Quote:
Originally Posted by UGAalum94
You didn't really address the issue though. Do you think they can be profitable again? What do you think it will take? Shouldn't the companies be able to show a plan for what they will do with the money?
I don't doubt the effects will be felt all over, but are the Big Three just a jobs program for the workers and the general economy? If so, wouldn't it be better to develop a plan to give money directly to the workers for retraining at companies with a track record of profitability?
I don't want to see them go under and I'm not indifferent to Michigan's immediate problem, but what's the long term plan?
Apparently, the author of the article doesn't think the companies should have to offer one.
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The auto companies were holding their own until the following things happened all at once:
1) Gas prices skyrocketed to over $4.00 causing people to stop buying the SUVs. The auto companies make the cars that people want to buy. People WANTED SUVs. They bought SUVs and big trucks like nobody's business. They didn't do that because other things weren't available. I have also chosen to drive small/compact sedans but most people did not want cars, they wanted SUVs. Men did not want little pick ups, they wanted F350s. GM has spent more money on research and development on alternative fuel cars than NASA spends a year. They have gone to the Bush administration repeatedly to encourage the infrastructure required to move to these alternative fuels. The Bush administration has been very invested in keeping oil as our main fuel source for obvious reasons. GM has hydrogen cell engines ready to go. They are planning on releasing the Volt in 2010. GM released the E85 flex fuel engine and guess what? There are 100 E85 gas stations in Michigan. People with flex fuel cars are lucky to be able to find somewhere to fill it up. When the auto makers started releasing hybrids, the reaction of the people was "I'm not driving something that can't accelerate fast and that's a small car". So Ford came out with the Escape hybrid and Saturn made the Vue hybrid and they couldn't keep them in stock. Yet the Malibu hybrids sit on lots. You cannot blame the auto industry for making what their customers wanted to buy. You can blame numerous government administrations for still not having a solid energy policy to make us independent from foreign oil. Not one of them has made a move in that direction.
2) The credit market froze. People who want to buy cars are having a hard time doing so because they can't get credit. I may be facing this myself this week because my car is in the shop and it may not be worth paying for the repairs given the value of the car. If I have to buy a car and cannot get credit, I honestly don't know what I'm going to do. I'm renting from Enterprise right now at the tune of $40-60 a day (depending on the day of the week), but I surely can't keep that up forever. Because of the banking crisis, people can't buy cars. The auto companies foreign market is still doing fine. Sales have dropped to nothing in the US in the past few months.
3) The stock market crashed. No business can survive their stock going from $24 a share in January to $3 in November.
4) They cannot borrow money because of the credit crisis. The money they can borrow is at double digits %. Yet, the Federal Reserve rates have dropped to almost nothing for banks to borrow money from each other.
I agree that the unions need to make more concessions. The $70/hr tossed around is full cost, including what they pay for health care benefits, retirement, dental, Social Security, etc. My employer gives us a statement once a year of our "actual cost" to them which is more than double our salaries when you add in all the other stuff. In truth, they make about $20 an hour straight time although they make much more when they work overtime, sometimes as much as triple time (Sundays). They also sometimes have to work 12 hour shifts 7 days a week which is pretty brutal. I've also seen them injured for life at age 40 so some of it is hazard pay. I was shocked at times when their profit sharing checks were more than my annual income. But then they go through times where they end up laid off for a couple weeks several times a year too. At the same time, GM going bankrupt is going to affect hundreds of thousands retirees who have already lost their health care beginning January 1st and now may also lose their pensions. Their GM stock option plans that they invested in their whole lives have dwindled down to nothing. In 1988, GM stock was over $65 a share. Now it's $3. Those retirees spend money in this economy too. The health care systems are going to be completely overwhelmed by the number of people who no longer have insurance. The ramifications are going to be huge and widely felt and it won't just be in Michigan. Any idea how many GM retirees are spending their money in Florida? North Carolina? Arizona? This isn't a Michigan problem. This is any state that makes polymers and coatings, plastics, tires/rubber, steel, fiberglass, paint, leather, fabric and parts.
This was a very sudden short term crisis that our government officials didn't appear to foresee. GM has a lot of investment into the future with alternative fuels. Their OnStar product is one of the best ideas that anybody has come up with regards to cars in decades. Their handicap accessibility innovations like the moving car seat was the first of it's kind. Do you know that GM developed the first infant car seat? It was called the Love Seat and it came out in the early 70s.
I don't disagree that they should have a plan. They should have driven to Washington in a Volt or hydrogen cell battery car. But, do you punish 5 million people with job losses and send the country into a depression because 3 CEOs took private jets to Washington? Seriously?