Dave, first of all, tell the editors that this new system of splitting articles is a fucking disaster. I just wrote a fairly long & brilliant analysis that got wiped out after I went back to the first page to reread your piece!!!

Gardnabbit. Now I'm afraid to go to page two for fear of losing this.

Anyway, I'll try to recreate it.

Fascinating, thought-provoking piece(and it's important enough that I'll ignore the digs on unions and plug for ethanol.)

Certainly, it's a better idea than the kind of bailout Congress will approve with strings with the strength of damp paper. More important, it's an intriguing concept--using the marketplace to force change to a system that has traditionally fought change every step of the way.

Some may fuss over the details, but that would be a mistake. The real value in the article is that introduces a pretty radical concept that should be considerered. Once the concept is understood & accepted, then we can question how many cars would be sold, what kinds of fuels should be encouraged, how quickly Detroit can retool to meet the demand, and if the tax credits are enough to stimulat the necessary demand.

Regardless, very good article. You libertarians are smart fellows...sometimes, LOL.

Be interested to see the feedback on this. Cover your head & protect your privates.

Curmudgeon-At-Large
In Jameson Veritas

Mark, I agree on the split page thing. When I can I'm now boiling articles down to fit on one page if I think they are important and I want them to be effective and actually read.

As for ethanol, I'm actually not a fan. I threw it in there to appease the farm belt. It WILL get stuck on any bill like this just because they will need midwestern votes.

The latest is that Pelosi's bailout proposal is apparently stalled, so this is a time when an alternative suggestion like this could be considered if some moderate Republican like Graham or McCain put it forward.

Dave

Dave, Mark,

You know, I was chatting on facebook with a friend from Northern Ireland. She said: "Well, I didn't think it would have been so quick... it really is tumbling Reuven, I was quite surprised at the domino effect. The destruction is truly amazing. House repossessions, mortgages, home loans..."

Then we went to neighbor's house for Sabbath dinner. The hostess keeps a sharp eye on the market in the States, and on events there. While she was cutting a salad and we were sitting in the salon:

"Reuven, did you know that the big three automakers have only enough money until December 31st?" Our hostess went on about (I think) "one in three homes that will be in foreclose proceedings in next year."

I mentioned that I had read that Obama said he would try and bail out the big three. She said, "So what? Everybody is afraid to buy a car in case they lose their jobs."

I shrugged. I know how that feels. I've been there, done that and bought several T-shirts. The conversation went on to other things, and eventually we all sat down to eat.

In short, Dave, you have a great idea. The only thing you need to fear for it, is fear itself.

If the auto-makers in the States indeed do fail, you are going to have one doozy of a "recession" on your hands. Obama is going to spread the "wealth"?

Did you the hear the one about the farmer who brought his pig into the bar.....?

If things get bad enough that no one is willing to spend to buy anything, then the best strategy is for companies like the big-three to shut down operations altogether and reopen when the market will support them. Just throwing money at them will do more harm than good if we're at that point.

Dave

Actually I have heard ideas very much like this floating around progressive radio sites all week.... I just hope someone actually proposes one to someone who will do something. I really like the idea myself of not giving any money to any of the big three until they completely reorganize (see Thomas Friedman) and NO new money but rather speeding up loan already promised last summer (which is 25 billion already). But anything creative that does not involve new money just being handed out with no stipulations IN WRITING would at least get a listen to by me.

What Paulson and the government have done so far is ridiculous and, like I said in my NO BAILOUT plan piece, it hasn't worked. I didn't think it would.

Market still going down. Consumer confidence still going down. Economy still a mess. Layoffs galore. Hmmmm. WHAT WAS that 700 billion dollars for? Kenn's piece is apt, too.

How come Paulson, who is supposed to be so smart, is so dumb? And everyone else bought into it, when the DUMB Americans, didn't buy it?

PS Mark, Re you reply and losing it....

Try, if you are gonna do a long one and want to refer back to the article, composing it in word...so you can save it. Otherwise, yes, you will lose it if you refer back to the article.
But then you found that out, didnja?

the article just recommends patches to particular companies that are in the news. But the basic problem is the extraordinary powers that are granted to ALL corporations, compounded by the willingness of citizens to accept the lame excuses of corp executives.

Take the case of GM. To anyone who observed this company dispassionately for the past 30 years it was apparent that they had a Going Out Of Business philosophy working in the executive suite.

For example, the deferred benefits accorded to workers were just used as a delaying tactic to postpone the reckoning long enough for the execs to clean out the GM treasury before leaving it an empty hulk. They could do it because they COULD do it by corporation rules, and because an ideologically compliant state allowed it and because a public was willing, even eager, to participate in the fraud.

In a better society, either pensions and health plans would be handled by the government or corporations would be held to their commitments (like, putting up the money to support their promises).

But we chose a third option: fake promises. Sometimes that's called 'fraud'. But it was so easy to do!

We have to reform the laws of incorporation or else we'll be right back here discussing the next industry.

We have to hold people responsible, and that includes CEOs as well as the distraught homeowners that constantly get critisized.

Waking up to the hangover from the Obama victory parties, I see. Bad headaches all around, eh? Shot of Jameson's anyone? A nip of the "Bush", perhaps?

Bliffle's suggestion, rewriting the laws of incorporation and compiling them as a "uniform laws on incorporation" - something that could be applid overseas as well - looks like a better idea than Dave's. Someting that Dan Miller might want to look at.

Relying on corporate toadies (legislators at all levels) to reform the joke of corporate democracy seems as useful as having a nip from from the dog that bit you. That is the only problem with Bliffle's idea.

Nevertheless, Dave's idea deals with ma sh'yésh - the issue at hand, in other words.

Ruvy, bring a pig into a bar??? Oy, get thee to a Shul & do confession & a few hail...Sarahs or something.

Ruvy & Lisa, it's too soon to tell if the bailout (as done so far) is going to work. Everyone said it would take time, and there are some indications that, at some levels, liquidity is improved.

What Paulson's directing his attention to now is that liquidity simply doesn't exist for small businesses, student & car loans, and credit cards...so he wants to try to loosen up those markets as well.

I have no idea if he's right or not. I'm still waiting for Congress to pass legislation that will make it possible for banks to void the contracts they have with the people who bought the bundled mortgage loans (which forbid any renegotiation of rates).

And then, the gov't needs to set up an organization like one they had during the depression (forget the name) that bought mortgages directly from banks at a discount and then renegotiated with homeowners.

When that program ended, the government had actually made a profit.

But back to Dave's concept, I don't know how to put into place, but I'd love to see it become part of the public debate.

And Ruvela, my friend, what hangover from the Obama victory. Are you already celebrating the Failed Obama Presidency? Well don't. I've got a draft of an article about that, LOL. (Ol' Jug Ears has got to be saying to himself, "Why the hell did I want this job again???)

And Jameson is good any time...if those bastards start sending me bribes to keep promoting that booze.

In Jameson Veritas

Meanwhile, back at the ranch, Robert Reich,

an economic adviser to President- elect Barack Obama[,] advocates wage and benefit cuts for auto industry workers and executives as part of any government bailout of the industry.

"In exchange for government aid, the Big Three's creditors, shareholders and executives should be required to accept losses as large as they'd endure under Chapter 11 [bankruptcy protection] . . . . And the UAW should agree to some across- the-board wage and benefit cuts," he added, referring to the United Auto Workers union.

European Commission President Jose Manuel Barroso told Europe One Radio that the E-U is closely monitoring plans for U-S government aid to the auto industry. Barroso says if the E-U finds any eventual plan in violation of international trade agreements...it will act to challenge the bailout through the World Trade Organization. Julia Qin (Chin) teaches international trade and finance at Wayne State University's Law School. She says the W-T-O has rules governing how member nations can subsidize their industries...and prohibiting subsidies if other nations show they will have an "adverse effect." Qin says the E-U could likely make that case for its automakers...if the U-S proceeds with a bailout . . .

Mark, just because you don't know how to work your browser doesn't mean the system is a disaster.

Ruvy says (Comment #8)

Bliffle's suggestion, rewriting the laws of incorporation and compiling them as a "uniform laws on incorporation" - something that could be applied overseas as well - looks like a better idea than Dave's. Something that Dan Miller might want to look at.

Why can't GM just reorganize under bankruptcy protection?

Clavos made an interesting suggestion on here recently....spend the money directly on the displaced workers [train them for new jobs], and let the companies go under if it happens.

About the split pages...on Firefox you can open pages 1 and 2 in separate tabs and go back and forth without losing either. I guess you can do this on Explorer too, but why use that anyway?

Ok, going to try to hit everything in one comment.

Bliffle, as usual, points the finger at the wrong culprits. Robert Reich has it right, as Dan Miller brings up. While there's some very bad management at these companies, the root of the problem is the deals struck with the uniions, an unholy alliance which has fed the beast and led to this problem. Union wages in Detroit with benefits included are about double what workers in auto plants in other states are paid, and that's ridiculous. No way a business can operate under that burden no matter how well it is run.

I've corresponded some with Reich and he's a very sharp guy. His book Supercapitalism is first rate. He's an interesting contrast with Paul Krugman. They came to prominence at about the same time, but while Krugman is all ideology and partisanship, Reich is remarkably sensible and pragmatic. Despite the fact that's he's from the left I'd trust him to run the economy, while I wouldn't trust Krugman to run a convenience store and not go out of business. With Reich likely to be in the Obama administration I probably won't get the interview he promised me any time soon, unfortunately.

As for the ideas put forward in the article, they may get some play in Congress. The various parts of what I suggest, like the idea of a tax credit and the idea of a 'square deal' reform of the industry have been proposed by people who more people listen to than listen to me. I'm just the first to put together the idea of the tax credit, scaling it to incentivize purchases AND the industry reforms into what a complete auto industry aid bill might look like, at least as far as I know.

Oh, and as for ethanol, the reason why the subsidies there and also with biodiesel have been so disastrous is that the subsidies have been aimed at the manufacturers rather than the consumers. The subsidy should be in the form of a per-gallon tax credit for alternative fuel consumers as it was prior to the last energy bill. That works much better.

Dave

the GOPs rationale is easy to understand, the Big Three go belly up, and the resulting economic catastrophe can be blamed on the Democrats.

Of COURSE they don't want to help them stay in business!

Handyguy, you ask, Why can't GM just reorganize under bankruptcy protection? It probably can. If the bailout does not happen, and even if it does, bankruptcy seems likely. However, not all that many people are buying new cars these days anyway, and how probable does it seem that the folks now in a position to do so would want to buy one from a bankrupt company? Warranty protection, recalls in the event of a problem, and all that sort of stuff would probably be perceived as big deterrents, even if below rate financing and rebates were to be available, which they probably wouldn't be. Besides, why buy a Chevy or a Ford when you can buy a better Toyota or Kia or other car for less?

As to training laid-off workers for new jobs, what new jobs?

Dan(Miller)

El B, instead of being snide, how about telling me how to do it? Better watch out or I'll have you arrested under the Americans With Disabilities Act...neener, neener, neener.

Handguy, tried using FireFox many years ago & had nothing but trouble. Hoping IE8 is better, but I'm also hoping to wake up tomorrow with a full head of hair.

One thing about letting GM go under...last I heard, 1 in 10 American jobs were dependent on them in one way or another. The whole "post-manufacturing" American theme reminds me of the post tech bubble when 20 somethings were telling me that P/E ratios didn't mean anything anymore. Oops.

If other companies can manufacture here, then we should be able to do it. It's going to require both management & labor breaking out of their concrete mentalities & addressing the real needs of the 21st century...or in their cases, the 20th century. Baby steps. Baby steps.

The rational alternative to auto industry bailouts in the US is to have the US car manufacturers design and build cars that people actually want and that don't use up the rest of the world's remaining fossil fuel stocks in the process.

Detroit has been way behind the eight ball, which is the real reason it's in so much strife.

Mark,

And .... what hangover from the Obama victory? Are you already celebrating the Failed Obama Presidency?

During the obscene screaming and arguing passing for debate that preceded this election, I told you all whay I favored Obama; but I also told you that no matter whom you elected, you would have hell to pay in one variety or another - that it didn't matter whom you elected.

The background noise that inspired Dave's article - the sound of the American economy collapsing under its own debt - was the reason that no matter who was elected, that presidency would be still-born - not failed.

I could get Biblical on you and quote the prophecies from Isaiah 60 on all this, but I won't bother. YOU folks are experiencing a "wealth transfer" of huge proportions - and the farther we in Israel are from it, the better.

Barack Obama will be a "wpread the pain" president, using mellifluous words to cover up the fact that America's economy - once the richest on earth - is now an empty dream.

Sorry Mark: Here we disagree. The "bailout" or whatever we want to call it, could have/should have been structurd completely differently from the get go. It was, from the beginning, just a handing out of cash with NO limits, to companies who had, for years, been making stupid decisions that resulted in more stupid decisions. Paulson panicked, the government panicked, and WHOOPS....there went several hundred billion dollars. IF an economic stimulus/savior package was needed (and I am not saying something wasn't called for) it needed to be handled in a more thoughtful, careful way. This has just been proved by Paulson's backpedaling and reshuffling and by the fact that nothing he thought would happen has happened. ANd by the fact that people are still standing around with their hands out asking for more (no strings attached) cash.

Dan(Miller) is right:

"As to training laid-off workers for new jobs, what new jobs?"

That's the unspoken secret of the new economy: jobs are replaced by machines or cheap foreigners.

we have a long history of bad labor management and the price is likely to be economic collapse. We should have started reducing the work week 30 years ago, and we should have started making better cars, but political inertia and partisanship screwed us.

While there's some very bad management at these [automotive]companies, the root of the problem is the deals struck with the unions, an unholy alliance which has fed the beast and led to this problem.

*Hmmm*.. I could have sworn it was the shitty product they have been manufacturing for the past 20+ years. Cutting corners & attaching an "American" image to a car built out of parts from fucking Canada & Mexico. Fuck the "Big 3"!! They have shat in their plate long enough...Now let'em eat it.

As to training laid-off workers for new jobs, what new jobs?

With all due respect, you sound like a Luddite back at the dawn of the Industrial Revolution, Dan(Miller).

Even in an economy with 10% unemployment, there are new (but different) jobs, so long as workers are willing to retrain and relocate - willing to make the necessary adjustments (even as to income, if necessary), there are and will be, jobs for the willing.

This is worth repeating here, as it is most relevant: After WWII American industry, both labor and business, could have retooled for success in the long run. Instead, it re-tooled for greed, for planned obsolescence, for a false prosperity that eventually had to disappear. And now that it has, the awful bill is coming due. Sixty years of mismanagement at the corporate level, along with irresponsible practices of labor unions, are now strangling you Americans, and may well strangle those of us overseas who have thrown out lot in with you.

I think its far too easy to lay the blame on union contracts. I agree with some above that the real root of the problem is and has long been the product.

It became painfully apparent shortly after the '73 OPEC oil embargo that American cars were far more about image than substance. While there have been some movement by the big three to upgrade their products, it has been a hit and miss effort at best. Every instance of their giving a nod to better quality and/or higher fuel efficiency has been countered by a return to glitz, size and power. Now new and used auto lots and numerous front yards are taken with monster SUVs, Humvees and the like collecting dust.

If the unions managed to "bully" the big three management, then again, the fault lay with that management. Each side is dedicated to pursue its interests. Obviously, the unions were better at it. Big three management has been a disaster since the mid 70s. Any aid the car makers receive - regardles of its source - should include a public tar and feathering and/or being placed in stocks on the lawn of corporate headquarters or dunkings in the Detroit River.

Corn based ethanol has proven to be a total bust. Cassava and other sources are less burdensome on the economy. However, the process in its production is costly and bad for the environment.

Other alternative fuels may well prove to be far better. I personally like hydrogen. I know it has its own problems, but the end product is water. Can't beat that.

B

Folks,

All we have is opportunity.

In this case, people have been supporting the American auto industry, many out of obligation. The buy America movement of a couple of decades ago sustained this industry. What we know is that they have turned out a poor product and we've all been hoping that they would just stop the madness, wake up and do good work that we all can be proud of.

Well this is an opportunity. If they get the bail-out it should be mandatory that they invest in the most forward thinking, implementable, well designed, green technology of all car makers on the planet. The new technology should create NEW jobs. India shouldn't be out "smarting" us (smart cars, get it). The demand is there for INEXPENSIVE, fuel efficient, sturdy, cars. I want one and I am strapped. Everyone wants one all over the globe.

American auto makers fell into the same trap that the Republican party fell into. They emotionalized their product. They took the buy America sentiment of the 80's and branded themselves a product for real Americans. Like Sara's "real Americans" ideal. They tried to make themselves an obligation rather than a product that must be competitive, smart, and best. Their adds of trucks driving through a farm and rugged men throwing bails of hay on the back was touching but they were playing those adds to an urban, suburban and even ex-urban cumminting America while Mazda was saying zoom zoom zoom. US auto makers were telling us that this is what you do with our products and it made no real sense. It was nice to look at, evocative but it didn't make sense and it didn't meet our needs(a la Sara Palin, wink wink). The style is horrible. You'd think they'd at the very least go to a Honda or VW dealership and just sneak a peek to find out what the hoopla is about. Much like if the Reps wanted to get Hillary votes they'd at least watch a half a minute of her tapes and try to get it a little right.

I see this time however painful and scary as it is, to be full of opportunity. Those who are innovative, smart and kind (we need that right now) will prevail. The world wants us to succeed. We get a redo. Let's get it right this time.

Baritone,

I think its far too easy to lay the blame on union contracts. I agree with some above that the real root of the problem is and has long been the product.

And the folks who actually put together the defective product were the workers at the plants. No matter what line of bullshit the engineers and managers fed them, they knew the crap they wre turning out.

The issue I raise here is not a union bullying management for "more". The issue I raise is the unions not demanding a voice in running the corporation, and in insuring that the product turned out by the firm that paid them was a high quality product instead of something that would be ditched for a cheap import, like the Volkswagen Beetle.

The "irresponsible practices of labor unions" I refer to were going on strike merely to demand "more". Go check out how West German labor unions behaved for many years, by contrast.

The previous ad was paid for by Zedd

I thought the President had been elected already?!

The issue I raise is the unions not demanding a voice in running the corporation

What?! Unions were formed to "protect the employee"!
If those people had an issue with the product they were manufacturing they should have left the company.

What?! Unions were formed to "protect the employee"!

Very good. The most basic protection the employee has is the status of an employee. In order to retain that status, there has to be a company to employ the employee. If there isn't, the employee is out of work, and is not protected at all.

If those people had an issue with the product they were manufacturing they should have left the company.

If the company is turning out trash, it is the employee's job, or the job of his representative to demand that the owners invest in the quality of the product, for the good of the company - which by continuing to exist, is for the good of the employee.

The auto companies were to cheap to re-tool to turn out good products, and the unions run by men who thought like fools like Samuel Gompers, whose four letter philosophy of "more" your reflect yourself, were too stupid to demand that the firms do what was best for their own ultimate best interest.

[edited for continuity]

Ruvy, re Comment #24, After WWII American industry, both labor and business, could have retooled for success in the long run. Yep. Could have, and actually some of that sort of thing happened. Plants which had been converted from making washing machines and automobiles to making military stuff for the war effort went back to what they had been doing before; probably in much the same way as before. However, we were awfully busy helping Europe do just what you suggest the United States should have done for herself. Remember the Marshall Plan? Then the Korean Conflict came along in 1950, and U.S. military procurement gave Japan a big boost. Toyota went from producing three hundred trucks in 1950 to about 5,000 vehicles in the first months of the conflict.

What does this mean? Oh, not much I suppose.

Dan(Miller)

I don't agree with you Ruvy - surprise, surprise!

While it may have helped the situation had the union sought for more of a voice in the quality of the end product, that is something that has not gained much traction here, at least as regards the big auto makers.

Otherwise, the workers can only work with the materials and processes they are provided by the designers and engineers. They can only assemble the parts they are given with the tools and via the processes in place. The problem with American autos has not been assembly. The problems lay with the corporate mucky-mucks who make the decisions as to what cars they will produce, then the choices made as regards design and materials.

B

Baritone,

If you can strike for money, you can strike for materials. It is not enough to say, "it's not my department". En fin that will do you no good at all. I never thought like a union man. I always thought like a sociali$t, like my daddy taught me to, looking at the whole picture as best I could.

My attitude was backed up by the management training I got at Burger King; I had to think in terms of the entire store, and not merely some section of it. This generalist's view is the one that can insure the survival of a firm.

At this point, though, the discussion is academic. The auto companies are on their last legs. Truly a shame.

The problem with American autos has not been assembly. The problems lay with the corporate mucky-mucks who make the decisions as to what cars they will produce...

Oh, please, B-tone. American cars have been junk for years.

The Japanese beat the americans first on price, then on quality. I've owned both. The Jap cars are light years ahead of the americans, in terms of quality. To a lesser degree, so are the Europeans.

If the american mfrs haven't been building the right kind of cars, then why are their biggest sellers the hulking SUVs, crap that they are? Why is the biggest selling single american vehicle the Ford F-150?

And most telling of all, why did the Japanese themselves start building full size pickups and SUVs like the Nissan Armada and Infiniti QX56? Because the public demanded them!

Until the recent runup in oil prices, americans wanted those tanks.

Would you strike for product improvements? Do you honestly think you could entice several thousand workers to jeapordize their livelihood in that scenario? Perhaps if it came down to safety issues - if their vehicles were injuring or killing people owing to shoddy design or engineering. At Burger King, did it ever occur to you to strike or otherwise go against management because your product WAS killing people? Or was that not your responsibility? You place far too much responsibility on the worker.

B

Baritone,

At Burger King, I was a manager, and yes, I knew that selling hamburgers was killing people (after a while, anyway). So I hustled salads instead. I wasn't in the position to organize a union at the store I managed, but I never discouraged that action either and kept silent if workers wanted to organize. And I was always the manager who emphasized the quality of the food over issues like speed.

Entice several thousand workers to jeopordize their jobs by demanding a better product? I'm sorry, Baritone, but demanding the opportunity to make a better product that would outsell the competiton overseas strikes me as enhancing job security, rarther than jeopardizing it. You may wish to explain to this not so intelligent Brooklyn boy why insisting on turning out shit would not jeopardize job security.

Clav, you are being way too simpleminded.

Americans wanted those tanks because American advertising created the desire for those tanks. It's a vicious circle. Americans didn't just think up to want huge cars...that is what what automakers made and sold and advertised and so on and so on.....

How weird you should take such a completely narrow view. Esp. when advertising is such a HUGE part of the corporate game and so much money is spent on telling us what we should want to spend our money on...

Lisa,

Would you object if I borrowed a few of your words and modified them just a little bit?

advertising is such a HUGE part of the corporate [political] game and so much money is spent on telling us what we should want to spend our money [votes] on....

But, we are not to blame.

Dan(Miller)

"Why is the biggest selling single american vehicle the Ford F-150?"

Because F series trucks and the Ranger are some of the only vehicles of decent quality built here. I owned a ranger for a decade as a work vehicle and traveled over 250K very rough miles frequently hauling and towing way more than the recommeneded load without any serious problems. I upgraded to the F-150 and so far (3 years in) it has performed similiarly.

I did get suckered into buying a GM car once thanks to a not so well thought out promotion from GMAC offering to make the first three payments for you. I didn't get greedy and go for six month financing, I chose to pay out over a year making it 25% off price on top of GM's other rebates and haggling. Looking back, it still wasn't worth it. It had major (and lots of minor) problems starting almost immediately at the expiration of the warranty. Cheap plastic parts buried deep in the drivetrain gave out costing thousands to repair. It was designed as a piece of junk barely able to function for 36,000 miles by intent.

Lisa,

It is you who's being simpleminded (and more than a little ignorant of how businesses identify, then meet, demand).

Americans have always driven large cars since WW II; gas was cheap ($.19-$.25 a gallon). As a teenager, I drove a car (1948 Pontiac straight eight) that was a tank and a gas hog (10-11 mpg). I didn't care; I could fit LOTS of my friends in it.

There were small cars available then (Nash Metropolitan, VW Beetle); almost no one drove them. Had there been strong demand for small cars, you can bet that Detroit would have supplied them.

Even when the Japanese cars started arriving, gas was still cheap, and those who bought them did so because they were cheap, not because they were better made. Eventually, the word got around that the Jap cars were better than the american ones, so their sales began to take off, but they weren't building big cars, so demand for big cars shifted to american vehicles, despite their obvious inferiority. Back then, if you wanted a full size pickup (and mini trucks are oxymorons), american was the only option. Experiencing strong demand for large vehicles and very little for small cars (the Japs were already dominating that market), the american mfrs. naturally went for their strength.

Eventually, the Japanese also realized they could sell a lot more vehicles if they made them bigger, and today, much of the production from Japan is every bit as big as Detroit iron, and is seriously eating into the american large vehicle market share, which is another major reason why the Detroit factories are faltering.

As to the efficacy of advertising: it's overhyped by...the advertising industry! Sure, it works, but in my 30 years in the corporate world, I bought a lot of advertising and dealt with a lot of ad execs--the ideas, first propounded by the likes of Vance Packard and others, as to the degree its influence on consumer choices are way overblown. Case in point; the same Japanese auto makers, who practically didn't advertise at ALL for years, and yet STILL wound up eating the gringo car factories' lunch--with quality; and almost entirely by word of mouth.

We are facing Armageddon. After being made to look really stupid by the banks, Congress and the Senate are now getting all balled up about whatever they can imagine and missing a chance to stimulate the economy and keep millions of Americans working. You really have to wonder what evil forces are at work in our government and for whom these people are working.

The American auto industry has stood behind the country for a hundred years through two world wars and these people are hesitating to get behind them and doing their very best to make the economy much worse. They are wondering if they should put millions more citizens out of work and incur costs in the hundreds of billions of dollars in the process. Now is not the right time to make things harder.

They can't get the banks to loan money so when they give the automakers their loans, they should also fund Ford Credit, GM Credit, and Chrysler Financial and mandate that these automaker credit companies give out very low cost loans to anyone who can afford to make the payments.

Link

Still smarting, huh, Dan? Sorry. You lost.

And Clav. It's neither Fish NOR Fowl. It's both. Big cars were the norm. Americans could easily have made smaller cars much sooner. Yes, too, they could easily have made better cars. I can't tell you why they didn't. But it certainly wasn't solely the unions fault... a lot of it was corporate lazines and profit before product.

When Japanese cars came out they were indeed smaller and cheaper which is why people bought them, but when they entered the big car market they advertised like hell, just like the Americans... I too spent years in PR and advertising and you sell what you have: if it's big cars, then you sell big cars.

As for trucks, most people who have trucks don't need them. For those who do, then that is a different story.

The reasons the American automakers are failing are because they built a lousy product, didn't have a long range plan, advertised and sold their lousy product to an American product as the best product money could buy after that was no longer true, caved in to demands by the unions instead of working with unions to build a better car, put greed before innovation, and a dozen other things...

BTW lots of people bought and loved the Beetle (although, for my own reasons, not me) and I don't think I'm naive. Companies can foster demand in many ways. It is NOT simply consumer driven at all. That is absurd. Look at the shampoo aisles. Are consumers clamoring for 100 different shampoos that all do essentially the same thing? Nope. They are bogged down by too many choices. THe consumers aren't demanding more shampoos at all. If anything, they would like fewer choices, or more REAL choices. Same with breakfast cereals. What we need are not 10 different brands of corn flakes all at within 2-10 cents of each other... Those kinds of choices are certainly not consumer driven.

Consumers did not drive the need for big cars. IF the manufacturers had come up with a better mousetrap (ie. a better built, more efficient American car, even smaller) and sold it properly and marketed it right, the American public would have bought right into it. I am completely convinced. You give the public very little credit.

But it certainly wasn't solely the unions fault...

Agreed. I didn't blame the unions; I blamed management. In fact, in my experience, when any company (or industry) fails, it's never (or extremely rarely) the fault of the workers or their unions; they aren't in charge. If a corporation fails, look in the executive suites for the reason. Yes, the UAW demanded excessive pay/benefits for their members, but that's what unions do; it's the fault of management that they GOT all that.

The reasons the American automakers are failing are because they built a lousy product, didn't have a long range plan, advertised and sold their lousy product to an American product as the best product money could buy after that was no longer true, caved in to demands by the unions instead of working with unions to build a better car...

Agreed, and except for the advertising part, pretty much what I've been saying.

You give the public very little credit.

I do. And H. L. Mencken and I are rarely wrong in that regard.

I think the industry should be allowed to crash, but if we're going to bail them out, then everybody above middle management in all three companies, AND their boards of directors should be fired first. Otherwise, we're just pissing the money away.

The response here seems to be all over the map. Clav, it was still the mucky-mucks who made the decisions.

And Ruvy, you are simply out to lunch. Your assumptions about what the auto labor force should do or have done does not align with reality. Few American auto workers would consider it viable to force a 'stop work' action to demand a higher quality product. Yours is a sanctimonious position. But, of course, that's pretty much where you sit regarding just about everything.

"...but demanding the opportunity to make a better product that would outsell the competiton overseas strikes me as enhancing job security, rarther (sic) than jeopardizing it."

That is hardly a given. Consider the American preference for anything "big." One of the reasons that American cars have never achieved the quality levels of most foreign makers is that they could not produce those monsters at prices competitive with the better built, but generally smaller foreign cars.

What I find totally disengenuous is the notion that union workers are accountable for the plight of the American auto industry. There is plenty of blame to go around - to management and, yes, the American consumer.

B

Clav, it was still the mucky-mucks who made the decisions.

Obviously you didn't read any of my comments, B-tone. THAT'S EXACTLY WHAT I SAID!!!

Sheesh...

A full fledge GM bankruptcy might be just the dose of castor oil the economy needs. Some consequences have to start being absorbed - and this company was losing money endlessly for years before the current crisis.

The market says that it's time for GM as we know it to hit the tar pit. They've done completely screwed the freakin' pooch till it's bloody and raw. Time to take Fredo fishing.

Absorbing those workers into new jobs and maybe some of the same ones under new management can be done much better than continuing to subsidize failure, cause that's only going to get you more of it.

Clav: "If the american mfrs haven't been building the right kind of cars, then why are their biggest sellers the hulking SUVs, crap that they are? Why is the biggest selling single american vehicle the Ford F-150?"

Yep, some cars have been popular Clav, but the industry has been turning out plenty of other crap. SUVs ... mother's little tractor, and so many to choose from - where do we start?

The blue-collar buyer holds up the pick-up end of the market, which is huge in the US, but even those folks now realise they need to cut their running costs to save a dollar here and there.

You're right about oil prices though.

Still, someone should've seen this stuff coming and bent themselves into shape accordingly.

The japs have been building quality vehicles, the European industry is holding up OK, and the most lauded US car just now on the market is ... a rebadged Australian Holden (the Pontiac G8, a Commodore with the steering wheel placed on the wrong side).

Seriously though, instead of concentrating on quality and the idea that less is more, the US industry has gone the quantity route, and it has suffered accordingly.

Exports are the key to the future, but the US dollar needs to come down - and check out the competition.

Agreed. I didn't blame the unions; I blamed management. In fact, in my experience, when any company (or industry) fails, it's never (or extremely rarely) the fault of the workers or their unions; they aren't in charge. If a corporation fails, look in the executive suites for the reason. Yes, the UAW demanded excessive pay/benefits for their members, but that's what unions do; it's the fault of management that they GOT all that.

This last bit is the center of the problem with the auto companies. The unions and management are not working in opposition to each other the way they should be, they're essentially in collusion instead. The union bosses are indistinguishable from corporate management and unions have become big business. The actual workers no longer really even figure into the whole process, just like the stockholders.

Dave

Baritone,

Your assumptions about what the auto labor force should .... have done do not align with reality. Few American auto workers would consider it viable to force a 'stop work' action to demand a higher quality product.

There are two things you need to keep in mind in all of this.

1. I said that both management/owners and labor were at fault.

2. My assumptions with respect to labor unions "do not align with reality" because the reality was a work force that simply believed what their union leaders told them - "more". That was reality. This was the philosophy of the cigar rolling Sam Gompers who avoided being called a sociali$t by simply having his workers chant "more!", as though industry was a goose laying golden eggs. In that atmosphere, to expect them to have done a work stoppage to demand a quality product would have been the height of lunacy.

3. I directed you to look at how an alternate group of labor unionists, the West Germans, looked at the picture to see what could have been done. Evidently, you did not think that worthy of your view. Talk of sanctimoniousness.

4. Finally, this whole blame session is an academic exercise - unless someone is in the position of telling potential auto workers that the only acceptable solution for them is a piece of the board and an insistence of high quality. That is a shift in mind set. I do not foresee that - though miracles do happen; for a while, the Saturn was a quality car. Then GM Corporate got their hands on the operation.

This is from comment #30 - and is attached to a true story designed to drive home the real purpose of a union.

Brian: What?! Unions were formed to "protect the employee"!

Ruvy: Very good. The most basic protection the employee has is the status of an employee. In order to retain that status, there has to be a company to employ the employee. If there isn't, the employee is out of work, and is not protected at all.

My father, may he rest in peace, was a card carrying sociali$t. He organized two locals of truck drivers - one as a driver for steam laundries in the 1920's, and one as a driver for a firm that supplied restaurants in the 1930's.

He was the shop steward for the Teamster local at the firm that supplied restaurants with butter, eggs and cheese. He was also the top driver, the one who trained all the others at the company.

One day, the Teamsters went on strike for higher wages. During the week, he walked the picket line with his fellow drivers. But he knew that if the strike went on long enough, the customers he had worked so hard to get for the company, the restaurant owners, would simply find a non-union jobber to replace his firm.

So, on Friday night, he snuck into the store, explained to his boss what he was up to, and that Saturday morning the two of them went out to deliver butter eggs, cheese and other provisions to the customers who had been waiting all week for deliveries. In order to make sure he (and his brother, who he had recruited as a driver) still had jobs, he had to take matters into his own hands, defy the union and see to it that the firm he worked for remained afloat.

I don't kow how often he had to sneak out to do night deliveries with the owner and the owner's son (who he was training to run the company) but the company did stay afloat, the customers were kept, and the drivers did get an increase in pay.

Maybe word got around among the other drivers. I don't know. This all happened before I was born, probably in either the late 1930's or right after WWII when price and wage contrrols were lifted and inflation set in seriously in the States. But the drivers said nothing. They understood that without jobs, their union membership was worth little. My father remained shop steward.

Lisa, Comment #42: Still smarting, huh, Dan? Sorry. You lost. Yep, and thanks for the expression of sympathy. However, I had hoped for a reasoned analysis of why corporate creation of demand via advertising is different from political creation of demand via advertising. Perhaps when you have a few moments you will be kind enough to humor me by providing one.

Dan(Miller)

It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn't have any real effect.

This time it's the car industry.

While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable - so this time let's target unemployment, create AMERICAN jobs and pump up the economy all at one time.


Consider the following:

Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that's not all direct but due to suppliers. GM alone has over 1300 suppliers. (That's a lot of jobs!)

1 in 10 Americans makes all or part of their income due to the automobile industry.

Money turns over 5 times in a year.
Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
(This isn't magic, it's simply how the economy works.)

Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
Foreign competitors have worked off-shore collectively to meet various US gov't. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

Make no mistake; it's no surprise that once again government has been a major part of the problem.

Here's the solution.

Instead of either shipping cases of cash off to car makers; or sending us all another check:

Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that's domestic. (Civic = 70% Ford Explorer=80%)

Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

This would bail out the car industry without giving them a dime directly
Further it would reduce the overall age of the nation's cars which would in turn;
increase overall fuel economy & decrease pollution.

Strengthen the dollar!

Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported ...like gas!


Jobs

Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
That would give the economy good swift kick right where it needs one!

Pays for itself!

Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
What is the income tax on 65,000 anyway?
(Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)


Another Stimulus Package?

I'm sure you'll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV's usually made in Malaysia or some such place.

Dan,

You know, if I had the time, which I don't, because I am swamped with work right now, I might try and try to convince you that Obama wasn't elected by the people because he "advertised" well. The truth is I don't even think, had I the time, I could. I think he got to people in a real way. You clearly don't and won't agree. Can I quote another post and Bono (not Sonny) and say "Nuff said?" 'Cause that is all I can and will do at this time.

Lisa,

If you find the time to read my comment again, you will see that I did not refer to Senator Obama. My comment was broader than that, and I had in mind the political process in general. We "buy*" politicians in much the same way that we buy shampoo, knowing not very much about them other than what their advertisements say; and the advertisements are not very informative. There are differences -- proponents of shampoo do not debate, but then political debates seem to be little more than another venue for talking points. And, of course, advertising takes money. Political advertisers are little constrained by truth in advertising rules, to which commercial advertisers are to a small extent subject.

Still, and as you rightly suspect, I think that Senator Obama used every trick known to commercial advertisers, and did it extremely well. As is customary, he made promises (often rather vague) which will not be kept, just as vendors of shampoo suggest that one's life will be sexier and otherwise better if only one uses the brand of shampoo they are hawking.

Dan(Miller)

*Not all politicians can be bought; many can only be rented.

I wonder if Joanne from Michigan still visits this site. Gov. Jennifer Granholm, the "brains" behind Michigan's economic collapse, is one of the top people in Obama's transition team (specifically, on the economy). I noticed that the Big 3 bailout talk began in earnest right after Obama appointed her.

Dan(Miller) says:

"I don't think the laws on incorporation are all that bad, and I can't imagine how they could be applied overseas in any event were they changed. "

Apparently they ARE that bad, as the modern record of malfeasance and failure indicates. One of the great problems is that corp leaders can accumulate enough egregious wealth to insulate themselves from the corp consequences of their actions. They can merrily skip off to the Caymans and leave the other stakeholders to struggle with the disaster.

What do you recommend to remedy this gross failure of the corp culture?

Clearly, the ancient principle of Noblesse Oblige has been rudely discarded by modern Captains Of Industry. Lacking that, there is nothing to curb their greed and acquisitiveness. As we see.

If this is not changed we certainly WILL see a revolution coming and the imposition of some horrible vicious nightmare such as communism. The advocates of unrestrained market fundamentalism have precluded any other choices through their astute political and propaganda manipulations.

It will be another Dark Age. And all our weapons cannot prevent it, for the change will come from within, just as the $4trillion Bailout Outrage has.

If, during this interregnum of power, the most powerful people in the USA do not come up with or encourage an alternate economic model, then angry villagers will storm the castle with torches. And we all know how that ends.


"Somehow, I can't see in my crystal ball other countries, for example, France, Russia, Spain, China ,et al taking a lively interest in supporting such a thing."

But they've been imitating us for years. They all look to the USA to lead in innovation and self-improvement. Have you been asleep? The election of Obama is just the most recent example of USA leadership, and the rest of the world applauds it! My European contacts make clear that they like th election of Obama because it demonstrates, once again, that the USA can change itself to achieve practical results. By contrast, it is still almost inconceivable that France could elect an Algerian president (even when they privately choose many Algerian intellectuals, writers and journalists).

"Moreover, while stockholders theoretically can control what their corporations do, that simply does not happen where large or even medium-size corporations are concerned."

You're missing the point. GM is controlled by the Operating Officers (Rick Wagonner and his cohorts). They only use their position as shareholders to enrich themselves through stocks as well as salaries and bonuses). The shareholders have as little power as other stakeholders, such as the employees and customers and vendors. Incidentally, if you examine GM debt you'll discover that vendors have a HUGE vested interest in GM because GM management has been very good at screwing vendors with Vendor Banking. Vendors have been operating a "GM Bailout" operation for many years.

"Let's assume that I own a thousand shares in GM (I don't have any, but let's assume that I do), and that I get the fifty or so pages of stuff which accompanies the proxy and notice of shareholders' meeting. How much time would I devote to reading it, analyzing it, and voting, by proxy or in person? The issues are far more complex than in voting for a Democrat or a Republican in a general election, and even with full disclosure, which is provided with even less frequency than in a general election, it would be almost impossible to make useful decisions unless I devoted my life to analyzing GM. Even then, I would more likely than not make the wrong decision. Perhaps if we had MSNBC and Fox News* to help it might be different, but alas we don't."

And you haven't figured out yet that obtuse confusing proxy statements are designed by management just to confuse you, the shareholder, and render you passive? use your brain, man!

The solution to corporate abuse lies in breaking the Operating Officer dictatorship of the BoD, and some kind of reform that includes the interests of all stakeholders in appropriate degree (and that is a problem) so that interests of all the stakeholders are represented.

Lacking that, we have to revive the traditional limitations that were built into the original corporations: market limitations and lifetime limitations.

For example, the original Hudsons Bay Corporation was chartered for 25 years and confined to markets in Colonies, like Canada.

What we have allowed the modern corporation to evolve into is a sort of Frankensteins Monster with terrific power but no programmed-in limitations.

handyguy makes an interesting proposal:

"...spend the money directly on the displaced workers [train them for new jobs], and let the companies go under if it happens."

But the Bush Administration has clearly demonstrated (with the newly re-purposed Bailout) that they have NO intention of helping mere people when they can distribute the money to corporations instead.

And, by spending the money before the administration changes on Jan 21 they will handcuff the incoming administration. The money will be gone. Thence it will take extraodrinary courage for Obama to revoke the Bush Bailout committments and call it off. I expect that will not happen because so many advisors and operatives have put such a premium on stability and trying to maintain stability, though the very idea of stability is an illusion in these extreme circumstances.

I would think that the reason GOP congressmen/senators don't want to save the auto industries jobs would be obvious...

Most union members vote democratic

Authentic Conn rep recommends that we strengthen the dollar, but exactly opposite may be required: Issue new dollars for old and start over again. It's either that or massive inflation. We have had a lot of inflationary pressures pent up for many years, and it's gonna blow someway: better a controlled explosion that a crash.

It almost eliminates spurious inherited wealth.

It's been done by most countries that have encountered our lopsided kind of economy.

Bliffle and Dan - Can't widespread stock ownership and the power of the internet combine to enable stockholders to exercise their power? A lot of small investors are looking at the market with the same fear. They could organize and turn GM into whatever they want it to be. It'd be surprising if they don't. The only barrier that I can see is the amount of ownership through mutual funds, pensions, et cetera. The owner gets the safety of diversification at the cost of direct ownership.

Baronius notes that:

"Gov. Jennifer Granholm, the "brains" behind Michigan's economic collapse, is one of the top people in Obama's transition team (specifically, on the economy). I noticed that the Big 3 bailout talk began in earnest right after Obama appointed her."

This bothers me a lot. In general the Obama administration is starting to look like current operatives of the economy, so they all come to the table with dirty hands.

What we need is New Economy people, who have the credentials and initiative to be willing to forgo "stability" and innovate.

The exact problem with all the Old Economy people is that they have a huge vested interest in 'stability'. Paulson and Bernanke talk about restoring stability.

But stability is a bogus goal, because the old system before stabilization was not doing so good, else we wouldn't be where we are.

Most of these characters only have "hands on" experience (normally highly prized and sought after when times are stable and one wants to move proven skill from one place to another to spread it around) and paper thin academic and theoretical credentials (do you know of any published studies and papers by Paulson?).

What we need is a fresh look at the economy as a whole, and the premises upon which it is built. And little voice for lobyists.

Baronius and Bliffle

I suppose it's possible for stockholders to assert their rights effectively, although as Baronius point out, there are substantial indirect stock holdings in mutual funds, pensions, etc. I don't know what percentage of, for example, GM, these amount to, but suspect it is substantial.

The internet is wonderful, and perhaps could be a force for good in this area. I still doubt that sufficient stockholders would make the effort to bother, even were the information provided to them absolutely clear and unambiguous.

The problem, I think, is not with the laws under which corporations are formed as Bliffle suggests. Those laws are pretty simple. The problem is with securities regulation, which does not make registration statements, proxy solicitations, notices of shareholder meetings and the like understandable. Any competent securities attorney can write such documents to make them even more incomprehensible than they would be without such effort, whether viewed over the internet, on paper or even on parchment.

Ambiguity is, unfortunately, a necessary art form because attempts to be clear and certain would likely produce more litigation than ambiguously written materials. Even with the best of motives, the authors of these things know better than to make favorable claims, particularly prospective claims, because they could in retrospect be deemed misleading. Read a typical registration statement or other such document. The thought which normally comes through is that nobody with the brains of a fermented cabbage would buy the stock.

The attorney-geeks who write that sort of stuff tend to cover their posteriors and those of their clients and, since they infrequently do trial work, have little vested interest in writing clearly, which would do little more than stimulate litigation. In short, there is a Augean stable to be mucked out, and I don't see any significant likelihood of true corporate democracy happening.

Dan(Miller)

bliffle #57:

"handyguy makes an interesting proposal:

"...spend the money directly on the displaced workers [train them for new jobs], and let the companies go under if it happens."

I agree. In fact, here's handy's complete proposal:

"Clavos made an interesting suggestion on here recently....spend the money directly on the displaced workers [train them for new jobs], and let the companies go under if it happens."

I dunno, Dan. The day you lose $70,000 of your retirement savings, and your local bank is featured on the national news - that's the day that investigating your personal finances suddenly seems worth the effort. It's the equivalent of a taxpayer revolt. I mean, people sue McDonald's for making them fat; shouldn't they try to restructure a failing company that they own?

Start a revolution, Bar.

BTW, Bliffle's proposal in #57 is basically what John McCain was proposing during the campaign.

Dave

Thanks anyway, handy...:>)

My pleasure. Always happy to rehabilitate the less objectionable parts of McCain's occasionally sensible policies. Global warming, immigration...and throwing GM to the wolves. [He also used to be good on taxes and on the intolerance of the religious right, but that's ancient history.]

Maybe that's why Obama invited him to Chicago this week.

It would be nice if the Israelis could contibute to the bailout of American auto firms - but they're too busy planning to expel Jews from Hebron (hint, hint, story in pending...)

I thought McCain had a killer campaign point when he advocated direct support to homeowners, but what I disliked was that (in those devilish details) what he really advocated was direct aid to the immediate lenders to busted homeowners. This was no real help at all for homeowners, and most of the immediate lenders had already skated by packaging the loans into CDOs.

Ruvy -

This is off-topic, but I see you're mentioning the removal of more Jews from Hebron. I was wondering if you'd give me some background on your point of view.

The story, as I understand it, is that before WWI, England had already promised the Palestinians the homeland where Israel now is, and that the reason why England decided to give the land to a new Israel was because of a certain chemist named Chaim Weizmann who, by developing synthetic cordite, saved the British fleet in WWI and thus saved England...and by logical extension, probably saved the war for the Allies. The Crown then offered Weizmann anything within their power to give, and he asked for a homeland for the Jews. What could they do? The Crown had already promised the land to the Palestinians, but Weizmann had saved England...so the path was set that would eventually become the nation of Israel...and it would also become what's known as the 'twice-promised land' to the Palestinians.

The above was from Richard Rhodes' Pulitzer-Prize-winning history, "The Making of the Atomic Bomb" - VERY strongly recommended (and really puts into perspective how Hitler's persecution of the Jews actually enabled the Manhattan Project).

I can see the Palestinians' viewpoint...but I don't think England had a choice in the matter.

But by the same token, even though Israel is surrounded by enemies who seek her death, would it not be pragmatic to go back to the original borders if for no other reason than to take that excuse away from those who were driven away from lands taken in the '67 and '73 wars? Israel has a preponderance of conventional force and up to 200 nuclear warheads - NObody is going to mess with her, not seriously.

The greatest amount of (non-religious) heartburn among the refugees is not that Israel occupies what she was granted just after WWII...but that Israel still occupies lands taken during the wars.

IMO, if you want peace, give them back their lands. You have the preponderance of force, the nuclear weapons, the (often questionable) backing of other nations including the U.S., and a strong economy.

But that's my opinion, and I could well be wrong. What's your side of the story, Ruvy?

I was just thinking...I keep seeing these ads for payday loans, where all you need is the title to your car. You even get to keep your car. So why doesn't GM produce a bunch of cars, and take out loans on them? Or better yet, they could build cars and sell them, and then they'd have the money to pay their bills.