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[Blog] Why the Seagull thinks GM is worth bailing out
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Author Topic: [Blog] Why the Seagull thinks GM is worth bailing out  (Read 11838 times)
Heq
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« Reply #15 on: November 18, 2008, 16:43:26 EST »

Ah, but you forget the third issue, control of price.

If I know america needs, say, oil, and I have a control over all aspects of oil production, then I can charge pretty much whatever I want.

Then management makes money -and- shareholders make money -and- employees make money.  The only people who get boned are those who purchase those staples.

How does this play out in the auto industry during wartime you say?

Easy.

Let's take something the military is highly reliant on, say the hummer.  It's sold by GM, but manufactured by AM General, so let's get both of those into a shareholder-employee system.  Given that control of a company can usually be achieved with less then 50% shares, let's give the union 15% shares, and make the rest of the voting shares 40% dispersed through the market, 20% patriotic, and 20% pure price interests, and 5% derivative interests.

So, this then falls into the ford system, pay high wages, charge big price, make good product.  As long as the product works, you can get away with charging gouge prices, which will alienate some of your voting stockholders, but not your pure price interesters, which, when added to the unionists who desire high wages, have effective control.

So the american military gets gouged pricewise, which means they need more money from the government, which they (of course) get.  No-one can go after AM General, as the 'pubs have no interest in seeing those contracts opened, and the dems can't go against union interests.  Thus the gouging continues and we pay for it in the form of taxes.
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DavidLeoThomas
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« Reply #16 on: November 18, 2008, 17:16:47 EST »

The military *already* pays out the nose for just about everything, and the government has never been shy about throwing its weight around when companies get *too* grabby on that count - either they'll start sticking guns in people's faces a-la Truman, or they'll cut a huge check to Lockheed-Martin or Northrop-Grumman someone to let them build plants enough to supply vehicles.

For everyone else, there is competition from non-unionized shops (foreign, in particular) to keep the unionized ones in line.
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Heq
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« Reply #17 on: November 18, 2008, 20:44:40 EST »

True in a free market.

Sadly, that is not the case in America.  The protectionist lobby isn't going to allow many contracts outside of american companies, and it's becoming less and less politically viable because the government officals who don't grant these insane gouged prices get haranged as being unpatriotic.

As a side note, Mercenaries are still a war crime right?

Also, you assume that those in power really care about the money they pay out.  Politically, debt (in america) doesn't seem to matter (I blame Regan) as if you kite it long enough it becomes someone else's problem.  Who listens to those economic historians and thier mouldy records, certainly not voters!  It's actually a good political idea, as if you cock it up real good, you can blame the guy who takes your job and your party can get back in after 4 bad years.

Remember, if you can make the GDP short cycle at 1%+, historically you always win!
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« Reply #18 on: November 18, 2008, 22:48:24 EST »

True in a free market.

Sadly, that is not the case in America.  The protectionist lobby isn't going to allow many contracts outside of american companies, and it's becoming less and less politically viable because the government officals who don't grant these insane gouged prices get haranged as being unpatriotic.

Because clearly, no one buys anything but American.  There is a small markup the average consumer will settle for in exchange for feeling patriotic or what have you, and I've every expectation that this will be exploited and the difference will wind up in the pockets of the employees of the car companies.  However, it is plainly not a very big difference.

If you are speaking of government contracts specifically, then there will be a steeper markup supportable, but I suspect the companies will find trouble if they demand a greater price for non-military government vehicles than consumer vehicles, and since when is largess in military contracts new?

Also, you assume that those in power really care about the money they pay out.  Politically, debt (in america) doesn't seem to matter (I blame Regan) as if you kite it long enough it becomes someone else's problem.  Who listens to those economic historians and thier mouldy records, certainly not voters!  It's actually a good political idea, as if you cock it up real good, you can blame the guy who takes your job and your party can get back in after 4 bad years.

Remember, if you can make the GDP short cycle at 1%+, historically you always win!

Again, this only applies to cars purchased by the government, and while those are by no means negligible, there is a much bigger market otherwise.
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« Reply #19 on: November 19, 2008, 06:55:00 EST »

Ok, I see that, but I think there are two things getting in the way.

1) Flagrant anti-competitive behavior outside the scope of that explicitly blessed by labor law would presumably still be subject to antitrust law.
Possibly.  It depends on the situation.

This sort of stuff is not just theoretical it has happened several times in Britain, and elsewhere too I expect.

2) It is not the union holding the shares that I propose, but those individual union members who work at the company.  While significant in number, employees at GM (or any given manufacturer) still make up a minority of union members, and the union would suffer significantly if any of the *unionized* competitors were to go under, and it is only these that the union has any influence over.
That makes sense.  I was explaining the problem Heq was pointing out.  I don't think though that it applies much to what you're suggesting.
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« Reply #20 on: November 19, 2008, 11:13:40 EST »

Ok, I see that, but I think there are two things getting in the way.

1) Flagrant anti-competitive behavior outside the scope of that explicitly blessed by labor law would presumably still be subject to antitrust law.
Possibly.  It depends on the situation.

This sort of stuff is not just theoretical it has happened several times in Britain, and elsewhere too I expect.

Yeah, that stuff *does* get super political.

2) It is not the union holding the shares that I propose, but those individual union members who work at the company.  While significant in number, employees at GM (or any given manufacturer) still make up a minority of union members, and the union would suffer significantly if any of the *unionized* competitors were to go under, and it is only these that the union has any influence over.
That makes sense.  I was explaining the problem Heq was pointing out.  I don't think though that it applies much to what you're suggesting.

Ah, gotcha.
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boring7
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« Reply #21 on: November 28, 2008, 23:54:07 EST »

I think GM should fail.  There is no time within my lifetime that GM has not been either, "on the rocks," or "just recovering" and begging for handouts.  It hurts to hack off a limb but one as diseased and gangrenous as GM needs to be removed. 

Unions and their status confuse me.  In 2000 one of the only differences between Bush and Gore's rhetoric of mediocrity and blandness was that union membership was down across the nation, and this was either good or bad (respectively) for America.  Yet in spite of them agreeing that unions were waning at the time we have these troublesome union spats going on. 

I mean, I live in Texas where the word union is generally followed by someone spitting, so I don't get direct relations to these things.  All I know is I'm getting reports that seem to conflict. 

As for what is most likely to happen?  I think "the big 3" will get their money when they come begging again in a slightly more proper format.  They will make the same token promises and the like and the ever short-attention-spanned American public will let it slide. 

Actually, I'm writing my congressman right now in a vain attempt to sway his opinion. 
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« Reply #22 on: December 01, 2008, 05:48:10 EST »

Those who think it should be bailed out should read about the history of British Leyland.

There is truth to the accusation that the UAW have helped GMs downfall.  Of course the management should take most of the blame.  There is though a couple of other groups that few have pointed to yet, dealerships and state legislatures.  In many states dealers have lobbied for laws to be enacted to prevent car manufacturers from discontinuing brands of vehicle.  This means that GM, Ford and Chrysler must continue to make certain lines and brands or face massive legal action.
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boring7
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« Reply #23 on: December 01, 2008, 13:35:55 EST »

That is rather ridiculous. 

I assume the dealership thing has to do with dealer warranties.  If you're going to be replacing sprocket cogs on a 1987 Dodge Whamdangler for the next 40 years because of silly warranties, then you probably want them to keep making Dodge Whamdanglers for the next 40 years. 

But really, that seems to be the fault of the dealers. 
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« Reply #24 on: December 01, 2008, 17:22:47 EST »

That is rather ridiculous. 

I assume the dealership thing has to do with dealer warranties.  If you're going to be replacing sprocket cogs on a 1987 Dodge Whamdangler for the next 40 years because of silly warranties, then you probably want them to keep making Dodge Whamdanglers for the next 40 years. 

But really, that seems to be the fault of the dealers. 

No i would not blame the dealers there. Before the dealers started offering those things, the were resurgence by the manufactures that they WOULD continue to supply the parts. the laws were only put thought when the manufactures started to welsh on those deals.

What the manufactures did not do is saying we will not ender the same deals foe our newer models. and continue to make low volume parts (not full vechiles) for those they they were contracted to forfill.
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boring7
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« Reply #25 on: December 01, 2008, 19:25:29 EST »

Well, if agreements or contracts were made then they should be fulfilled, but I honestly don't know enough about dealership/manufacturer relations to know how it all goes down.  I remember a co-worker of mine telling me about her stint working for Cadillac, handling the paperwork for the "certified pre-owned" deals they had but it all seemed quite fast and loose as to how the dealings went down. 

Cadillac would have very specific rules for one thing, but very vague rules for another, and so on...
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« Reply #26 on: December 02, 2008, 06:44:26 EST »

That is rather ridiculous. 

I assume the dealership thing has to do with dealer warranties.  If you're going to be replacing sprocket cogs on a 1987 Dodge Whamdangler for the next 40 years because of silly warranties, then you probably want them to keep making Dodge Whamdanglers for the next 40 years. 

But really, that seems to be the fault of the dealers. 
No, warranties and parts are not the main concern.

The issue is lines of business and brands.  GM made many contracts with their dealers to do certain things.  This is entirely the fault of GMs management, they should have been more careful in the good years.

However the state laws that govern how dealership franchises work are a large part of the problem.  In most states dealers have to be licensed, the business is subject weird regulations.  In Michigan in counties of more than 25000 people there can only be one dealer per six mile radius.

The main problem now though is that GM cannot discontinue lines without large costs.  If they do then the state laws of many states stipulate that they must compensate their dealer network.
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boring7
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« Reply #27 on: December 02, 2008, 12:45:01 EST »

All of which further points to the hypothesis that the auto industry (dealers included) has been manipulating government and painted itself into a corner.  Let the big manufacturers fail and their agreements and fines default. 

Additionally, the idea that continuing a line of cars or brand name is necessary or important for dealerships makes no sense to me.  Why, exactly, does that matter to anyone? 
« Last Edit: December 02, 2008, 12:48:34 EST by boring7 » Logged
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« Reply #28 on: December 04, 2008, 13:05:21 EST »

Additionally, the idea that continuing a line of cars or brand name is necessary or important for dealerships makes no sense to me.  Why, exactly, does that matter to anyone? 
Ask anyone who used to own an Oldsmobile or Plymouth dealership.
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« Reply #29 on: December 10, 2008, 13:51:04 EST »

It seems the US government are determined to show up-front just how stupid bailing out car companies would be.  They are going to appoint a "Car Tsar".  Can anyone think of a single government operation where a "Tsar" has being appointed and success has followed?  Including Russia?

« Last Edit: December 10, 2008, 14:36:06 EST by Current » Logged
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