Will Wilkinson - Latest Comments in Failure: For Our Future

Re: Failure: For Our Future

coloradoone — Wed, 21 Oct 2009 14:59:52 -0000

This is truly shocking data. ....people who make more struggle less to pay housing costs, while people who make less struggle more.USAToday is such an insightful new agency. We are lucky to have them around...no one would have ever been able to surmise the in depth insight and analysis that they continue to give us on the daily basis.
Of course the reason for this struggling is that we live in a consumer driven society in which consumption is king. Buy more than you can afford, you can have it all, keep the masses poor through the encouragement of consumption. It all harkens back to George Oewell's "Brave New World".
Summit County real estate listings

Re: Failure: For Our Future

f1alonzojg — Thu, 23 Apr 2009 01:30:55 -0000

That bail out just when to last year dept for sure. Auto industry sales last year are negative. When the government gave a bailout its good for nothing. I feel bad for the people that are making the cars that have been layoff.

Re: Failure: For Our Future

Philk — Fri, 05 Dec 2008 15:56:43 -0000

There is one comment by Stu that we make computers in the U.S .
Most PC's are probably made in China.
I was working on DEC servers 10 years ago and I'm almost certain
they had a sticker that said "Assembled in China" on them.

Re: Failure: For Our Future

Philk — Fri, 05 Dec 2008 15:44:18 -0000

As the U.S is turned into a third world multicultural country it will be less able to compete with the asians and europeans.
Educational standards have declined in the U.S since immigration policies changed
in 1965 to favor third world countries.
Since then the U.S has gone from ranking about 2 to ranking about 23.
The U.S originally limited immigration only from northern europe.
Those are the people who created all the inventions and industries that made the U.S what it was before it started it's decline in 1965.

Re: Failure: For Our Future

webgrrl — Mon, 17 Nov 2008 15:02:49 -0000

Robert, in the USA we have had several large employee-owned companies that are/were relatively successful. Avis was probably the best known. So yes, it's legal, and yes this has been done before here and even in a related sector involving cars. Please take that rope section and yank sideways . . .1. . .2. . .3!

Re: Failure: For Our Future

Robert — Mon, 17 Nov 2008 13:56:37 -0000

I'm ready to close this argument too, but do you really end up giving GM -- and Ford too? -- to the UAW? Are these reasonable suggestions? Is it legally, constitutionally possible? Do you nationalize these industries first and then gift-wrap them for the UAW? Does the UAW want GM? And for the Germans, didn't they just spend a lot of money to get away from Chrysler? I know very little about the UAW but I do know about Italian unions, and actually they would not be at all against becoming entrepreneurs (not a good word, I know, but I don't know exactly how to define the concept), but only in a fixed system. In other words, with special concessions, tax breaks, monopolies or access to public funding that would make their activity unassailable. I suspect the UAW, if we are talking about anything remotely realistic, would take GM under the same conditions -- namely, no more free market, no competition just guarantees, privileges and political control. So welcome to Italy. We tried to sell our airline, Alitalia, to the French, but with the help of the unions that deal fell through. Now we are trying to pay Italian banks/industrialists to take it over and it's still not clear if even that's going to work. Many years ago we could have sold Alfa Romeo to Ford, but, true to form, we ended up paying Fiat to take it. The result: the erosion of our manufacturing base (no other car manufacturer has ever opened a factory in Italy and Fiat itself has all but moved out) and a public debt, a good part of it created by the 1 million € loss per day of Alitalia, that has spiralled beyond all control. Be careful what you wish for.

Re: Failure: For Our Future

ish — Mon, 17 Nov 2008 12:31:30 -0000

Thank you Jason, for making the point I've been trying to make in a much-less successful way in other posts. A mere 4 years ago the Japanese and German automakers were clamoring to make full-size trucks and SUVs just like the ones created in the US. A big part of what has caused these problems is a major shift in consumer demand which has affected all automakers in the world. It has affected the big 3 more because they were more invested in that product mix. That is a poor management decision. But Toyota is in major trouble as well, primarily due to declining sales of large trucks in the US market. Sound familiar?

Re: Failure: For Our Future

Some Guy — Mon, 17 Nov 2008 11:46:42 -0000

I did not intend to provide a detailed argument that the German model cannot work here.

I very much doubt that we can emulate the Germans hook-line-and-sinker. Germany is Germany. It has an entirely different set of economic institutions, economic culture, demographics, eductation system, tax structure, geography, corporate laws, etc. I am surprised that anyone would need this point elucidated.

Similarly, I could not emulate Babe Ruth's success by taking up all his habits. I would simply be a fat, untalented, wanna-be baseball player with lung problems and a wife in divorce court.

Further I would not want to fully emulate Germay, even if we could. Perhaps the German car industry is currently more successful that the US car industry. So what? That success comes at a price and it might not be a price worth paying. Indeed, I would not want to pay it.

Personally, I've been to Germany and I don't want to live there. Do you? (If you are not living in Germany, I guess that the answer is no.)

Re: Failure: For Our Future

Jason O. — Mon, 17 Nov 2008 11:33:29 -0000

1) The US auto industry, in late '07/early '08, signed a new UAW
contract that removes all of the healthcare and other post
employment benefits from their balance sheets and into a trust
(called a VEBA, or voluntary employee beneficiary association) that is
managed by the UAW.

2) Every auto analyst declared at that time that GM, F and C, with the VEBA, reached labor cost parity with Japanese, German and Korean automakers. The WSJ, et al described the UAW's agreement to the VEBA as a fundamental change in US labor relations. Low interest loans to US OEMs would not be a UAW bailout...the current contract has already solved this problem.

3) Also at that time, GM's share price was in the 20's: Deutsche Bank (the same firm that last Monday set a $0 target price on GM's stock) set a target price of $48 and praised GM's management for devising a method to get out of providing healthcare/pension benefits for hundreds of thousands of retirees and current employees.

This price target of $48 was set less than one year ago.

4) What happened? in 2007, about 16.5 million vehicles were sold in
North America. In 2008, the number will be about 11 million. Every automaker is experiencing 25%+ decreases in units sold. This drop in demand is close to unprecedented, i.e., the credit crunch is hitting "main street." The claim that "GM and F should make cars that people want to buy" is disingenuous.

Don't believe me? Believe this guy: "This environment is more severe than anything we have ever experienced," said Mitsuo Kinoshita, Toyota's executive vice-president, who added that profits were likely to remain at depressed levels next year as a result of weak US demand. "Honestly, it is difficult to foresee when it will bottom out."

Re: Failure: For Our Future

stu — Mon, 17 Nov 2008 11:27:05 -0000

One assumption in this thread that has gone unchallenged is that the manufacturing base of the USA has been seriously eroded. This is simply wrong! In real dollar terms we manufacture more product now than we did 20 years ago. What has happened is that we have,through gains in productivity, produced more with less labour imput. Also the nature of our manufacturing has evolved with the more productive, like computers, replacing the more labor intense, such as textiles. Do you think its healthier assembling computers or to work at a spinning machine? Who do you think has the more pleasant work environment and better income? That's what happens with "creative destruction".

Re: Failure: For Our Future

Sandmich — Mon, 17 Nov 2008 11:05:29 -0000

I've of the opinion that GM is probably making the best cars that it has in its entire existence, but the labor, business, and environmental regulations (some of which are of their own making) are stacked against it. At least a chapter 11 will clear some of that out, and might encourage lawmakers to create a more hospitable environment for the businesses that come out of bankruptcy.

But, no bankruptcy, no fixes, and we'll be back giving them another bailout in five or so years.

Re: Failure: For Our Future

James M — Mon, 17 Nov 2008 11:01:14 -0000

"Do you still have that Yankee know-how to combat Germany, Japan, and just wait, China in car production? Is this a battle you can win? The British have lost, and it might not be winnable anymore."

To be fair, instead of efficiently building cars that people liked and wanted to buy, Britain in the 60s and 70s tried bail-outs and state-ownership and state-sponsored mergers of failing car companies, culminating in the fantastic British Leyland, supported by the taxpayer rather than customers. On the other hand, foreign car companies did manage to create an environment in Britain (eg, Japanese car companies in Sunderland) where quite reasonable cars could be made and turn a profit. "Intelligent" policy makers in Washington might be well-advised to check historical examples abroad carefully before jumping into action. It took a long time before the British Government was finally free of Leyland (and other failing industries).

Re: Failure: For Our Future

webgrrl — Mon, 17 Nov 2008 10:54:42 -0000

Let me take this piece by piece, and then I'll still my argument; it's done its work, I think.

"Here I admit to being way over my head; I’m neither an economist nor even a blogger, but I’ll press on".

Commendable. Not knowing in public is a big step forward, but as Robin Hanson would say, while it's something, it isn't much. Of course none of us know, that is why we have the discussion.

"Does the world need all of these car companies?"
Consumers will decide, yes? But it seems there is much pent-up demand for cars in rising economies, such as India.

"Don’t we now have a problem of overproduction?"
Doesn't seem like it - it seems like the problem is not overproduction per se, but production of the wrong thing. We need smaller, efficient, green cars, that's what consumers appear to calling for.

"Is this a good industry to invest your money and your future in?"
With such low market caps, actually, it appears that a plan to sell 'em to the UAW would cost less than either bankruptcy or bailout to the taxpayer.

"Do you still have that Yankee know-how to combat Germany, Japan, and just wait, China in car production?"
Oh yeah. "Yes we can."

"Is this a battle you can win? The British have lost"
The British tried hard, but they didn't try smart. You saw that with Rover.

" Then, who would build this German-type company? Not your current management class, it would seem. So who, the government?"
Definitely not the government. I hate to keep repeating myself, so I'll stop, but it's time to pull the rope sideways. Let the UAW own it, and make them hire Germans to manage it. Let the Germans build a German-style industry with employee ownership.

Re: Failure: For Our Future

Robert — Mon, 17 Nov 2008 09:28:09 -0000

A quick, albeit superficial Google search using strings like “factory jobs Germany, Poland Volkswagen” produced as top results: “Daimler chooses Hungary for new car factory”; “Volkswagen builds new engine plant in Poland.” A search for “Fiat 500 factory”, our new sub-compact produces this: “Italy’s biggest car-maker is going to ramp up the 500 factory in Tychy, Poland. It will now knock out 67,000 units this year . . .” To be fair to webgrrl and the truth, some of these articles also talk about investments in their respective countries – just Germany by the way -- usually related to the luxury models of their production line, where profit margins, I’m guessing, may be different from GM products. What I understand from all of this is that the prevalent model for staying competitive has little to do with investing in your own backyard when that backyard is characterized by high labor costs. That some German car companies still have enough profit to do this is commendable, but they are also companies that are not in the economic hole that GM is in. And if they were, I doubt that they would try to return to profitability by building in Germany. But webgrrl’s premise brings up other problems. Many of which have already been mentioned on this blog. (Here I admit to being way over my head; I’m neither an economist nor even a blogger, but I’ll press on). Does the world need all of these car companies? Don’t we now have a problem of overproduction? Is this a good industry to invest your money and your future in? Do you still have that Yankee know-how to combat Germany, Japan, and just wait, China in car production? Is this a battle you can win? The British have lost, and it might not be winnable anymore. Then, who would build this German-type company? Not your current management class, it would seem. So who, the government? I live in a country where the State decided to invest heavily in the chemical industry, chemicals seemed future proof, but as the factories were being built, the market for chemicals and where it made sense to produce them had radically changed, and so as a result our landscape is littered with abandoned chemical factories (and now some Fiat factories as well). I reluctantly take back my crack about “one decent wine” from Canada, even though I remain highly skeptical.

Re: Failure: For Our Future

webgrrl — Sun, 16 Nov 2008 18:29:42 -0000

But the US automakers do outsource to lower wage countries: Welcome to Mexico, home of the Ford Mustang. Specifically, Cuautitlan, Mexico, where engines are shipped for assembly.

As for Canada, GM's been there since the '50s - GM makes Chevrolets there. On the wine front, try the Inniskillin. So alas Robert, you're mistaken on all counts.

I repeat my question: why cannot we take this opportunity and give ourselves a German-style world-class auto industry? I await a serious reply.

Re: Failure: For Our Future

Micha Ghertner — Sun, 16 Nov 2008 17:10:52 -0000

And if we smash five million windows, we can "create" five million new jobs as well, thereby destroying our way to prosperity.

Re: Failure: For Our Future

Robert — Sun, 16 Nov 2008 16:45:36 -0000

On Germany. I'm far from an expert on these matters, but as a European, Italian to be precise, I do know how much Germany, Volkswagen in particular, has been investing in Poland. The wage differences are also remarkable in what is supposed to be a unified market. I recently read of a spread of about €30 an hour for factory workers. So I'm not sure the German example is such a good one; it might actually, if we knew all the facts, prove the opposite of what the contributors here have intended -- namely, that there is no way to keep Detroit afloat by imitating the German auto industry. Of course, you can always try to force the Canadians to work at slave wages; after all, it serves them right for living in such a cold country that doesn't produce one decent wine.

Re: Failure: For Our Future

furious — Sun, 16 Nov 2008 12:54:26 -0000

The "green industries" than Pres-elect Obama promised would create five million new jobs.

Re: Failure: For Our Future

furious — Sun, 16 Nov 2008 12:36:37 -0000

How salvageable is an industry whose essential business model (let's be honest) is to generate cash flow for its retiree pension and medical plans? Legacy costs add at least $1,000/vehicle to Detroit's vehicles, which is why Detroit can't sell fuel-efficient cars at a profit.

It's also why Detroit doesn't have the cash to invest in new model development for cars that American consumers want to buy...and it's only going to get worse, as the UAW now has more retired than active members for the first time. As for "far-seeing sympathy", the UAW seems more interested in prolonging feather-bedded contracts and work rules than in providing opportunity for the next generation of UAW members.

If Washington really wants to save Detroit, why doesn't it waive CAFE mandates for Detroit, so they can build and sell those vehicles they can at a profit? Detroit has effectively ceded the small-car segment to the Japanese and Koreans, anyway, who will continue to produce (in the US even) and sell small cars profitably regardless of regulatory favoritism shown Detroit.

Re: Failure: For Our Future

GilM — Sun, 16 Nov 2008 02:27:14 -0000

I think what we're seeing is the common bias towards stasis and against dynamism (visions spelled out in Virgina Postrel's The Future And Its Enemies).

I think Will spelled out very well how far-seeing sympathy is better than short-sighted sympathy. But, lots of people won't accept it.

It's interesting how many people accept dynamism in either personal/cultural areas or economic areas, but not both.

Re: Failure: For Our Future

GilM — Sun, 16 Nov 2008 01:54:21 -0000

I don't think Will is the religious one here.

He has made an argument. Do you have one?

Re: Failure: For Our Future

ArtD0dger — Sun, 16 Nov 2008 01:33:19 -0000

That's the point, Ernesto. If no one wants to buy Detroit's cars, then that 5% of GDP is already lost. They might as well be digging holes Monday through Thursday, and then filling them back in on Friday. A steep recession is when we especially want the people and resources that used to produce the 5% of GDP to be redirected to enterprises that are actually productive.

It is amazing how the labor theory of value persists after all this time.

Re: Failure: For Our Future

Jordan — Sat, 15 Nov 2008 23:28:04 -0000

Hilarious. You can always count on the types who rail about the "eeevil corporations" to be first in line when said corporations come begging for handouts.

Re: Failure: For Our Future

Micha Ghertner — Sat, 15 Nov 2008 23:01:30 -0000

I also love the "retrain the workers" option. Can someone please tell me which industries are in desperate need of millions of workers?

Candlemakers.

Re: Failure: For Our Future

Jim — Sat, 15 Nov 2008 22:50:00 -0000

Micha: What Chapter 11 is not an option means is that those who suggest Chapter 11 is the way for the automakers to go are not being realistic. People will simply not commit $15K+ to buy a car from a company that is in bankruptcy. If bankruptcy is the option, it's a Chapter 7 liquidation.

Mike: Perhaps not all or none, certainly not just a blank check, but I fail to see how letting the companies die in the next year will produce anything other than economic pain on a scale few of us can imagine.

I also love the "retrain the workers" option. Can someone please tell me which industries are in desperate need of millions of workers? America doesn't make a whole lot of anything these days. There are only so many spots for more consultants and burger flippers.