

We all know why they don't locate those plants in Michigan. They all locate in right-to-work states.

You said:

With respect to Ford and GM (especially GM) adjusting to their falling market share, they've had almost four decades to adjust. Doesn't look like they're gonna make it, huh?

I agree. They started their decline in the early 70s. It seems ridiculous to think that it would take nearly 40 years for them to adjust.

I can't explain it. It frustrates me to watch them.

Having worked there, I can only say that even small changes come very very slowly.

Last year when gas prices jumped after Katrina and people started to think twice about buying big SUV's, GM came out and said their new business plan was to make an even bigger SUV. It is as though they make all of their decisions in a very vacuous and isolated board room.

Hopefully the new guy at the top of Ford can help them. They are in bad shape.

Retrofitting a plant to manufacture & assemble WWII aircraft and heavy vehicles did not require the same jump in manufacturing technology that would be required to manufacture and assemble current military toys. I'm not sure there's an auto assembly plant in existance that could stand the floor loading required for an M1.

Management of US auto companies, especially GM, are just plain clueless. The Saturn experiment was probably the best example of just how clueless they could be. Roger Smith decided to spend billions of dollars to build a second rate Japanese car. Oh gee. They failed. Well, actually they kinda succeeded, they built a second rate Japanese car. They just hadn't bothered to figure out that if people wanted a Japanese car, they'd buy one from Toyota or Nissan. Wow.

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If "pro" is the opposite of "con", what is the opposite of "progress"?

I think that is a relic of WWII. Weaponry was very crude by today's standard, as well as manufacturing practices. Many of the consumer factories now days don't even see the same materials you commonly see in military production now days, and would be at a loss to deal with stuff like titanium and carbon fiber. It would be much easier and faster to just build new factories for any expansion in military production.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

Outside of bankrupcty court, anyway. By shrinking and giving up market share, they aren't doing much to deal with their labor costs right now. All those legacy costs are still there. They don't start saving on those until the employees who took buyouts enter retirement. They are still going to have major issues with their business when they are finished restructuring. They just hope to make it into the black. It'll still be a lousy business.

As for not doing anything for 40 years... I would argue that they've done exceptionally well on the quality front. The quality of American cars in the 70s and 80s was abysmal. They've fixed that. Now they are as good or better than any import. I would think that qualifies as an accomplishment.

I also think the fact that they made all that dough making trucks and SUVs while the imports pretty much sat on the sidelines or showed up late to the dance is also a credit to the domestic automakers. Toyota is still trying to be taken seriously in the light truck market. The other Japanese manufacturers still haven't bothered to show up.

They aren't complete idiots. If they could solve their legacy issues, they would be OK.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

Before I bought my current car in 2004, I wanted to make sure that I felt comfortable buying a foreign car again. So I stopped off at a GM dealer one day with as open of a mind as I could muster. I test drove some more or less upper end GM car like a Buick Park Avenue or something like that. The A/C fan was deafening, it rode like crap, and (I swear I'm not making this up) the aging salesman fell asleep in the back seat next to my kids. That was my last trip to a domestic car lot.

Then again, I ended up buying a Volvo, and Volvo is owned by Ford, so does that really count as buying a foreign car?

I have to admit that I'm not a fan of GM. I have one GM now that I'm always working on and has several design defects that need to be reengineered by the end user, but it was a heavy duty diesel flatbed and the price was right, and that's why I bought it.

Other than that I've owned 95% Fords and everything produced in the 90s or later has been a very good car. I commute well over 100 miles every day in one of two Fords with over 10 years and over 150k miles on them, each, with no issues and no signs of impending doom.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

it's costs of production are higher than the costs of production for equivalent cars from other makers (chiefly Toyota). This makes the cars from Toyota with similar quality cheaper or cars in the same price range more desirable due to extra features. Most of that difference in cost of production is due to labor and benefits costs. GM is suffering from similar problems.

Everyone who follows the auto industry knows that Ford and GM (later) made a big, successful bet on SUVs. Everyone also knows that five years ago, it was common knowledge that the bet was based on low oil prices, and that the bet would someday go bad.

If you were among the major institutional Ford shareholders at that point, you would have been among those rewarding Ford with a nominal share price roughly five times higher than it is today. Because given the environment in which large American businesses are managed, it was the right decision at the time. The fact that our companies must be managed so as to make this quarter's numbers and not plan for the long-term is one of the big things wrong with them. It's a competitive disadvantage that Japan's companies don't face, and that we must change. And I'm not getting into this discussion on this thread because it's a huge important discussion that involves a lot more than the regulatory environment.

Ford is losing market share to Toyota, a company that resides in perhaps the most regulated labor force in the world.
I don't even know what that means. All the Japanese automakers assemble many cars for the North American market in North America, and they face the same labor regulations everyone else does.

When companys lose money the first they do is try to shed overhead. And the easiest place to do that is your work force. It provides a quick and easy way to cut costs.
Flyerhawk, just exactly how much experience do you have as a manager or director of a large company? How many layoffs have you personally had to announce? There's nothing quick and easy about cutting costs, and labor costs are among the hardest to cut, for a lot of reasons. And not just because you are in a legally-binding labor contract that prohibits you from laying off hourly workers. For decades, the auto industry has lived through a roughly seven-year cycle, and they're used to living with this. However, the cyclicality of that business is one of the reasons for its historically-challenging relationship between labor and management. On the other hand, in many other businesses, particularly in service industries, as soon as you start laying people off, you start dying.

I never said that Ford's workforce is the problem here, and I do so wish you would have the simple common courtesy not to put words in my mouth.

You didn't bother to connect your points into an argument. Are you actually trying to say that Ford's problems are of its own making and therefore, like a good Schumpeterian, you would simply allow Ford to die off? And that the ills which afflict Ford are not representative of either the experience of other companies, or of the overall business climate (which is strongly affected by the political climate)?

My point in writing this post, which I assume you agree with since you didn't touch it, is that in trying to preserve the political status quo, we're actually moving in the wrong direction. We need to do a lot more than just defeat the Left. We also need to start moving hard to the Right.

I will certainly apologize for putting words in your mouth. The only reason I did so is because you have yet to explain how you get from Ford Motor Corp's financial woes to claiming that the country needs to go more rightward.

I did not mean to suggest that it is always easy to lay people off. what I meant was that it is always an easy avenue to cut costs. If you have a protected workforce, it is obviously NOT easy to perform layoffs.

Ford's problems are certainly exacerbated by a senior management that has not developed a more dynamic business cycle. I'm not suggesting that they should have weaned themselves off of the gas guzzlers when they were making big money with them. But they knew that the good times could only last so long and they should have looked for ways to transition to other markets. They didn't.

I certainly do not want to see Ford die off. But I don't understand what you are proposing.

"There are those who look at things the way they are, and ask why... I dream of things that never were and ask why not." George Bernard Shaw

Big vehicles with high markups were the only way they could continue as an ongoing business without doing something about their labor costs. Unless they can figure out how to sell subcompacts for over $20k, they still aren't going to make money on small cars.

The reason for this is that GM has an hourly labor cost (pay, benefits, retirees) of almost $100 an hour while Toyota's cost is around $35. How do you stay in business selling the same product (small cars) with that kind of differential? The only way to stay alive is to sell something your low cost competitor doesn't that can command a much higher markup... big trucks and SUVs.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

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If "pro" is the opposite of "con", what is the opposite of "progress"?

But it was a few months back. I couldn't find the article... it is probably in their premium archives area somewhere.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

The big three have been squeezing their suppliers to get cuts in material costs.

As to the layoffs, they are not easy. They are not fast either. Smaller companies can get a pretty quick cut in costs by cutting their payroll. When the autos cut theirs, notice it takes years before the cuts actually come to fruition.

They all still have tremendous excess manufacturing capacity. They could run every plant 24 hours per day, but they can barely sell 8hrs per day of vehicles right now. I think I just read that Chrysler has something like a 6 month inventory. That is horrible. They want to have a 30 day inventory.

is GM. GM is, over the last 40 years and certainly since Roger Smith, the most poorly managed multinational company on earth. IMLTHO.

GM seems to think they exist for the convenience of their management and employees. They have probably 30% too many people in managment positions and they consistently refuse to negotiate with their unions in a manner that will allow them to be competitive. I don't blame the unions, it's their job to get what they can. GM is simply incompetent when it comes to dealing with their cost to manufacture a car.

Will the Japanese companies "make the same mistake"? No.

_______________________________
If "pro" is the opposite of "con", what is the opposite of "progress"?

They came into the market in the early 70's with small, inexpensive, and relatively fuel efficient vehicles during the gas shortages.

Younger people snapped them up. They were more reliable than the domestic vehicles at the time. The younger folks who bought them then became loyal customers. They are still loyal customers.

Used to be entire families would be "Ford" families or "Buick" families. Not anymore. (Unless they work for one of the companies.) If anything you will find families that only drive Honda and Toyota.

with the Truck market this time.

Initially the japanese companies came in and took away the car market. Then they went into the minivan market (at least Honda and Toyota did). But they didn't really dent Chrysler much in that market.

Then they went into the SUV market. They have made a big dent there.

Now they are going after the pickup truck market. That is the death knell for our domestic industry.

They earned their market share by understanding what the consumer wanted and by building a better product. Their service is consistently superior as well. They just do a better job than GM and Ford. And for that matter, they do a better job than BMW and Mercedes.

_______________________________
If "pro" is the opposite of "con", what is the opposite of "progress"?

Their service is consistently superior as well. They just do a better job than GM and Ford.

This perception is also pretty regionalized. The imports seem to completely own the auto industry on the west coast... not so in the midwest. That's part of the reason why the domestics do so well in trucks. The places where they sell the most (midwest, south) are not places where people are willing to pay a premium for a Toyota badge. On the west coast, they'll pay almost anything for that badge. It would be just too embarrassing to drive a domestic.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

...and though I and probably others disagree with some of this, I'd like rather to relate it to the main point.

You always have to blame management for the problems that any company faces. It's their job to solve them, and they get fired with great alacrity when they don't. (As Billy Ford, the board chairman of Ford, recently fired himself as CEO.)

Be that as it may, the conditions under which America's large business operate today put them at great disadvantage vis-a-vis their global competitors. And most people are not sufficiently aware of this fact. As much as I'd love to discuss the history of this as it relates to manufacturing in general and automaking in particular, I should probably just stick to this observation: it's a truism that the global competitive landscape has changed everything, but I think many of America's older and larger companies have yet to make (or even perhaps to understand) the necessary adjustments.

Many people are fond of pointing out that "we are the richest country in the world," "we have the best of everything right here," and "America's companies are the strongest in the world." The misplaced complacency implicit in these feelings leads directly to the Left's demands for more of the kind of "wealth sharing" that lead to the labor contracts of the Fifties and Sixties. And of course they want much more of the environmental regulations that did much good for all of us back in the Seventies but have now gone way too far and are causing incredible damage to our competitiveness.

In short, not only do managements need to change to be competitive in the new world (and shareholders will see that they do, and in some drastic and disruptive ways too). Our political and regulatory climate needs to change as well. American businesses face far too many constraints today, and not enough people realize that we need to change that immediately or face irreversible damage to our prosperity and well-being. And that affects everyone, rich and poor, Democrat and Republican.

Unfortunately, if the next election brings a new Left-wing ascendancy, we may be starting out on a long journey in exactly the wrong direction.

I blame the automakers' management more than the unions. The unions have only one interest: more. It is up to the employer to act like an employer and protect its interests.

I don't understand why unions always get blamed for bad management.

"There are those who look at things the way they are, and ask why... I dream of things that never were and ask why not." George Bernard Shaw

The unions have more than one interest. It is as much in their interest as it is in management's interest that the business continues as an ongoing concern, otherwise all their members will be out of their jobs. That is the idea behind making voluntary concessions. That and keeping the business out of bankruptcy court, where their contracts could be invalidated.

I wouldn't place the blame entirely on management. They've certainly made their share of blunders over the years, but its an open question of whether a mature business like that with a unionized workforce is even a workable thing, long term, (outside of government, of course). In government you have the advantage of an endless supply of free money to pay for any bloated union contract you agree to. That might have something to do with why unions are becoming more and more a public sector thing.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

are the real problem, mostly because they're nearly defunct in productive businesses anyway. For the most part they survive only where they are shielded from competition, as in the government business.

The way a labor union has traditionally worked is to suppress the free market for labor by eliminating the ability of individuals to sell their work freely. Like any government-protected monopoly, it works beautifully until you have competition that you can't control. In the case of manufacturers, that competition comes from less-expensive workers in other countries, or from non-union shops here.

To a degree which might surprise a lot of people, the US economy was not only shielded from foreign producers until relatively recently. It was also not a strong participant in foreign consumer markets. (For the simple reason that only the US has generated significant final demand in the postwar period until very recently.) In an essentially closed system like that, unionism works well as a way of artificially boosting the price of labor. In the wide open system we have now, it doesn't work.

is unionized, less than in 1932 before passage of the National Labor Relations Act. The only place they survive is in "legacy industries" like autos, mining, and what's left of steel or in the "third sector" of regulated monopolies or heavy government finance or regulation.

The real power in unionism is the wall to wall public sector and service unions like AFSCME and SEIU, and they are little more than political parties with the right to compel contributions. The old line trades and crafts unions are now in thrall to them since they need the public unions' political power to get the project labor agreements for big public projects or to grease the skids in the regulatory environment to favor the union employers.

In Vino Veritas

As an aside, this is one area where I think President Bush deserves way more credit than he gets: He turned the Democratic plan for DHS into a way to attack the public unions. He turned Katrina relief into a way to attack the public unions. He may not be a conservative, but he seems to know this is a key issue.
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If you're seeing shades of gray, it's because you're not looking close enough to see the black and white dots.

after the unions went the whole Clinton Administration without reporting their salaries and expenses as required by the LMRDA. The Ds hated that so bad that when they controlled the Senate they put in budget language prohibiting expenditures on enforcement. It is now published on USDOL's webside. The only problem is, it only applies to unions representing private sector employees, so the biggies in the public sector still take a pass, since as far as I know no state bargaining law requires it. We tried to add language straight from the LMRDA to our bargaining law in '97, and they still haven't gotten all the blood up off the floor of the capitol - we failed with a veto-proof R majority.

In Vino Veritas

It seems to me that Ford and GM are at a huge disadvantage now due to defined-benefit pensions paid to retired employees, which foreign companies (even those who manufacture here) don't have to support.

If we assume that an average American retires at age 65 after 40 years of work and lives until age 80, generous pensions are now being paid to auto-workers who retired since 1991, who started working between 1951 and 1966. The sticker price of Ford and GM cars manufactured NOW still bear the costs of these pensions, but very few of the cars these people built are still on the road. Ford and GM customers are now paying the price of both new cars and old T-birds from Elvis' day.

Back in Elvis' day, there were few retirees, and few cheap imported cars (European imports were more expensive than American cars back then) and Ford and GM could make profits by selling big cars slightly above manufacturing costs.

There had been a previous gasoline-price run-up back in the mid- to late-1970's, and the public turned to small fuel-efficient imported cars, mostly from Japan. Lots of auto-workers lost their jobs then, but after a few boom years in Japan, the yen started rising against the dollar (due to the Reagan-era interest-rate cuts), and Toyota and Honda started building factories in the United States, hiring some of the laid-off workers. They didn't offer defined-benefit pension plans, but the IRAs and 401-K plans offered then seemed attractive enough to young auto-workers. After oil prices dropped in the early 1980's, American automakers latched on to the SUV boom, which made sense with gasoline between $1.00 and $1.50 a gallon. Meanwhile, with low oil prices and a temporary oil glut, refinery construction stagnated, and existing refineries kept up with demand at reduced throughput.

With suddenly higher gasoline prices (still much higher than a few years ago), demand for small cars is likely to increase, and demand for SUVs likely to decrease. The SUV cash cow is gone, maybe forever, but those pension costs for GM and Ford will continue for years to come. Meanwhile, Toyota and Honda might be offering American employees stock in their companies, but since a rising tide lifts all boats, why not share the wealth?

Somewhere along the line, GM and Ford will have to (1) re-negotiate their pension costs; (2) shift to production of smaller, more fuel-efficient cars; or (3) be bought out by more profitable companies.

Still, the management should have seen this coming--people were already complaining about high oil prices back in 2001, when the terrorist attacks led to instability in the Middle East, and Hugo Chavez' antics in oil-rich Venezuela should have
set off a few alarms. Didn't they remember the lessons learned in the late 1970's? But they bet on SUVs in the short term--apres moi, le deluge.

You can't expect people to pay for both today's car and Elvis' car, when the competitors are only charging for today's car.

The bad news: Conservatism is hard to sell. The good news is that it works.

...that the retiree health-care liabilities are strangling GM and Ford. The question is what comes next for them, as you say.

I don't buy into second-guessing the push to market SUVs. The auto market runs in roughly seven-year cycles (although Daimler has been trying to shrink the cycle), and it's now 2006. It would have been the wrong call for Waggoner and Nasser to have forgone an entire product cycle back in 2000 because they anticipated (as many did) high fuel prices today. I think the real problem they faced is that, cash-starved as they were (and are), they both had to make one large bet, so they went with the lowest risk. Given adequate capital for marketing and engineering, I would have liked to have more than one program going to meet multiple different markets. Now of course, they're stuck because they're behind the Japanese, who are able to make money selling smaller cars. And they have less capital than ever to invest in new products.

How do you get rid of the health-care liabilities? By breaking the union contracts. How do you do that without a bankruptcy or change of control? You can't. But both GM and F have existing management teams that would have to admit defeat and clear the decks before any rationalization of the assets can take place. Kirk Kerkorian just found out how tough that is to do, so it may take some time. Especially for Ford, which generates enough cash to cover its long-term debt obligations, so they will be hard to force into making wholesale changes. Meanwhile, they're bleeding market share. And the clock is ticking. And the longer they wait, the less likely we are to have a domestic auto industry.

are a lifeline to many retirees. These people, while living longer are starting to have more and more serious medical problems too. Of course for retirees who reach the medicare age, the health care costs revert back on the taxpayer and we know that issue is also not being addressed or solved by our frightened legislators. We want to salvage our medical/pharma system and find compromises that F and GM can live with. The union will have to address this as well, or your solution to change ownership or face bankruptcy court allowed changes is a real possibility. I only hope we see better management (Transformational Management) soon before these lazy solutions become the only ones.

Never underestimate the ability of modern medicine

And I would bet a lot of money that the UAW will not permit the Big Two-and-a-Half to significantly rationalize their cost structure. It's just not part of the union mentality to see the world as anything but a zero-sum game, and they would sooner lose all their jobs than "give anything back." If anyone has a hard time believing this, well, so do I. Every time I see it happen.

Both GM and F have established management teams that will have a very hard time admitting error and clearing the decks. If allowed to remain in place, they'll continue to play for time with band-aid solutions and hope for the best. Management's behavior is just human nature and Labor's behavior is standard for two-year-olds, so both are pretty understandable.

I don't think bankruptcy is a good solution. It kindof works for airlines, but they don't face foreign competition in their home markets, and are basically looking for ways to keep operating more or less as they always have. But with an automaker, a non-prenegotiated bankruptcy will tie everything up for many years and leave the outcome in the hands of some black-robed Clinton-appointee with delusions of Solomonic grandeur and a taste for publicity. Meanwhile the industry would wither away under the competitive pressure, with no access to reasonably-priced capital and no management focus.

That leaves a change of control, with a complete reorganization of the productive assets. And here the fight will be between the managers and the shareholders. We all saw the egg that Jerry York laid at GM. And I have to admit I was very surprised by the Nissan/Renault negotiations, but not surprised by the outcome. I think Carlos Ghosn is the sharpest top exec in the auto business, and he wasn't going to marry a weak sister, not on GM's terms anyway. (Well, not on GM's management's terms.) I think a private equity consortium would be a good place to look for a deal. Here of course, there is a huge risk that their goal would be just a quick asset-flip rather than to rebuild the domestic industry.

So, what about the retiree and dependent liabilities? Hell of a question. Will those liabilities need to be socialized? I think probably yes. But can that be done without the Justice Department trying to find a way to put Rick Waggoner and Billy Ford in jail? I have no idea, but if the answer is no, you can bet they won't be in favor of any kind of drastic change until it's too late. And as I've said more than enough already, time is the real enemy.

_______________________________
If "pro" is the opposite of "con", what is the opposite of "progress"?

So, what about the retiree and dependent liabilities? Hell of a question. Will those liabilities need to be socialized? I think probably yes. But can that be done without the Justice Department trying to find a way to put Rick Waggoner and Billy Ford in jail?

Sure they can shed them without anybody getting into any hot water... in bankruptcy court. That is what this arm of the Federal government does. I think it is inevitable it will go that route. It will be a loser for everybody involved. For the shareholders that get wiped out, for the retirees who get greatly reduced benefits (PBGC will not pay 100%), and to the taxpayers who will bear the burden. Long term, I don't see a realistic alternative, though.

Both GM and F have established management teams that will have a very hard time admitting error and clearing the decks. If allowed to remain in place, they'll continue to play for time with band-aid solutions and hope for the best.

Bill Ford is already out and I believe Wagoner is on his way out. Bill Ford's replacement is a huge improvement over Bill (but who wouldn't be), and his acceleration and expansion of the restructuring is a very good plan, but the directors could give Superman himself the helm and I'm not sure he'd be able to do much to salvage the business.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson

The downturn in trucks and SUVs has more to do with how incredibly popular they were at the peak. Those sales figures were unsustainable and would have to be followed by declines, no matter what happened with gas prices. They came to dominate all other vehicle types. Tastes always change. When every other vehicle you see on the street is an SUV, that is a good indicator that things are overdue for a change. Add to that the big 3 were running giving-away-the-store incentive plans the last few years and the drop is going to be that much more severe, because many of those sales were being borrowed from the future.

People do talk about gas prices a lot, but most people aren't seriously interested in driving an econobox... and for good reason. Your average 15k mile a year driver doesn't spend that much on gas. If they have to choose between 15mpg in a vehicle they love and 30mpg in a vehicle they hate, they'll choose the 15mpg almost every time. The people who drive hybrids do it for the politically correct image or the bragging rights. They don't do it to save money.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson