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So typical-Obama auto team drives imports

 
 
Bi-Polar Bear
 
  1  
Reply Wed 25 Feb, 2009 09:32 am
no matter what happens or how it shakes out there are going to be cars... some of them will be made here. they will be bought and driven, maintained and repaired. Maybe not on the scale when our economy peaked...but it will happen.
Setanta
 
  1  
Reply Wed 25 Feb, 2009 09:35 am
@Cycloptichorn,
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It seems to me that management has done a pretty shitty job of negotiating with the unions these last 50 years or so, if they've let things get out of control to this point.


The reason for my comments on labor-management relations in the auto industry from the late 1940s to the 1980s was that i see this as less a case of letting things get out of hand as of an arrogant attitude that Detroit could sell the public whatever they produced, every two years, at the highest price the market would bear, which gave management no incentive to get into the trenches and do some hard bargaining over UAW packages.
0 Replies
 
Setanta
 
  1  
Reply Wed 25 Feb, 2009 09:37 am
@Bi-Polar Bear,
Oh yeah . . . i see no reason to cry over the failures of Detroit other than that it affects of so many Americans who work hard and bear the brunt of criticism for Detroit's failures. I don't miss Plymouth or Oldsmobile--i see no reason i would miss Chevy, Ford or Chrysler.
0 Replies
 
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 12:56 pm
@Setanta,
Setanta wrote:
What's is this "we" crap?


I was referring to the country, which is not debating "dealership" bailouts but rather that of the manufacturers of the automobiles. And in said debate, when the profit margins of the manufacturers come up I find dealership profit margins irrelevant. I feel that their fortunes are largely linked to that of the manufacturers they distribute for and that their financial state is not really the problem we (as a country that is considering using public money to intervene) are facing.

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Have you got a mouse in your pocket?


Do you miss the schoolyard playgrounds so? You brought up dealership profit margin in the middle of a discussion about manufacturer profit margin. This is irrelevant to the "we" who will pay for the bailouts to manufacturers and the discussion about the manufacturers' labor costs and profit margins.

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I am not obliged to restrict my observations to the points of view which you wish to pursue to the exclusion of ideas which occur to me.


And I, in turn, am under no obligation to refrain from opining as to their irrelevance and nonsensical nature.

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The dealerships sure as hell won't be around long if the auto manufacturers go out of business.


Which is why "we" are not talking about bailing them out and why "we" are focused on the manufacturers.

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You choose to focus on labor costs as it relates to the profit margins of the manufacturers.


Naturally. The country is debating bailouts to the manufacturers and not the dealers. We certainly could focus on the dealers, but that won't solve anything.

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One could as easily point out that executive salaries and perquisites are "not small when it comes to profit margins."


The executive compensation, despite being exorbitant and something I fully support reducing as well, small (by my estimation) when it comes to the profit margins per vehicle or when considering the overall financial health of these companies.

You claim the executive compensation is not relatively small to profit margins, so what percentage of their losses does the executive overcompensation represent? My research has led me to believe that the executives were overcompensated by an insignificant amount in comparison to the billions per month that these companies are losing.

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One could as easily say that the wage and benefits packages of steelworkers, or of parts manufacturers employee wage and benefit packages matter.


If it's not clear by now, I find the facility with which someone can make a claim less relevant than the veracity of the claim. It's abundantly clear that someone can easy say just about whatever they want, but that doesn't make it relevant or even true.

So if these are relevant factors, then what is the basis for this claim? How are these not issues faced by their competitors?

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One could as easily say that the salaries and perquisites of the executives of steel manufacturers or parts manufacturers are not small when it comes to profit margins.


But how is this a matter that uniquely affects them and not their competitors? If their competitors face the same issues I don't see how this is a competitive disadvantage to the manufacturers we are providing aid.

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It is a choice to focus on employee wages and benefits packages among a host of cost factors when discussing any value-added business.


Just as it is to focus on dealership profit in a discussion about manufacturer profit. But some choices are better than others.

If you think there's anything in the "host of cost factors" that is more relevant I'd be happy to see the numbers. If Detroit can be saved without bringing their labor costs down I'd be very happy. However I don't think it makes sense to pour good money after bad and I believe that their labor costs and obligations are the single largest impediment to their financial health. If there are other factors you think are more pertinent, then I'd sincerely like to see the case made in concrete terms instead of generalities.

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Once again, the dealerships won't be in business long if the manufacturers go under.


That's why the focus has and should be on the manufacturers and not the dealers. The problem isn't the dealers, and their profit margin. It's the manufacturers and theirs.

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Many dealerships are owned in part or wholly by the auto manufacturers, and their relationship with dealerships of which they own no part is still crucial to moving the inventory they have created based on their projections about how many cars to manufacture based on estimates of how many cars they can sell, either through dealerships they own in part or wholly, as well as dealerships of which they do not own no part.


Ok, so you're fixated on the dealers. By all means focus on them. What now? What's the dealer-centric solution to these problems?

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Can you come up with a way they (Detroit, not the dealerships mind you) can make a profit per vehicle at their current labor costs?


Sure, they need to produce a product which the consumer will either find as attractive as or prefer to the product produced by Japanese, Korean and German manufacturers.


At present they product cars at a higher labor cost that are less attractive than the competitors. They do so while paying about the ideal profit margin per car over what their competitors do for labor and benefits.

If they are able to match their competitors' quality how are they going to compete with them on cost when they eat up their profit margin by inordinate labor costs?

Show me the numbers. Even with the wishful thinking of them suddenly being able to compete with their competitors in quality this does not explain how they are to compete in price and value while paying higher labor costs. Given that the profit per vehicle is slim (they should be estatic if they can get to $1,000 per vehicle) I don't see how this addresses the very basic value issue if they are paying around that much more in labor obligations.

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As for the rest of your comments, once again, you might just as well focus on the cost of steel or parts...


But why? Is this just random scatter shot? My understanding is that those costs are shared by their competitors, and would thusly not represent any competitive disadvantage to them.

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You might just as well focus on the cost of management in terms of their salaries, benefit packages and perquisites.


I have no problem with doing so, and I think the compensation of all involved should be reduced either through bankruptcy or as negotiations in the bailout packages. But if you've been paying any attention you'd note that their compensation has already been capped at $500,000 and any shares they receive as compensation has restrictions on them tied to repayment of the aid.

By all means focus on this. Where is the solution to be found here?

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To hammer the point home, they are in this mess because of their own arrogance, which seems to have prevented them from taking the steps necessary to compete effectively with Japan, Korea and Germany in a more timely manner.


No matter how you want to characterize the nature of their problem, the numbers point very clearly to allowing labor costs to spiral as a key factor in their inability to run a profit. So sure, we can call them arrogant and incompetent all we want, but they still need to lower labor costs if they want to compete with their less arrogant and more competent competitors who are not paying as much in labor costs.

No matter what characterization one prefers, they still pay about what they should be profiting per vehicle in labor costs that exceed that of their competitors and this is a significant impediment to their ability to turn a profit.

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You can call the union costs overcompensation, and i don't necessarily disagree, which is why i reviewed the history behind the large wage and benefit packages which became the norm in the auto industry (and which, given the historic relationship between the auto industry and the steel industry, also accounts for the expensive wage and benefit packages which long obtained in the steel industry). That does not change, however, the basic fact that the Detroit manufacturers (in all their locations, of course, in the United States and Canada) don't compete well with the products the Japanese, the Koreans and the Germans offer here. If you choose to focus on labor costs, while ignoring the costs of steel and parts, and the cost of bloated management, that's fine by me, but don't expect that you are somehow entitled to insist that nothing else if as important, or that labor costs are solely responsible for their failure to make a profit.


If you'd like to insist that the cost of steel and parts is important then how about starting by explaining how this cost is any different to them than it is to their competitors?

Show me the numbers. Show me how the "cost of steel and parts" can make them profitable. If we focus on this instead, what is the proposed solution?

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Detroit has done a lot to become more competetive, but they've got an uphill battle to overcome decades of customer disenchantment with their products and services. It will be a long haul, and making organized labor the villain of the piece will do nothing to restore the confidence of the consumer in the auto manufacturers, and will do nothing to make their offerings more attractive to the consumers.


Nowhere have I made them the villain. They are entitled to whatever compensation they can get on the market and of all the dogs in this fight they are the ones I'd most like to see protected after the general American taxpayer. But being overpaid can be worse than being underpaid, and if this labor cost is really not tenable then it is a waste of taxpayer money to give them bailouts without such financial restructuring.

If their compensation exceeds what the market can support, then insisting on it is no good for them either, they have every right to do so, but we have every right to be concerned about the fiscal health of the companies we pour public money into. And these companies don't look to be able to compete well with the additional labor burden, and the longer the negotiations drag on with the laborers the more harm will be done to the public perception of their product.

They got a sweet deal and I understand wanting to hold on to it. But if those companies collapse then the deal goes away. It would behoove them to help find ways to contribute to making these companies financially healthy if we are to bail them out.

I consult for a company receiving no public funds, and I willingly accepted a significant reduction in compensation that I have a contract for. The reason is that it is futile to insist on my agreed upon compensation in this market. I undertand that the company is undergoing such tremendous financial difficulty that they have to reduce our pay or go out of business. So in a decision between no job and the compensation I negotiated I recognize the new financial reality.

I eat my own dog food here. To insist on bubble compensation in a company that will collapse under that burden is anyone's right, but it doesn't make it the wise choice. And if we are going to invest billions of public money into such financially unhealthy companies we have every right to want assurances that they will pursue a fically responsible strategy. Right now I think these companies are better off going bankrupt than fulfilling their previously negotiated labor burden and that propping them up should be conditional on their ability to negotiate compensation levels that allow the companies to compete in value with the offerings of their competitors.
0 Replies
 
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 01:23 pm
@Cycloptichorn,
Cycloptichorn wrote:
I hate this attitude which says, 'well, Ford is losing Billions per year, so cutting executive pay won't make a difference.'


Ford isn't asking for public money yet. If they do I'm fine with limiting their pay, but no it won't make a significant difference to their bottom line or make them healthy.

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Bullshit. It does make a difference. It gives the guys at the top an incentive to actually improve the situation.


I'm fine with the public imposing their conditions on their pay if the public is footing the bill but the value that this "incentive" provides is nebulous outside of the company's public relations.

If their companies go under, the executives lose their compensation and are left to the market's valuation of them after a failure. If they leave their companies they are in the same boat.

I'm fine with limiting their pay, but it's not going to solve anything and the UAW is pointing at it to deflect from the pressure to make concessions themselves. It's not an either or. It's not the upper class versus the lower class. The whole company is going under.

As a matter of principle I think corporate leaders should always reduce their pay if they require that of their employees, but from the perspective of our investment in these companies it's a very small issue that does not directly threaten their viability, while I believe that their labor obligations is something that does.

My focus on the labor obligations is not borne over any preference for the "fat cats" over the "laborers" but rather that I find their labor costs to be more financially threatening than their executive compensation and thusly find it more threatening to our public investment.

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As it exists right now, you can get hired into a top position at these companies, not do a damn thing to make them any leaner or meaner, and still walk away with millions of dollars. It's a perverse situation.


Well, it's also not as simple as that. One of the reasons they have exorbitant pay is due to the risk associated with letting anyone walk into those positions. While it's true that there are many able individuals who can do their jobs for far less these companies are risking a lot with their choices in executives and tend to minimize this risk by going for known qualities.

The nature of this is that they tend to shop for the stars at other companies, that are already doing well. They don't look for their CEO on monster.com, they pay significant money in the process of acquiring them and frequently coax them out of already well-paying positions.

Now when the company fails, it's natural to blame the leaders, and want their heads. But get too carried away and you may be doing more harm than good. A general restriction on their executive pay doesn't come without risk. Some CEOs are good enough to pull companies out of messes like this, but with the executive pay restrictions these companies would have a harder time finding these executives without a large risk on less proven management.

While the CEOs are failures attacking the pay makes sense, but there are superstar CEOs out there as well who are worth more than these companies can now pay for their services. I guess what I'm saying is that the right CEO is worth a lot, and while it's easy to make the case that these aren't the right guys a crude limit on what these companies can pay for those positions will necessarily make it harder for those companies to pursue better leadership.

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I also don't understand why the Unions are the devil and the management is presented as victims. It seems to me that management has done a pretty shitty job of negotiating with the unions these last 50 years or so, if they've let things get out of control to this point.


It's only this way if you insist on seeing this as a matter of classicism. I think what should matter the most to the public investment is the viability of the companies we are investing in. There's no point in pouring money into them if they will go under as soon as we stop. The executive compensation just doesn't directly threaten the viability of these companies, while their labor obligations might (I believe they do) and that's the motivation for my personal focus on the labor obligations. I think the executive pay limitations are about a wash for the company and they are already a done deal. If we focus on this further what solutions are we hoping to extract?

I think we can get these companies to break even with a reduction of labor costs and the closure of some of their "peanut butter" strategy of spreading their brands too thin. I don't think we can reduce the risk to our investment any further with a focus on executive pay.
Cycloptichorn
 
  1  
Reply Wed 25 Feb, 2009 01:43 pm
@Robert Gentel,
Quote:

Now when the company fails, it's natural to blame the leaders, and want their heads. But get too carried away and you may be doing more harm than good. A general restriction on their executive pay doesn't come without risk. Some CEOs are good enough to pull companies out of messes like this, but with the executive pay restrictions these companies would have a harder time finding these executives without a large risk on less proven management.


I disagree. The 'proven management' currently in place in many different industries has shown itself to be a farce. The theory you are putting forward is not currently being supported by the evidence available.

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The executive compensation just doesn't directly threaten the viability of these companies


Once again, I disagree. The exec. compensation levels 100% threaten the viability of the companies; not b/c of how it affects the overall bottom line, but how it affects the decisions made by the management all the time.

As I have said before, when a single year or two years of salary are enough to set one up for LIFE, there is no incentive whatsoever for the management to manage the company safely. They will be fine either way. It encourages them to take greater and greater risks in the name of short-term profits. And this is exactly what we have seen in the last decade.

Without reforming executive compensation, we will not achieve success in reforming these companies and industries.

Cycloptichorn
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 01:54 pm
@Cycloptichorn,
Cycloptichorn wrote:
I disagree. The 'proven management' currently in place in many different industries has shown itself to be a farce.


Can you explain? My point isn't that they are proven to never fail, just that they have verifiable experience in the roles and are a known quality to a greater degree than trying out a brand-new CEO.

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The theory you are putting forward is not currently being supported by the evidence available.


I'm not sure I've expressed it clearly then, because it's an unremarkably simple theory:

The market for individuals with previous CEO experience is small, and the importance of a good selection is large. Due to these two simple factors, their compensation is driven up, as there is less risk to overpaying a CEO in a company that size than there is of picking the wrong CEO.

It certainly doesn't mean the right CEO is always picked, it aims to explain the relationship of risk to executive compensation. You shouldn't just focus on them being overpaid, as the larger risk to the company is having the wrong guy at the helm.

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Once again, I disagree. The exec. compensation levels 100% threaten the viability of the companies; not b/c of how it affects the overall bottom line, but how it affects the decisions made by the management all the time.


Their compensation is still not a direct threat, even if this is true. But I don't think it is.

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As I have said before, when a single year or two years of salary are enough to set one up for LIFE, there is no incentive whatsoever for the management to manage the company safely. They will be fine either way.


By this reasoning how do they have any more incentive with the limit on their pay? They should already be set for life from their previous years of work and it should make no difference either way right?

Their ability to draw these kinds of salaries is going to be somewhat dependent on their ability to pull these companies out of the mess as there is some relationship between their perceived value on the marketplace and the performance of their previous companies.

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It encourages them to take greater and greater risks in the name of short-term profits. And this is exactly what we have seen in the last decade.

Without reforming executive compensation, we will not achieve success in reforming these companies and industries.


I think this is just instinctive identity politics at this point then, because they are already at $1 salaries voluntarily, capped at $500,000 as a condition of the bailout, and you still are talking executive pay reform.

I think this is a more general beef you have with executive pay than anything specific to the challenges these companies face. Traditionally the consequence of said risks would be to allow the companies to fail. In regard to the auto industry I've always favored that approach. But now we have their pay capped, and we are likely to spend billions and billions more into these companies. Do you still want to insist on discussing executive pay when any pressure to reduce their labor costs comes up? I really don't think you do, I've seen you express the need to address these labor costs elsewhere.
Cycloptichorn
 
  1  
Reply Wed 25 Feb, 2009 02:02 pm
@Robert Gentel,
I think you fundamentally misunderstand how these companies got into the problems they are in, Robert. They did so because of poor decisions of managers who were primarily interested in short-term profits over long-term stability of their companies. This is directly the fault of those who are at the top of these companies.

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By this reasoning how do they have any more incentive with the limit on their pay? They should already be set for life from their previous years of work and it should make no difference either way right?


Absolutely not. Executives who make millions of dollars per year, tens of millions in many cases, face no pressure whatsoever to keep their company afloat.

Scenario A - Exec A makes 15 million a year and runs his company into the ground after 3 years on the job. He doesn't give a damn b/c he's got more than 20 million in capital sitting around, enough to retire and never work again.

Scenario B - Exec B makes 300 thousand a year and runs his company into the ground after 3 years on the job. He is now in trouble, b/c he has a poor track record of leadership and has to find another job, not having enough saved up to retire on.

Which scenario do you think is more likely to lead to leadership which will not run the company into the ground? You only can say 'A' if you think that paying people more money honestly gets better leadership. I contend there is very little evidence this is true, and instead salaries have risen for a variety of other reasons, but primarily: because the execs CAN demand higher salaries, they have done so, and as they run each others' companies, the old-boys network keeps the salaries high.

Cycloptichorn
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 02:19 pm
@Cycloptichorn,
Cycloptichorn wrote:
I think you fundamentally misunderstand how these companies got into the problems they are in, Robert. They did so because of poor decisions of managers who were primarily interested in short-term profits over long-term stability of their companies. This is directly the fault of those who are at the top of these companies.


Why do you think I fail to "understand" this? Let's pretend I'm completely on board with this, how does that change anything I've said?

Their pay is already reduced and capped, and how does this make the labor costs any less of a competitive disadvantage?

I have no love for these executives, and as I've long said I'd rather their companies go bankrupt before we bail them out than afterward but I don't get why discussing the fundamental competitive disadvantage these companies face due to labor costs and obligations reflect in any way on the culpability of the executives. Is this just one of those tone things where I'm not bashing executives enough while I discuss labor costs? Something that can be remedied with a dash of "fat cat" here and "greed" there?

If there's something concrete that you propose I'd like to see it but I'm not good at that slogan kind of thing.

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Absolutely not. Executives who make millions of dollars per year, tens of millions in many cases, face no pressure whatsoever to keep their company afloat.


Well I disagree with this reductionism but I still don't see how this isn't a generalized executive pay qualm you have that should already have been addressed to your satisfaction in this case.

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Which scenario do you think is more likely to lead to leadership which will not run the company into the ground? You only can say 'A' if you think that paying people more money honestly gets better leadership.


I personally think it could go either way. I don't think making $300,000 a year is any more a guarantee of competence and motivation than paying millions. I think this tends to be a very personality oriented thing and that the motivated and competent individuals will tend to be so at either pay range. You'll just have higher chances of securing and retaining them with the larger compensation as it's a marketplace where others are also interested in these same qualities.

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I contend there is very little evidence this is true, and instead salaries have risen for a variety of other reasons, but primarily: because the execs CAN demand higher salaries, they have done so, and as they run each others' companies, the old-boys network keeps the salaries high.


Ok, now let's connect the dots to our current state of affairs with the auto industry. I advocated a focus on the labor costs, you seemed to resent this in favor of a focus on executive pay. So what do you want to do about it before we can get to the labor costs you already agree need to be reduced?

They are at $1/year right now. Capped at $500,000. Shares come with strings about being able to pay the public back.

What's your point? If we focus on this issue, does that just mean we are going to talk in generalities about executive pay or is there a solution that you are getting to? I'm more than willing to be convinced by something reasonable, but I just don't see where you can be going with this.
Setanta
 
  1  
Reply Wed 25 Feb, 2009 02:22 pm
I was unaware that we were conducting the symbolic debate of the nation, and i find it pretty ridiculous that you wish to wrap your take on this topic in the flag of national opinion, when i have no reason to assume that your point of view is representative of the national point of view. I brought up dealerships because the manufacturers can't be profitable unless dealerships can sell their cars, and the dealerships can't sell the cars if they don't have a competitive product in the eyes of the buying public. I made a reference to the extent to which labor costs affect the profits of the dealershp because it provides a dramatic example of the proportion of profit labor costs represent at that level, not because i was suggesting that "our" object is to bail out dealerships. In contrast, i find your focus on the cost a labor as a function of profitability to be nonsensical when focused on to the exclusion of the costs of steel, of auto parts manufactured for the auto makers, of the costs of executive pay and benefits, and of two ultimate issues, being the "saleability" of the models offered, and the expectations of the auto makers of their ability to sell the product. Projecting and planning for 18,000,000 sales in a model year only becomes disastrous for the auto manufacturers in an econcomic downturn if they have already overextended their credit and are not providing value for money in the eyes of the public. If the public had the same confidence in the products of GM, for example, as they do for Honda, then a projection of sales in those numbers, even if unrealized because of a sudden economic downturn, would not have been as disastrous for GM. If the auto makers had been plowing a reasonable amount of their profits, when they were making profits, into pension funds, which they manage themselves, and had been managing them prudently, their "legacy" costs would not now be the burden to them that they have proven to be. It is inescapable that poor management is the foundation of the crisis in the auto industry today, whether it is the management of their pension funds, the management of their manufacturing enterprises, the management of their logistical and strategic resources for any given model year, or their design management's success in producing a product the public will want to buy.

When i wrote:

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You choose to focus on labor costs as it relates to the profit margins of the manufacturers.


. . . it wasn't about the profits of dealerships, it was about your choice to see labor costs as the cause of the loss of profitability on the part of the manufacturers. As for the cost of management, everything i've read over recent months equates in scale the cost of management salaries and benefits to the costs of assembly workers pay and benefits. I have not said that executive compensation is more important than the cost of assembly workers' compensation, i'm just saying that it is as significant as the latter. I also haven't suggested that costs for steel and parts do not play an equivalent part in the profitability of the competitors, because at base, my point is that Detroit is suffering because it does not compete successfully with the competition by Japanese, Korean and German companies, whether those vehicles are manufactured in North America or not. Detroit is suffering from two factors, the mismanagement of their resources (i.e., in providing for "legacy costs," in logistical deployment for any given model year); and their failure to manufacture a product which compete successfully with the "outside" manufacturers.

Once again, i'm not focusing on dealership profitability. Once again, i brought it up as a means of illustrating the proportion of profits represented by labor costs.

I haven't said that Detroit can be saved without bringing labor costs down. I have pointed out that an equivalent to labor costs is management pay and benefits. If you assert that this is not the case, if you continue to assert that assembly worker labor costs is the crucial factor, rather than management costs, i'd love to see the figures. I'd love to see you make that case in concrete terms rather than generalities. I also brought up the cost of steel and auto parts because, if labor costs are so crucial in the profitability of the Detroit manufacturers, then it would be reasonable to dicuss those labor costs, too. I've not said that there is a "dealer-centric" solution to these problems. I mentioned labor costs as a factor in dealership profits for illustrative purposes, and you've become obsessed by it. It is hardly my fault if you want to hammer on the matter, and i was unfortunate enough to think your obession merited a repeated response. If you didn't keep bringing it up, if you did not keep hammering on it, it would simply remain what it initially was--a means of putting labor costs in perspective as a function of profitability.

If you contend that "the ideal profit margin" for Detroit cars is exactly equal to the diffrence in labor costs between what Detroit pays and what the "outside" manufacturers pay, i'd love to see that in concrete terms, and not just generalities. At no time have i stated or suggested that the Detroit manufacturers would be able "suddenly" to compete with the outside manufacturers, and, in fact, i was very explicit that it will be a long, hard road. If your $1,000 figure as the beloved profit and the increased cost per vehicle due to labor costs is accurate, i'd love to see the evidence. I don't deny it's there, but i am pointing out that you are dealing in generalities as fast and furiously as you allege that i or anyone else is.

I have been paying attention, by the way, and discussing what executive compensation packages will be is not an explanation of how profitability eroded before such a cap was in place. Which is why i pointed out that it will be a long, hard road.

As far as allowing labor costs "spiralling," one of the main points of my original post was why, historically, this happened. Once again, i'm not saying that labor costs are not a significant factor, i'm just pointing out that it is not necessarily justified to characterize it as the only problem, focusing on it to the exclusion of all others. Show me the numbers. Have you looked in detail at management salaries and benefits as a function of the bottom line in Detroit? To use one of your points of view, perhaps you can explain to me why Honda remains profitable when GM doesn't, when Honda manufactures in the United States and Canada. In addition to having made deals with the UAW and the CAW, Honda also brings in Japanese management teams who recieve far, far less compensation than do American and Canadian executives. I can't provide evidence, so i won't insist upon it, but i believe i am correct in stating that they have a much smaller management team in their North American operations than do the "Big Three." They also manage their assets more effectively--Ford is not a part of this bailout right now because they borrowed money as a capital hedge against hard times before the credit economy went to ****. It might have been preferable for Ford to have built up a war chest out of profits, but it is still a better management picture that they had the sense to immunize themselves against a credit crisis before one actually arose. In that respect, c.f. DD's remark to the effect: "The driving force for all decisions at a publicly-traded company is the stock price, not long-term health." I would point out at this point that one might amend that to read "The driving force for all decisions at American publicly-traded companies . . ." etc., etc.--Japanese companies consistently plan for the next decade, the next half century, the next century, and they typically sequester resources for the express purpose of building a hedge against future examples of "credit squeeze." It is also unrealistic to compare the profitability of Japanese companies to American companies because they operate on an entirley different basis in Japan and in their manufacturing operations in other countries outside North America than they do here. Their assembly operations are the show pieces of their industry, but they save enormous amounts of their cost because their costs in Japan and other operations outside of North America pay far less for steel than they pay here or than Detroit does. Which is why the cost of steel within North America is a significant factor of an "unlevel" playing field. The Japanese corporations can not only save on economies of scale in their operations outside Norht America, they can bolster their overall profitability in markets outside North America, where Detroit does not compete. In Japan and in operations outside North America, the Japanese obtain many of their parts, especially those which don't require casting or milling, from piece-work operations whose cost per part are risible small fractions of the cost for the same types of parts in North America. If Detroit was positioned as well outside North America as the Japanese are, it might be worthwhile to compare them as though it were an apples to apples comparison--but it's not. The Germans have a generations long tradition, stretching back at least to the mid-1950s, of cooperative negotiation between labor and management. When VW wants wage concessions from their unionized employees, they can get if and when they offer concessions in management costs and employment of an equivalent nature. When was the last time you heard of a Detroit company cutting management positions in the same proportions as they lay off assembly workers? It is also a factor that in both Germany and Japan, the domestic steel industries are subsidized by the government. So long as they aren't selling that steel here, it is not a subject for trade negotiations or protests to trade regulating bodies. That means that the costs of steel and parts for German and Japanese companies on the cars they import are not equivalent to the costs to Detroit. The same goes for auto parts in Japan where the working conditions are appalling and the compensation pathetic.

My original post was largely a review of the historical reasons for the generous compensation packages received by assembly workers in North America. I don't preclude reduction in salaries for auto workers as one of the solutions to the current problems they have. I simply don't see it as the only solution. As for letting them collapse, that doesn't seem such a bad idea to me either, except for those pesky old workers, who, if they lose their jobs, aren't going to be buying other consumer products in this economy, and there are enough of them that it would be a major hit to the economy. Negotiating realistic compensation packages is reasonable, and it can be done on the Canadian model, where the CAW has agreed to lower entry level wage and benefits packages, or on the German model, where labor gives up wages and benefits on a "tit for tat" basis with management pay and benefits cuts. The "legacy costs," though, won't go away, and are in greater measure a function of the bad economic situation which drastically reduced the value of their investments, and their consequent ability to pay out benefits. In Canada, both the Province of Ontario (where almost all auto manufacturing operations are located) and the Federal government have been negotiating with "the Big Three" over bail-out packages (loans and loan guarantees), but hanging fire until they see what the eventual American package will be. Quite recently, GM began to whine about their "legacy costs" while coming hat in hand to Queen's Park. Dalton McGinty (the Ontario PM) has told them (in so many words): "Fine, we can come up with four or five billion to bail out your pension funds for CAW workers, but you can go whistle for loans or loan guarantees if we do that." Far more than current labor costs, the legacy costs are putting the hurt on Detroit, and nothing in the way of cutting labor costs right now is going to "suddenly" help that situation.
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 03:36 pm
@Setanta,
Setanta wrote:
I was unaware that we were conducting the symbolic debate of the nation, and i find it pretty ridiculous that you wish to wrap your take on this topic in the flag of national opinion, when i have no reason to assume that your point of view is representative of the national point of view.


I have no need to wrap myself in any flag. I am perfectly fine telling you that bringing up the dealership profit margins in the middle of a discussion about manufacturer profit margins is irrelevant on my own.

Quote:
I brought up dealerships because the manufacturers can't be profitable unless dealerships can sell their cars, and the dealerships can't sell the cars if they don't have a competitive product in the eyes of the buying public.


The profit margin of the dealerships is not the problem at all.

Quote:
I made a reference to the extent to which labor costs affect the profits of the dealershp because it provides a dramatic example of the proportion of profit labor costs represent at that level, not because i was suggesting that "our" object is to bail out dealerships.


The dealers' profit margins has no real bearing on the crisis the manufacturers face except in that as the manufacturers go so do the dealers.

So in a discussion about the manufacturers' financial health and profit margins bringing up the dealer's profit margins is not very relevant.

Quote:
In contrast, i find your focus on the cost a labor as a function of profitability to be nonsensical when focused on to the exclusion of the costs of steel, of auto parts manufactured for the auto makers, of the costs of executive pay and benefits, and of two ultimate issues, being the "saleability" of the models offered, and the expectations of the auto makers of their ability to sell the product.


Yeah, you already said all that and I asked you to substantiate your claims.

The cost of materials is not something unique to them.
Nor is the cost of parts, and the same arguments about labor apply here. Many of the suppliers are in the same union.
Nor is the need to make desirable products.
The executive pay and benefits have been cut drastically.

So these are issues all their competitors also face, and even if they are able to make all things equal on these fronts it does not answer the labor burden and the competitive disadvantage it is.

Quote:
If the public had the same confidence in the products of GM, for example, as they do for Honda, then a projection of sales in those numbers, even if unrealized because of a sudden economic downturn, would not have been as disastrous for the auto manufacturers.


This is not true. The union makes it harder for these companies to respond to the market and adjust their costs accordingly as they have negotiated obligations that make workforce optimization difficult. The union doesn't just negotiate their compensation but also negotiate how layoffs can be handled and the auto companies have been wrangling with them for years in their efforts to downsize.

Quote:
If the auto makers had been plowing a reasonable amount of their profits, when they were making profits, into pension funds, which they manage themselves, and had been managing them prudently, their "legacy" costs would not now be the burden to them that they have proven to be.


That may, or may not, be the case but either way it doesn't change the current reality it just seeks to define who to vilify.

Quote:
It is inescapable that poor management is the foundation of the crisis in auto industry today, whether it is the management of their pension funds, the management of their manufacturing enterprises, the management of their logistical and strategic resources for any given model year, or their design management's success in producing a product the public will want to buy.


The only escapism here is the avoidance of a focus on labor costs. I've not defended any of the management of these companies.

Quote:
. . . it wasn't about the profits of dealerships, it was about your choice to see labor costs as the cause of the loss of profitability on the part of the manufacturers. As for the cost of management, everything i've read over recent months equates in scale the cost of management salaries and benefits to the costs of assembly workers pay and benefits.


I'd be very interested in this information, but I've not defended any labor costs, be it of assembly workers or management.

Quote:
I have not said that executive compensation is more important than the cost of assembly workers' compensation, i'm just saying that it is as significant as the latter.


Not in dollars it isn't.

Quote:
I also haven't suggested that costs for steel and parts do not play an equivalent part in the profitability of the competitors, because at base, my point is that Detroit is suffering because it does not compete successfully with the competition by Japanese, Korean and German companies, whether those vehicles are manufactured in North America or not.


So what is your point when you deflect from labor costs to the cost of, to pick one example, steel? I've been saying they that labor costs are the most significant reason for their competitive disadvantage that can be addressed, and you find this "nonsensical" and bring up stuff like steel instead. Laughing

So make your case. How is the cost of steel a more relevant item to focus on?

Quote:
Once again, i'm not focusing on dealership profitability. Once again, i brought it up as a means of illustrating the proportion of profits represented by labor costs.


Well it's not any more useful that way. What "proportion of profits represented by labor costs" are you talking about? If your aim was to illustrate a proportion then what is said proportion.

Quote:
I haven't said that Detroit can be saved without bringing labor costs down.


But you think focus on these costs are "nonsensical". If Detroit can't be saved without bringing labor costs down, then it's very relevant.

Quote:
I have pointed out that an equivalent to labor costs is management pay and benefits.


Where did you point it out? Just by claiming it is so?

Quote:
If you assert that this is not the case, if you continue to assert that assembly worker labor costs is the crucial factor, rather than management costs, i'd love to see the figures.


I've never made such an assertion, and the onus is on you to substantiate your own claim rather than ask me to disprove it's opposite.

I have claimed that the executive (not "management") pay is not hugely significant, and I have no idea what your claim is as you've provided no substantiation for it.

If the managers are overpaid that's a labor cost I support reduction in as well.

Quote:
I'd love to see you make that case in concrete terms rather than generalities.


What case? To try to prove the opposite of your generalized claim? Bring the claim to the table and I'll decide whether or not I disagree with it. It's intellectually lazy to try to goad me into proving its negative.

Quote:
I also brought up the cost of steel and auto parts because, if labor costs are so crucial in the profitability of the Detroit manufacturers, then it would be reasonable to dicuss those labor costs, too.


Only if these costs are significantly different for Detroit than for their competitors. If it's the same then it poses no competitive disadvantage to Detroit.

Quote:
I've not said that there is a "dealer-centric" solution to these problems.


If there is no dealer-centric solution to these problems then I contend that it's far less "nonsensical" to focus on areas where there are solutions to the problem.

Quote:
I mentioned labor costs as a factor in dealership profits for illustrative purposes, and you've become obsessed by it.


You have this ass-backwards. If anything you can say I've fixated on the labor costs. You are the one insisting my focus is nonsensical and bringing up dealers to illustrate "proportions" that you don't provide.

Quote:
It is hardly my fault if you want to hammer on the matter, and i was unfortunate enough to think your obession merited a repeated response. If you didn't keep bringing it up, if you did not keep hammering on it, it would simply remain what it initially was--a means of putting labor costs in perspective as a function of profitability.


I can see the convenience of making it my fault that you keep talking about dealers but do remember that you brought it up and defended it as relevant. You shouldn't suddenly claim it's an obsession on your interlocutor's part if asked to substantiate your claims.

Quote:
If you contend that "the ideal profit margin" for Detroit cars is exactly equal to the diffrence in labor costs between what Detroit pays and what the "outside" manufacturers pay, i'd love to see that in concrete terms, and not just generalities.


I've not made that specific contention (that it's exactly equal). I've contended that it's proportionally similar to what is a healthy profit margin in this industry and unlike yourself I'm prepared to defend my claims or abandon them:

The additional costs:

CNN/Fortune wrote:
A big reason is the cost of labor. As analyzed by Harbour-Felax, labor costs the Detroit Three substantially more per vehicle than it does the Japanese.

Health care is the biggest chunk. GM (Charts), for instance spends $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota (Charts) pays nothing for retired workers - it has very few - and only $215 for active ones.

Other labor costs add to the bill. Contract issues like work rules, line relief and holiday pay amount to $630 per vehicle - costs that the Japanese don't have. And paying UAW members for not working when plants are shut costs another $350 per vehicle.

Here's one example of how knotty Detroit's labor problem can be:

If an assembly plant with 3,000 workers has no dealer orders, it has two options. One is to close the plant for a week and not build any cars. Then the company still has to give the idled workers 95 percent of their take-home pay plus all benefits for not working. So a one-week shutdown costs $7.7 million or $1,545 for each vehicle it didn't make.

http://money.cnn.com/2007/01/26/news/companies/pluggedin_taylor_ford.fortune/index.htm?postversion=2007012611


Now on to what a healthy profit per vehicle consists of:

Car and Driver wrote:
Toyota, the most profitable of all automakers on a per-vehicle basis, increased its profit per vehicle from $1,175 in 2005 to $1,977 in 2006, the report said.

http://www.caranddriver.com/news/car_news/japanese_automakers_lead_in_per_vehicle_profit_car_news


So in a healthy year the most profitable auto maker made $1,175 per vehicle. And in their record year they made close to 2K.

Also in that same article:

Quote:
GM cut its loss per vehicle in North America to $146 (euro106) in 2006 from $1,271 in 2005, mostly because of cost cuts that included the departure of more than 34,000 hourly workers to buyout and early retirement offers. It also is saving money through efforts to design cars and trucks globally, by increasing the number of parts common to all of its vehicles and by purchasing parts on a global basis, Harbour-Felax said.


This is a small sample of the data that leads me to conclude that the total labor costs (including wages, benefits and legacy benefits) is the single largest impediment to their profitability.


Quote:
At no time have i stated or suggested that the Detroit manufacturers would be able "suddenly" to compete with the outside manufacturers, and, in fact, i was very explicit that it will be a long, hard road. If your $1,000 figure as the beloved profit and the increased cost per vehicle due to labor costs is accurate, i'd love to see the evidence.


Does the above suffice or do you want me to include more than just health care benefits?

Quote:
I don't deny it's there, but i am pointing out that you are dealing in generalities as fast and furiously as you allege that i or anyone else is.


I can back mine up. Can you? Show us how what you prefer to focus on can have a greater impact on their profitability than the "nonsense" you claim I'm peddling.

Quote:
I have been paying attention, by the way, and discussing what executive compensation packages will be is not an explanation of how profitability eroded before such a cap was in place.


Yet it is more relevant an area for focus even after it has already been addressed? And the much larger cost that has not yet been fully addressed is nonsensical?

Quote:
As far as allowing labor costs "spiralling," one of the main points of my original post was why, historically, this happened. Once again, i'm not saying that labor costs are not a significant factor, i'm just pointing out that it is not necessarily justified to characterize it as the only problem, focusing on it to the exclusion of all others.


I'm not excluding other considerations, but if they aren't even in the same ballpark as these costs (e.g. executive pay) and we can't do anything about it (cost of steel is going to be roughly the same for all manufacturers) then I'll focus where there's the obvious need to do something.

Quote:
Show me the numbers. Have you looked in detail at management salaries and benefits as a function of the bottom line in Detroit?


I have to some degree, but I shouldn't be doing your research for you. This is your claim, not mine.

Quote:
To use one of your points of view, perhaps you can explain to me why Honda remains profitable when GM doesn't, when Honda manufactures in the United States and Canada.


Lower labor costs is the most significant immediately changable factor.

Quote:
In addition to having made deals with the UAW and the CAW, Honda also brings in Japanese management teams who recieve far, far less compensation than do American and Canadian executives.


I've never claimed that "mak[ing] deals with the UAW" is the problem, nor manufacturing in the United States, so I don't see why those factors are a useful comparison.

Inordinate labor and benefit burden is the difference. Honda just does not share the same costs in that regard.

Quote:
It is also unrealistic to compare the profitability of Japanese companies to American companies because they operate on an entirley different basis in Japan and in their manufacturing operations in other countries outside North America than they do here.


I wish you'd try to substantiate your claims more often. This is false. We can do an apples to apples comparison of only vehicles manufactured in the United States and the difference in the labor burden is still there but I'm not going to do all the work disproving your claims if you aren't going to bother to even try substantiating them.

Quote:
Their assembly operations are the show pieces of their industry, but they save enormous amounts of their cost because their costs in Japan and other operations outside of North America pay far less for steel than they pay here or than Detroit does.


Please substantiate this claim.

Quote:
Which is why the cost of steel within North America is a significant factor of an "unlevel" playing field.


No, I'm talking about vehicles produced in the same country and with the same steel. I have no idea what you are on about so please substantiate it.

Quote:
If Detroit was positioned as well outside North America as the Japanese are, it might be worthwhile to compare them as though it were an apples to apples comparison--but it's not.


This is just not true. They can use the same steel, manufacture in the same country and there's still a very simple difference where Detroit compensates for labor at a much higher cost.

Efforts to obfuscate this very basic fact are futile because some Japanese vehicles are manufactured in the US as much or more than Detroit's vehicles are and the difference in labor costs remains.

Quote:
It is also a factor that in both Germany and Japan, the domestic steel industries are subsidized by the government.


No, it is not. A Japanese company manufacturing in the United States has the same access to the same steel that an American company in the United States has.

If you'd like to make the claim that the problem is the cost of steel then substantiate it. Japanese companies make their vehicles at a lower labor cost in the US. This is not a steel issue at all.

Quote:
So long as they aren't selling that steel here, it is not a subject for trade negotiations or protests to trade regulating bodies. That means that the costs of steel and parts for German and Japanese companies on the cars they import are not equivalent to the costs to Detroit.


The labor cost stands regardless of whether we are talking about imports or domestically produced cars. You are moving the goalposts.

Again: using the same steel, producing in the same country, Detroit pays much more for labor (not steel) than its competitors.

Quote:
The same goes for auto parts in Japan where the working conditions are appalling and the compensation pathetic.


Now you are just making things up. Substantiate this claim.

Quote:
As for letting them collapse, that doesn't seem such a bad idea to me either, except for those pesky old workers, who, if they lose their jobs, aren't going to be buying other consumer products in this economy, and there are enough of them that it would be a major hit to the economy.


A bankruptcy doesn't mean the company has to cease operations. In the last few years this has been illustrated repeatedly by airlines that have gone bankrupt.

A bankruptcy would force the companies to negotiate a new financial reality for all involved (union, executive etc) and force the change we are instead trying to negotiate with them as our terms for our aid.

Quote:
Negotiating realistic compensation packages is reasonable, and it can be done on the Canadian model, where the CAW has agreed to lower entry level wage and benefits packages, or on the German model, where labor gives up wages and benefits on a "tit for tat" basis with management pay and benefits cuts. The "legacy costs," though, won't go away, and are in greater measure a function of the bad economic situation which drastically reduced the value of their investments, and their consequent ability to pay out benefits.


Bankruptcy can significantly change the legacy costs as far as I understand it.

Quote:
Far more than current labor costs, the legacy costs are putting the hurt on Detroit, and nothing in the way of cutting labor costs right now is going to "suddenly" help that situation.


I'm not advocating just cutting current wages. I'm advocating that a precondition to our bailouts is to cut all labor costs. This includes current wages, current benefits, legacy benefits and more. And yes it would immediately help. These companies do not have the money to pay for these financial obligations. With these financial obligations there is a strong possibility that there is no path to profitability.

If these companies want public money to pay the obligations they are unable to then it should come with some due diligence that we aren't just postponing their collapse. And if they aren't willing to concede then let them fall. We can pick them up again after bankruptcy has made the hard concessions for them. But the bottom line is that they are broke and can't pay. We should not lend them money if they aren't going to cut up their credit cards. And if they won't bankruptcy would do it for them without a choice.
0 Replies
 
DontTreadOnMe
 
  1  
Reply Wed 25 Feb, 2009 03:51 pm
@Bi-Polar Bear,
Bi-Polar Bear wrote:

universal health care? why not just open the gates of hell and give satan free reign ?


cheney has already done his duty for his country. can you not let him rest now? Smile
0 Replies
 
Setanta
 
  1  
Reply Wed 25 Feb, 2009 04:15 pm
I don't know why you think you've got a grip on the issue of competition between Japanese auto manufacturers and American manufacturers, RG. In the first place, Japanese cars are imported in to the United States, in addition to those manufactured here. You cannot import subsidized steel into the U.S., but you can import products made from subsidized steel. For that reason, in both Japan and Europe, steel companies not only produce steel for export in facilities separate from those in which steel is produced for domestic manufacture, they usually set those operations up as holding companies to obviate the fair trade issues.

In the second place, Japan competes with American auto makers in North America, but American auto makers don't compete with Japan in Japan. There is nothing like a level playing field in trade with Japan. The Japanese conscientiously exclude American products from Japan.

In the third place, Japanese companies such as Honda and Toyota can remain profitable even if they were to lose money in North America. Their overall profit picture does not depend solely on the North American market. The Big Three have nothing even remotely approaching the volume of sales outside North America that the Japanese do.

You probably aren't old enough to remember this, but in the late 1960s and early 1970s, when the Japanese were making their push to destroy the American electronic consumer goods sector, one of the measures the Congress took was to require that any imported television must have all of the station numbers for UHF and VHF channels printed on the selection knob (cable was almost unknown then). The Japanese didn't miss a beat, they complied immediately with the requirement, and still beat the pants off the American manufacturers. They accomplished this in three ways. The first was that they were conscientiously practicing dumping--they were willing to take a loss for years and years, it that was what it took, to drive their American competitors out of business. But that was not necessarily what happened, because the second thing they offered was quality--my grandmother bought a Panasonic portable in 1971, with the tuning knobs covered with almost unreadable numbers for every channel you could tune in with them, and when she replaced it with a newer model (circa 1976), she gave me the portable. I kept it until i sold it in 1988--and it still gave a great picture, after 17 years, and you could have drop-kicked around the house, and then turned it on to watch the soaps. The third factor was a lack of a level playing field in the competition--American manufacturers couldn't sell their product in Japan.

American companies can produce products as good as the Japanese products, if forced to it, although they'd prefer to continue to sell us over-priced crap. But they can't compete with the Japanese economies of scale, because they are woefully improvident compared to their Japanese competitors, and don't even come close to matching their international markets. Japanese corporations will accept running some of their operations at a loss in order to corner a market. They sequester capital for future need rather than immediately paying out dividends. This isn't unique to them, either--the Hudson's Bay company didn't pay a dividend for the first 56 years it was in operation, at which time it paid a 33% dividend, and continued to pay dividends averaging 15% or better for more than a century. I acknowledge that the HBC was a unique case until well into the 19th century, with only a handful of share holders who were willing to accept that situation--but American corporations don't take a long view, and the Japanese do. And, of course, my point overall is that the Japanese don't play fair. Not much to be done about that.

As for your remarks about legacy costs, you more or less sprung on me the notion that those costs would be curtailed. I'd sure like to see anyone pull that off. I'd be very much surprised if any politician wanted to touch that one. Perhaps the measures you recommend are those you'll take when you become benevolent dictator.
Cycloptichorn
 
  1  
Reply Wed 25 Feb, 2009 04:22 pm
@Robert Gentel,
Robert, to avoid rehashing a long argument, let me sum up by saying that the failures of the auto companies are all failures of their managment.

Legacy costs too high? That's the fault of the management for not negotiating better years ago.

Current salaries too high? See above.

Quote:


I personally think it could go either way. I don't think making $300,000 a year is any more a guarantee of competence and motivation than paying millions. I think this tends to be a very personality oriented thing and that the motivated and competent individuals will tend to be so at either pay range. You'll just have higher chances of securing and retaining them with the larger compensation as it's a marketplace where others are also interested in these same qualities.


Oh, really? Well, in the words of Barney Frank, I'm your new efficiency expert: cut all the executive salaries to somewhere around this level and American companies will save billions of dollars next year with no real drop in performance whatsoever. You don't have to worry about retaining them if they have nowhere else to go.

You know I think that executive compensation should be capped and regulated overall; it is one of the major reasons we find ourselves in trouble today, the unrestrained greed that drives our system and those who continually argue that we should not even attempt to restrain it.

Cycloptichorn
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 04:45 pm
@Setanta,
Setanta wrote:
I don't know why you think you've got a grip on the issue of competition between Japanese auto manufacturers and American manufacturers, RG.


I don't have "a grip" on this, but I certainly have a grasp on it that you so very clearly don't. You don't bother to substantiate your claims or acknowledge when claims you disputed are substantiated so I don't see any profit in continuing on your next red herrings about on trade and protectionism.

None of this changes the fundamental labor cost differences. When all things are equal in those regards Detroit still significantly overpays for their labor and this is a significant part of their competitive disadvantage.

Quote:
As for your remarks about legacy costs, you more or less sprung on me the notion that those costs would be curtailed. I'd sure like to see anyone pull that off. I'd be very much surprised if any politician wanted to touch that one. Perhaps the measures you recommend are those you'll take when you become benevolent dictator.


There's need for a dictator, just a regular old bankruptcy. That you'd rather toss in a dictator argument of this ilk instead of substantiating your claims is reason enough to move on to more profitable discussion.
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 04:47 pm
@Cycloptichorn,
Cycloptichorn wrote:
Robert, to avoid rehashing a long argument, let me sum up by saying that the failures of the auto companies are all failures of their managment.

Legacy costs too high? That's the fault of the management for not negotiating better years ago.

Current salaries too high? See above.


I've made no statement about whose fault it is so I'm not sure what this addresses.

Quote:
Oh, really? Well, in the words of Barney Frank, I'm your new efficiency expert: cut all the executive salaries to somewhere around this level and American companies will save billions of dollars next year with no real drop in performance whatsoever.


I see. I guess there's nothing much more to say about this. I was correct that this is a general executive pay bone you have to pick. The executive pay has already been capped, what's with the resistance to a focus on labor costs now?

Quote:
You know I think that executive compensation should be capped and regulated overall; it is one of the major reasons we find ourselves in trouble today, the unrestrained greed that drives our system and those who continually argue that we should not even attempt to restrain it.


I know your general position on it (and you know I disagree and I was once even able to convince you of my position on it), but I must admit I'm having a hard time reconciling it with this particular subject.

Their pay is already capped, you've said that you think they need to reduce labor costs. So why, when labor costs are brought up, are you back to capping executive pay?

When does the labor costs get it's turn in your spotlight?
Cycloptichorn
 
  1  
Reply Wed 25 Feb, 2009 04:56 pm
@Robert Gentel,
Robert Gentel wrote:

Cycloptichorn wrote:
Robert, to avoid rehashing a long argument, let me sum up by saying that the failures of the auto companies are all failures of their managment.

Legacy costs too high? That's the fault of the management for not negotiating better years ago.

Current salaries too high? See above.


I've made no statement about whose fault it is so I'm not sure what this addresses.

Quote:
Oh, really? Well, in the words of Barney Frank, I'm your new efficiency expert: cut all the executive salaries to somewhere around this level and American companies will save billions of dollars next year with no real drop in performance whatsoever.


I see. I guess there's nothing much more to say about this. I was correct that this is a general executive pay bone you have to pick. The executive pay has already been capped, what's with the resistance to a focus on labor costs now?

Quote:
You know I think that executive compensation should be capped and regulated overall; it is one of the major reasons we find ourselves in trouble today, the unrestrained greed that drives our system and those who continually argue that we should not even attempt to restrain it.


I know your general position on it (and you know I disagree and I was once even able to convince you of my position on it), but I must admit I'm having a hard time reconciling it with this particular subject.

Their pay is already capped, you've said that you think they need to reduce labor costs. So why, when labor costs are brought up, are you back to capping executive pay?

When does the labor costs get it's turn in your spotlight?


I've already said that labor contracts will have to be re-negotiated to ensure the survival of these companies; what more is there to say? I don't blame the unions for driving hard bargains, it's their job to get as much money as possible for their workers. Of course, union leadership is another area where salaries should be capped Laughing

I keep circling back to the executive pay issue, b/c it lies at the heart of our problems, and not just with Ford and Chevy, but the financial sector as well, and likely many other American companies. A system which rewards risk and short-term gain over all other factors is doomed to fail and without reform of this we will just be back at these same problems very very quickly.

Cycloptichorn
Robert Gentel
 
  1  
Reply Wed 25 Feb, 2009 05:03 pm
@Cycloptichorn,
I see. Well I still don't get how it can help the already capped Detroit and I don't really want to turn this into another thread that turns into an executive pay discussion between you and I without starting that way, but have you changed your mind since we last spoke of mandated country-wide capping?

Last I remember you found the argument that increased regulation, legal liability and taxation was a more suitable means to that end (if you want we can do this in it's own executive pay thread as well).
Cycloptichorn
 
  1  
Reply Wed 25 Feb, 2009 05:07 pm
@Robert Gentel,
Robert Gentel wrote:

I see. Well I still don't get how it can help the already capped Detroit and I don't really want to turn this into another thread that turns into an executive pay discussion between you and I without starting that way, but have you changed your mind since we last spoke of mandated country-wide capping?

Last I remember you found the argument that increased regulation, legal liability and taxation was a more suitable means to that end (if you want we can do this in it's own executive pay thread as well).


It's not that I don't accept the merits of increased regulation, legal liability, and taxation; they're just different means of accomplishing something which I feel could be done much more simply just by capping the pay. I find most arguments against it to be unconvincing, but that doesn't mean that I am right and they are wrong.

I agree that we shouldn't screw the thread up though, so I'll drop it.

Cycloptichorn
0 Replies
 
curtis73
 
  1  
Reply Wed 25 Feb, 2009 06:20 pm
@Bi-Polar Bear,
Quote:
gosh, I just like my fords and have never had any problem with them. I didn't mean to be an ignorant faux patriot


I own two fords, a chevy, and a mercedes. I'm not saying its a bad thing to own one, I'm just saying its bad to pound a patriotic chest when you do. Buying American doesn't mean you are supporting American economy, or supporting hungry children in Detroit waving little flags at a parade, it means you're giving your money to a company that flies CEOs in private jets while they go broker deals in Korea for cheaper electronics.
0 Replies
 
 

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