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Stocks fall as fate of automakers hangs in balance

Discussion in 'The OT' started by curt8403, Nov 19, 2008.

  1. Stuart Sweet

    Stuart Sweet The Shadow Knows!

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    I agree with a lot of what's being said, and I appreciate that this thread hasn't gone political.

    Pay not or pay later... I certainly agree with that, and russdog's explanation is a great one. Very accurate, from what I've been able to see.

    All I can say is that I really hope the people responsible for making this right are smarter than I am, because I don't know what I'd do. It's a huge old mess.
     
  2. curt8403

    curt8403 Hall Of Fame

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    I heard that if the auto makers fail that we would see 20% unemployment in detroit....:nono2:
     
  3. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    Not hard. Detroit is already half way there.

    If doubling unemployment is reason for a bail out then bail out the RV industry. Elkhart County Indiana's unemployment rate has already doubled this year because people are not buying recreational vehicles as they do in good times.
     
  4. russdog

    russdog Godfather

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    I don't know the numbers about Detroit, but it would be 2 to 3 million people nationwide.
    It's not just direct employees, but it's also suppliers, dealerships, the list just goes on and on.
    And when those 2 to 3 million stop having any money to spend, how many other people does that throw out of work?
    And when they can't make their house payments, then it's even more foreclosures, driving down home values even further.
    This is not a local problem. Not even close.

    For whatever Detroit's sins might be, this is a side effect of the general economic mess that started w/ Wall St.
    People are scared about money, so fewer and fewer are buying cars.
    And for those who still want to, the banks are hoarding money, not lending money.
    Detroit didn't cause this, the Great American Economic Shell Game did.
     
  5. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    The only reason for autoworkers to be out of work would be the same reason that RV workers are out of work ... people are not buying the products.

    So what will $25 billion in loans get us? Welfare for some autoworkers via their employers? Build cars that the non-bailed out still can't afford to buy?

    Can we have a bailout for IT people who can't afford to upgrade their computer systems and can't afford to buy the right tools for the job because their taxes are going to be raised to pay to bailout someone else? Would the last person receiving a bailout please turn off the lights?
     
  6. hdtvfan0001

    hdtvfan0001 Well-Known Member

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    Hmmmm...the media perpetuating a self- fullfilling prophesy.

    News alert....I totally agree with Russdog...

    Paramedics have been called.

    Film at 11. :D
     
  7. Lord Vader

    Lord Vader Supreme Member

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    Oh, puhleeze! American union membership is a paltry 7% approx. in this country. This isn't going to destroy the unions, including one as mismanaged and selfish as the UAW.

    FYI, I've been a member of several unions during my life and am a member of one now as well.
     
  8. Lord Vader

    Lord Vader Supreme Member

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  9. russdog

    russdog Godfather

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    Sorry, but the UAW's labor costs are not the big problem. Their recent contracts bring Detroit's labor costs in line with workers elsewhere. Anybody who says the problem is fat UAW contracts is going by phony anti-union soundbites, not the actual reality. The big problem is legacy costs. You can call it "restructuring" all you want, but getting rid of those costs boils down to cheating retirees out of pensions that they earned. Going back and changing their retirement terms years after the fact is flat-out thievery. How about if you earn stuff via contract, but then somebody takes it away years later because they don't like it? Bet you wouldn't take that lying down. You think blaming the union somehow makes it OK? No, it does not. Stealing pensions from retired working people is wrong, no matter how you try to justify it.
     
  10. Lord Vader

    Lord Vader Supreme Member

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    First, I never said the Big 3's problems were because of the UAW. The union and its contract with the automakers are but one of the problems. Romney's right, sorry to say, and the fact that he's a failed presidential candidate is irrelevant. His track record of success in dealing with economic messes is well-known, and while he's not perfect, I'd trust his and similar persons' thinking than GM's management or its unions.
     
  11. russdog

    russdog Godfather

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    You can trust him if you like, that's up to you. But you're advocating for a politician and thus bringing politics into this.
    From what I understand, we're not supposed to do that around here.
    I think it would be a good thing if you refrained from getting the thread locked.
     
  12. Lord Vader

    Lord Vader Supreme Member

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    I am NOT advocating for a politician. It's irrelevant that he was one. You are forgetting that he took over the Salt Lake City Olympic Games and turned that around. His father took over AMC and turned that around. Neither had anything to do with politics, and his suggestions spelled out in that NYT article aren't borne of politics either.
     
  13. russdog

    russdog Godfather

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    Just sit down and breathe deeply. It will be OK ;-)
     
  14. russdog

    russdog Godfather

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    That's not why. It's because employees have 401K's now, and they have to manage them and hope their investments do well. The big load on Detroit is from back when they had pension plans that the company is contractually bound to honor. Eventually those folks will die off and that load will go away, but it's gonna be a while.

    If they do go into bankruptcy, it might start as Chapter 11, but as soon as they're Officially Bankrupt, nobody (and I mean nobody) is gonna buy cars from them... which will send them into Chapter 7 liquidation. If that happens, the end result will be that tons of old retired folks will lose their pensions. I'll never have a pension, they don't happen anymore, but I wish there was a law against taking away the pensions from retired people who earned them. IMO, that's just wrong. It's hard for me to think of anything more wrong than doing that to retired people. What are they supposed to live on? IMO, that's exactly the kind of heartless crap that gives capitalism a bad name. Back when we had checks-and-balances on it, that kind of stuff just didn't happen.
     
  15. phrelin

    phrelin Hall Of Fame DBSTalk Club

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    Perhaps someone who is negative about the pension obligation has a suggestion for resolving the problem. Just keep in mind these retirees are someone's grandparents who recently absorbed the significant cost of retirement medical insurance promised by the companies. These union retirees are not folks who go to the winter home in Vail and the summer home on the Cape.

    And I assume those Toyota employees 401k's look like my and everyone else's "ownership economy" investments, down in value by a third this year. An outstanding way to prepare for retirement.
     
  16. Stuart Sweet

    Stuart Sweet The Shadow Knows!

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    This has been a touchy subject and it's strayed far away from the discussion of satellite TV. Let's try a little harder not to be political. This isn't the forum for that.
     
  17. Sirshagg

    Sirshagg Hall Of Fame

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    +1
    Question though - what happens if GM files chapter 7, are the pensions still funded?
     
  18. Sirshagg

    Sirshagg Hall Of Fame

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    makes alot of sense to me.
     
  19. russdog

    russdog Godfather

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    Romney's "analysis" relies on 2 premises that are simply false:
    • That Detroit's cost problems are primarily due to current UAW labor costs, which is not true. Recent UAW contacts (negotiated prior to the current Wall St-induced crisis) bring Detroit's labor costs in line with those of foreign companies with US plants. Detroit's problems with being cost-competitive are primarily rooted in legacy costs for retired workers and the pensions those workers earned.
      .
    • That Detroit's management problems are attributable to the current management, which is also not true.
      .
      • At GM, there is indeed a decades-long history of lousy management, but the idiots who steered GM down the drain are gone. The current bunch have been making appropriate decisions lately.
      • At Ford, the boss was brought in from Boeing only about 2 years ago, and 2 years is about half the the time it takes to get new products through the pipeline into showrooms.
      • At Chrysler, the management is also new. It was brought in recently when Mercedes sold Chrysler to a private equity outfit (after Mercedes lost a fortune while screwing up Chrysler).

      At both GM and Ford, management has been making reasonable long-term decisions, despite the fact that Wall St hammers any company that focuses on anything besides next quarter's profits.
      .
      At Chrysler, it's too soon to tell if their goal is to strengthen the company long-term vs. just strip it down for resale. (Given that it's a private equity firm, I have my guesses, but my guesses could be wrong.)
    IMO, if we wish to keep the discussion non-political, then it is not helpful to post editorials written by politicians who may benefit from the simple fact that almost-nobody likes bailouts. I think this is true regardless of who that politician is and who his daddy was.

    Regardless of that, I think it's smart to be suspicious of arguments that misrepresent the basic facts of the situation. Romney's arguments make sense only if you don't understand the industry's situation. Personally, I think the man is smart enough to understand the actual realities. I have no knowledge about why his editorial fails to reflect such an understanding; any speculation I might have about this would be a comment about politicians in general, which would not be helpful.

    I think it's interesting to observe that Toyota is preparing to ask European nations for $50-billion-plus in aid. Since Toyota has a track record of being an exemplary car company, I think this supports the idea that the main problem is not the industry, but rather the world-wide general economic meltdown that is rooted in Wall St's recent shell game.
     
  20. russdog

    russdog Godfather

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    There is no automatic provision written into to Chapter 7, but going into Chapter 7 is a great way for pension liabilities to get jettisoned, leaving retired people without the pensions they earned.

    With those liabilities gone, then somebody (perhaps major stockholders in the company that was liquidated) can buy up the assets for cheap, and the show goes on, leaving the retired folks screwed.
     

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