Big 3 Auto bailout

[AMDScooter]

I coulda swore we already had a thread... I scanned back into Nov and could not locate it. If one of our kind mods can locate it and feels the need to combine this into it you have my permission in advance.

On a completely unsurprising note.. the unions tell the auto companies to F-O. Be prepared to be supplementing their wages and cradle to grave benefits forever folks.

GM, UAW talks break off; Chrysler talks stall

DETROIT (Reuters) – Talks between the United Auto Workers and General Motors Corp central to a turnaround plan for the struggling automaker have broken down over the issue of retiree healthcare costs, a person briefed on the talks said on Saturday.

A parallel set of talks between Chrysler LLC and the UAW over similar concessions were continuing over the weekend but little progress had been made, a person briefed on those negotiations said.

The breakdown of talks at GM and the stalled negotiations at Chrysler come with just three days remaining until both automakers must submit new restructuring plans to the U.S. government as a condition of the $17.4 billion in federal aid that has kept them both operating since the start of the year.
"It doesn't seem like the stakeholders are really prepared to give a whole lot," said independent auto industry analyst Erich Merkle. "It's a high-stakes game of poker right now."

If GM cannot win agreement from the UAW and creditors to reduce its debt, analysts say the Obama administration will face a politically tough choice: either pump billions of dollars more into the struggling automaker or steer it toward bankruptcy as some critics of the bailout have urged.

UAW negotiators walked away from talks being held near GM's Detroit headquarters on Friday night because of differences over how to pay the health care costs of retirees, the person familiar with the talks said.
Under Chief Executive Rick Wagoner, GM has resisted suggestions that it would be better able to restructure under a court-supervised bankruptcy.
Wagoner and other executives have argued that consumers would shun GM cars and trucks if it were in bankruptcy, sending already weak sales into an irreversible tailspin.

But in recent weeks, senior executives at the automaker have become more open to the prospect of a bankruptcy filing, a person involved in the talks said.

GM declined to comment directly on the state of negotiations with the union. "We are committed to meeting the terms of the bridge loan and executing our restructuring plan," GM spokeswoman Renee Rashid-Merem said.

Chrysler said it was also committed to meeting the terms of the federal bailout, which requires both automakers to reduce labor costs and the amount owed to a UAW-affiliated fund.

"We continue to engage all of our stakeholder groups as we work through this process," Chrysler said in a statement.
UAW representatives were not immediately available.

HEALTH CARE COSTS KEY

The UAW is owed some $20 billion by GM, money pledged to a healthcare trust for retirees. The union faces demands that it surrender its claim to half of that amount in exchange for stock in a recapitalized GM under the terms of the federal bailout for the automaker.

GM and the UAW agreed to create the retiree health-care fund as part of a 2007 labor agreement the automaker hailed at the time as a way for it to shift a crippling liability from its balance sheet.

But the steep slide in U.S. auto sales in late 2008 overwhelmed GM's attempts to cut costs and raise cash on its own, leaving it unable to survive without federal loans and unable to fund its commitment to the union trust fund.
For his part, UAW President Ron Gettelfinger has balked at saddling retired workers with additional risk by taking devalued GM stock instead of cash.
GM's bondholders, who are being asked to write off some $18 billion in debt in exchange for GM stock, have also held out for better terms, people briefed on the talks have said.

GM has received $9.4 billion from the U.S. government and has been pledged another $4 billion if it can show it can be viable at a time when U.S. auto sales are near 30-year lows.

The Wall Street Journal reported on Saturday that one scenario being considered by GM would put its viable assets, including international operations, into a single company. Other assets would be sold under the protection of a bankruptcy court, the newspaper said.

A bankruptcy filing would allow GM to rework its contracts with creditors, the UAW, dealers and its suppliers.

But it would also mean even steeper job losses. GM, Chrysler and Ford Motor Co have cut 250,000 jobs since the start of the decade and are looking to cut more.

A bankruptcy by one of the U.S. automakers could also trigger a wave of failures among parts suppliers. That industry is seeking $18.5 billion in federal aid and has warned that 1 million jobs could be lost if the industry collapses.
Chrysler has been given $4 billion in emergency funding from the U.S. Treasury and is seeking another $3 billion.

Chrysler has said it will present two restructuring plans. One will show its prospects as a stand-alone company now owned by private equity firm Cerberus Capital Management.

A second scenario will show Chrysler's prospects under a tie-up with Italy's Fiat SpA. Fiat has agreed to take a 35 percent stake in Chrysler in exchange for access to its small-car technology and development efforts if the U.S. automaker can be made viable.

(Additional reporting by Jui Chakravorty in New York and David Bailey in Detroit; editing by Todd Eastham)

[mostholycerebus]

This is the closest thing I can find. I know there was discussion in other general 'bailout' threads, don't think there was a UAW-specific one in TLR.

IIRC Ford is actually doing OK. The way I read it, they will take free money because, well, its free money, but are refusing anything that comes with strings attached.

[AMDScooter]

This is the closest thing I can find. I know there was discussion in other general 'bailout' threads, don't think there was a UAW-specific one in TLR.

IIRC Ford is actually doing OK. The way I read it, they will take free money because, well, its free money, but are refusing anything that comes with strings attached.

Thanks for double checking me there MHC.

IIRC Ford simply had cash on hand to last through March or so. They are still in a world of sh*t like the other two.

IMHO with the unions simply refusing to make any concessions the big 3 are doomed as a private enterprise. Going "green" is not going to save them as the business model still runs at a loss due to the union entitlement overhead. Personally, I refuse to purchase new a car from any of the three until the unions come out of orbit in their expectations. Not that it'll make much of a difference with the current administration taking my money to prop them up anyway.

[Enmore]

From 3 years ago:

http://forums.pcper.com/showthread.php?t=413092

[Orangutan]

TTAC has a long series on the bailout/domestic cluster••••. The unions aren't the only, or even the most significant, problem for why the automobile manufacturers are suffering their current troubles. Here's the most recent post over at TTAC on the situation, by the way:

http://www.thetruthaboutcars.com/bai...c11-in-theory/

[old82]

Thanks for double checking me there MHC.

IIRC Ford simply had cash on hand to last through March or so. They are still in a world of sh*t like the other two.

IMHO with the unions simply refusing to make any concessions the big 3 are doomed as a private enterprise. Going "green" is not going to save them as the business model still runs at a loss due to the union entitlement overhead. Personally, I refuse to purchase new a car from any of the three until the unions come out of orbit in their expectations. Not that it'll make much of a difference with the current administration taking my money to prop them up anyway.

and how do you know unionless toyota is not in the same boat?

[jimzinsocal]

http://www.riehlworldview.com/carniv...o-execs-0.html

[myv65]

I can't swear to it, but based on conversations with a couple of locals who are employed by GM I gotta say that I think at least some of the bailout money is being pissed down the drain. No, really, I'm serious.

Our local plant in Janesville was the longest-operating GM plant in the company, and most recently built stuff like the Tahoe and Suburban. It was officially shuttered just before Christmas, but a few stayed on to finish out some production work for Isuzu.

Anyhow, two friends who were employed there went into the jobs bank at the end of the year. One was recently recalled to Janesville (he's a toolmaker) and the other was told to accept a transfer or go from the jobs bank to unemployment (and take a major $$$ hit). The toolmaker had no idea what work would exist at the plant, and the other doesn't yet know where she'll transfer. GM still has far more workers/capacity than demand for cars/trucks.

My hunch? Sure, they closed the jobs bank (good PR) but all they've done is bring those people "back to work" to do nothing. Such actions do nothing to change the fundamental problems. They merely carry along the weight of excess worker payroll and benefits courtesy of the American taxpayer.

As to a current stand-off, I have a hard time putting too much onto the union. This, from a guy who is historically anti-union. The union is being asked for concessions, again, without any indication that GM is actually taking additional steps to make it a viable long-term entity. If I was in the union, I'd be asking for what had been previously agreed upon and putting no faith in a promise of future payment.

[BlackDragon24]

With the recent losses and job cuts/buyouts by Toyota, I think it is a big step to say that this is a union problem across the board.

[AMDScooter]

With the recent losses and job cuts/buyouts by Toyota, I think it is a big step to say that this is a union problem across the board.

Which companies are currently asking for bailout bucks? Which companies are growing market share & which are seeing it's market share shrinking? Short take, it ain't Honda, Toyota or any number of other foreign car makers whom also produce cars right here in the US. What's the most notable difference between them and their US counterparts?? No unions.

Yes.. the foreign companies are seeing sales slide as well. But they do not suffer from the same systemic issues the US/Union automakers have to deal with. A recession will not kill the foreign companies as they can adjust to the market. The US automakers are hobbled by the unions and have no ability to shift quickly with the market conditions to remain profitable or even stay in business minus billions in taxpayer $$.

No, not ALL the problems are due to unions. But they are a very large component of the problem.... very large. And as usual they are not willing to negotiate at all. There is no way in heck the big-3 will ever be competitive again with the unions, their cradle to grave entitlements and gubberment (which are one and the same at this point) calling the shots.

If the unions wanna pull this crap I say screw the lot of them. Don't wanna negotiate? Fine. Either C-11 or just go away. I'll simply never buy a new car from any of the big-3 as long as they are using my tax $$ to pay for the union members wages and entitlements.

[jimzinsocal]

For me the entire argument right now is a tapdance around C 11/
Government[Obama Administration] and UAW dont want that option
because they will lose. Thats why were reading foolishness like a government assisted restructuring.
Any honest restructuring has to include rollbacks on wages/pensions etc.
not simply shoved up the bondholders and common shareholder's asses.

How can anyone suggest that bondholders take less than the agreed amount?...and in the same breath assume wages and pensions are sacred?

[Meridian]

What's the most notable difference between them and their US counterparts?? No unions.

You forgot the other important difference: they sell cars that people want to buy.



M

[AMDScooter]

You forgot the other important difference: they sell cars that people want to buy.



M

Definitely part of the equation... but it's an end effect of having to deal with the unions. Due to the much higher overhead of union labor the US automakers are forced to put less into their cars. Less meaning, lower quality materials and/or fewer features. IIRC from a previous article I read the deficit ranges from hundreds in the low end vehicles and ramps up quickly to thousands from there. The only models they were not making at a loss were the SUV’s, luxury cars and such where they could pad the price a bit. Ever wonder why similarly priced imports "feel" like higher quality units with much better finish? No mystery… it’s because they are. US auto makers sacrifice a lot in end product quality to pay for the union labor $$ & entitlements. It's not that the big-3 are incapable of engineering good cars.. trucks... SUV's & the like. They can. They simply cannot produce them at a profit due to the union baggage.

[JustinC939]

Definitely part of the equation... but it's an end effect of having to deal with the unions. Due to the much higher overhead of union labor the US automakers are forced to put less into their cars. Less meaning, lower quality materials and/or fewer features.

Okay, so it has NOTHING at all to do with wages/benefits of the CEOs, and management teams who have made the decisions that put them in their predicament in the first place.
SUV sales have been declining for the past several years, and so what does GM do?
Make more SUVs!!!!
And as an answer to rising fuel costs they'll make Hybrids because heck what's dropping $70,000 on a vehicle when the economy is in recession?
Great thinking guys!
Sure union wages are a bit steep, but it's no better than the corporate fat cats that run their company into ground and then fly a corporate jet into D.C. begging for money.
Ford is the only American auto-maker that's still in good shape why?
Because they took a hint, and dropped their excess baggage and only manufacture a total of 11 SUVs (opposed to the 33 from GM), and of the 11, two of them are just station Wagons, and 2 others are just Hybrid variations of their parent vehicle.
And you know what! Ford is a Union plant!

[AMDScooter]

Okay, so it has NOTHING at all to do with wages/benefits of the CEOs, and management teams who have made the decisions that put them in their predicament in the first place.
SUV sales have been declining for the past several years, and so what does GM do?
Make more SUVs!!!!
And as an answer to rising fuel costs they'll make Hybrids because heck what's dropping $70,000 on a vehicle when the economy is in recession?
Great thinking guys!
Sure union wages are a bit steep, but it's no better than the corporate fat cats that run their company into ground and then fly corporate jet into D.C. begging for money.

The wanted to continue to make the only products they could actually turn a profit on. Seems like a logical choice to me. What would you have done?

1) Build SUV’s at a profit?

-or-

2) Convert all your lines to manufacture fuel-efficient vehicles that you make at a loss?

Make a few bucks for every vehicle or lose a few bucks for every vehicle?


You can say the “fat cats” ran the businesses into the ground but their choices were extremely limited by union labor costs. No denying the price of oil peaking a few months back pushed them over the edge.. but the writing was on the wall for a long time. So no.. it was not the "corporate fat cats" or their jets the killed the industry IMHO.