Chrysler, GM and Ford may go bust!

[st13phil]

Isn't that an indication that they were overpaid and inefficient.?

It's many years (i.e. >15) since I last looked at international manufacturing productivity comparisons, but North American workers were generally at the top of the pile and in many industries were the most productive. I doubt US auto makers are inefficient from a direct labour point of view, but using "units made per employee per period" is notoriously misleading as different manufacturers have different manufacturing strategies and either manufacture components themselves, which makes the labour consumed per vehicle look higher, or they buy them in which makes the labour consumed per vehicle look lower.

The big issue for the major US auto manufacturers is not really their direct cost of production but the myriad of "social provision" overheads that they carry. In other advanced nations many of these overheads are borne by the state, i.e. everyone throughout the populace pays a bit, while in the USA they are largely borne by employers. When a downturn comes these overheads become unbearable for a single employer and you get the issues that GM, Ford and Chrysler now face.

 

[crockers]

One thing that struck me in the '80s when I lived and travelled in the USA was the level of poverty I came across. We may complain in this country but we dont have the massive range of living standards in this country.

USA can't afford to allow GM & FOrd to go bust -- it would put too much strain on their "welfare programs" and where is Detroit??? Obama's back yard....so it aint gonna happen.


Famous last words..

 

[Dieselman]

It's many years (i.e. >15) since I last looked at international manufacturing productivity comparisons, but North American workers were generally at the top of the pile and in many industries were the most productive.

Do you have any further information on this because I understood the japanese companies were the most productive some while ago with Nissan and Toyota producing twice as many cars per worker as other manufacturers, including Austin Rover.

This artical mentions that also.

http://www.wikinvest.com/industry/Auto_Makers

Production Methodology
The third factor affecting the cost and the quality of automobile production are the manufacturing techniques employed by auto company. While Japanese producers were once universally the most efficient because of new factories that embraced the most current labor saving automated assembly lines (as well as not having to deal with the UAW), that gap has largely closed and today production methods are basically the same at all major automakers around the world.[20] By the summer of 2008, Chrysler and Toyota both required an average of 30.37 hours to make a vehicle, GM 32.29 hours, and Ford 33.88 hours.[21] This evidence reflects the fact that the difference in labor usage between the most and least efficient major car producers shrank to 3.5 hours in the first half of 2008.[22] When Japanese producers entered the US market in the 1970s and 1980s their cars often required half the labor hours than the domestic competition.

 

[Satch]

GM has got the begging bowl (well more like a large bucket with a hole in it) out again and asked the US Gubmint to fill it up with $50bn of loans by way of a bail out.

That would be on top of the $25bn it got in September. Good job there is a new Democrat President, eh?

 

[Dieselman]

That's about $350 per taxpayer then..and this isn't going to help them much:

For the United States in 2007, 88.3% of new car purchases were financed either through an auto loan or lease.[32] The source for this financing is either from a financing company owned by an automotive firm (e.g. Toyota Financial Services, GMAC, or Ford Motors Credit) or banks and credit unions (including online lenders). Additionally, many car buyers in the US have extracted cash from their homes through home equity loans to purchase automobiles.

As higher gas prices and sluggish economic growth have reduced the demand for used cars in the US, many lease lenders have found themselves unable to recoup the expected value from vehicles coming off lease. As a result, Chrysler Financial decided to stop offering leases in the summer of 2008, while GM has tightened leasing standards in the US and stopped leasing altogether in Canada.[37] Most other major automakers lost money on their US leases because of deteriorating car demand through 2007 and 2008.

 

[st13phil]

Do you have any further information on this

Sorry, no I don't - as I said it was many years ago that I looked at manufacturing productivity comparisons.

A note of caution on the numbers though. As I mentioned before it is notoriously difficult to compare direct hours per unit between manufacturers due to differences in vertical integration between them. For example, if Ford or GM manufacture components in-house that Toyota buy in then the hours per unit for Ford and GM will be higher as they are actually adding more value to the raw material - a small matter that is often overlooked in the headline comparisons.

 

[hawk20]

And how does that compare for UK workers.?


Isn't that an indication that they were overpaid and inefficient.?

UK workers have had earnings rising at about 2% per annum after allowing for inflation. But we have allowed manufacturing to decline to about a seventh of GDP (and much of that is foreign owned). Now the City is going to shrink we may have to learn to make things competitively again.

The problem in the US is not so much inefficiency as the imposition on firms of the costs of pensions and healthcare. Chrysler have more people retired, or made redundant, and claimimg healthcare and sometimes pensions too, than they have on their current workforce. No amount of negotiating with the Unions has managed to lift this burden. That's one big reason MB pulled out; it is said to be why Nissan/Renault would not proceed with a merger, and is probably why GM won't without govt money.

But the Americans now have the same 'lame duck' problem as Thatcher. Prop them up or let them go. Left to the free market two of the big three would be dead by next spring -and possibly all three.

 

[Satch]

Market finally calls GM shares as worthless.

http://ftalphaville.ft.com/blog/2008/11/10/18035/gm-is-worthless/


taken long enough.

 

[Dieselman]

UK workers have had earnings rising at about 2% per annum after allowing for inflation.

I don't follow you here. do you mean the average UK worker has had pay rises 2% above inflation or 2% which is actually below inflation. If it's below then surely they also earn less in real terms than they did 20 years ago.

The problem in the US is not so much inefficiency as the imposition on firms of the costs of pensions and healthcare.

The additional employment costs are a seperate issue and one a European manufacturer pays to the Government in the form of employee NI.

The efficency point is that it took twice as many labour hours to build a car in the USA as it did in other countries. That's whole production time, not final assembly. It currently takes a Ford 10% longer to build a car than the rest of the industry.
Don't forget the US car workers have very strong unions which as you say have been extremely obstructive to new practices.

 

[Birdman]

Market finally calls GM shares as worthless.

http://ftalphaville.ft.com/blog/2008/11/10/18035/gm-is-worthless/


taken long enough.

The only question is, when will GM become a nationalised enterprise.

Like I said, it's FUBAR.

Of course, it only makes sense if severe restrictions are placed on foreign imports. Otherwise the rescue fund tax dollars are irrecoverable.

Under the new bailout regime the US economy could survive for oh, say another twenty years, before it goes the same way as the British Empire.

Ooops. Wash my mouth out!

(Ps I want to have Top Gear's Dodge Charger. For the soundtrack. OOooohh!!)

 

[hawk20]

I don't follow you here. do you mean the average UK worker has had pay rises 2% above inflation or 2% which is actually below inflation. If it's below then surely they also earn less in real terms than they did 20 years ago.

The additional employment costs are a seperate issue and one a European manufacturer pays to the Government in the form of employee NI.

.

Two per cent after allowing for inflation means just what it says. So it is a real increase.

Health and Pension costs are not paid for solely by employers in UK and Europe as a whole. Workers pay 11% national insurance and on top of that many pay into their firm's pension scheme as well often 6-9%.

 

[Dieselman]

Two per cent after allowing for inflation means just what it says. So it is a real increase.

Health and Pension costs are not paid for solely by employers in UK and Europe as a whole. Workers pay 11% national insurance and on top of that many pay into their firm's pension scheme as well often 6-9%.

Inflation in the UK has run at somewhere between 2% and 5% over the period, depending on which figures you take. So are you saying that the average UK employee has recieved pay increases of between 4% and 7% annually over the same period.
If so I'd dispute that unless you can provide some data to support your claim.
More commonly when the RPI has been reported as 2% then that's what the increase has been set to.

Obviously that doesn't give an award of 2% after allowing for inflation, it is a static award just keeping pace with inflation thus the actual pay remains the same over a period.

What the employee pays ADDITIONAL to the employer wasn't the point. It was that the total cost of employmet of a US worker asgainst a EU worker is broadly equal. The differance is that a US workers health and pension payments are paid directly into a private fund, the EU worker's is paid into a Government pot.

I'm not sure what personal, private arrangements have to do with that.

 

[scumbag]

Chrysler, GM and Ford may all go bust. .

I have found a way to respond to this news in one word.


GOOD!




I'm out!

 

[Birdman]

Perhaps Chapter 11 but not sure how that would work as restructuring a pile of poo is difficult without $billions of taxpayers money to detox and defib them. Then tap them back to the private equity funds for a dollar apiece, shorn of all their social overhead costs (the taxpayer will fund the pension pot etc).

Perhaps Cerberus gets tax dollars to back GM into Chrysler, in a reverse takeover. But the US auto market can't support three manufacturers.

So maybe having already sold Aston, Land Rover & Jaguar, Ford Europe gets hived off by its own management (although it's probably unviable at the mo) alongside Volvo.

Maybe Obama turns to Europe to fund the reconstruction at the European end of the Ford/GM rescue package.

Oh it's all fun and games (until someone breaks a leg).

 

[hawk20]

Inflation in the UK has run at somewhere between 2% and 5% over the period, depending on which figures you take. So are you saying that the average UK employee has recieved pay increases of between 4% and 7% annually over the same period.
If so I'd dispute that unless you can provide some data to support your claim.
.

If earnings did not rise faster than prices there would be no rise in living standards. Our standard of living over time in Britain rises at about 2% per annum. That is the 'long term growth rate' of the economy.

Although 2% per annum does not seem much to those experiencing it -who often don't notice how much better off they are getting- it does double living standards every 35 years or so making each generation much richer than the previous one. Think how many cars there are. Only one in 7 families had a car in the fifties. Think videos, frigs, central heating, TV's etc etc. Twenty per cent had a frig in 1960. Only one in five had central heating. People had meals out rarely and hardly any went abroad for holidays.

All this comes from average earnings rising over time by about 2% per annum after allowing for inflation.

Lots of stats here: -
http://www.statistics.gov.uk/

For a less time-consuming link see Halifax data showing : -
"Average annual earnings in real terms (i.e after allowing for retail price inflation) have increased by 48% over the last 20 years (1985 to 2005)."

That is 2% per annum compound.
http://www.hbosplc.com/media/pressreleases/articles/halifax/2005-08-28-00.asp

 

[Birdman]

One interesting aspect of the 'China Syndrome' is the American blue collar worker felt better off, even though his overall income was barely rising as the global money markets funnelled cheap credit from China's export earnings back to the USA to finance the purchase of Asian and European imports. In effect, America's consumer were living on tick to China (and of course Japan). The hidden costs of that period of affluence are only now being painfully felt.

The curious result was that America's blue collar workers reasonably came to believe their living standards were rising permanently when in fact they were unwittingly building up huge personal debts far into the future. The sub prime scandel created a false wealth effect (80% of Americans 'own' their mortgaged home) that reinforced the illusion of permanently rising affluence.

It's easy to create rising living standards on the back of debt until the music stops, without having an equivalent rise in disposable income - as every bank manager knew, before they bought the farm.

Now, the same adjustments are being extended to the US public sector which has also been funded by borrowing from Asia. And if the world's sheriff don't get paid...

How many of us saw it coming??

 

[hawk20]

The differance is that a US workers health and pension payments are paid directly into a private fund, the EU worker's is paid into a Government pot.

I'm not sure what personal, private arrangements have to do with that.

Not really true that European workers health and pension contributions are paid into a government pot (while US ones go into a private pot).

Many, many European (inc British) workers pension payments go into private pension funds. Car manufacturuers all have private pension schemes in UK for example. And many employees have private health care. And in France the govt pays 70% of hospital bills but you have to have private health insurance for the rest. Many variations from country to country.

 

[Defiant]

Insider discussion about Chrysler becoming purely an auto design team subcontracting production to surplus GM manufacturing capacity is fantasy.

I should hope. Hadn't those people seen the 300?

 

[hawk20]

I should hope. Hadn't those people seen the 300?

I love the looks of the 300c. Pure mafia and very individual. The old Jeep was a classic too.

Latest news is Ford stopping production at 9 plants affecting 23,000 workers.

 

[crockers]

Not really true that European workers health and pension contributions are paid into a government pot (while US ones go into a private pot).

Many, many European (inc British) workers pension payments go into private pension funds. Car manufacturuers all have private pension schemes in UK for example. And many employees have private health care. And in France the govt pays 70% of hospital bills but you have to have private health insurance for the rest. Many variations from country to country.

I think he meant the US ones are put into a pot by the govt and ringfenced whereas the European ones are collected on monday and paid out to retired people tuesday with no provisions made for the future...

If he didnt mean that I apologise for guessing...