Auto Bail Out explanation please
December 13, 2008 by kellys
Filed under automotive, financial matters, news
Someone smarter than me is going to have to explain to me this whole auto bail out plan because I am not getting it. This week I heard a statistic but I can’t remember the source. The statistic went like this … In 2007, Toyota and GM sold the same amount of gross product. Toyota, however, mad etwice the profit as GM. So if htey are both making cars in the US and they both brought in similar amounts of money, then why is Toyota fine and GM needing y tax dollars to pay a rediculous overhead.
Let me say quickly that I do understand that if they go under, we can’t handle the aftermath. Too many jobs will be lost and our economy will tank. I understand that. But what I don’t understand is that if Detroit doesn’t get our tax dollars, then they will restructure under Chapter 11 bankruptcy. Seems to me like I don’t want to throw my good money after bad decisions.
Am I missing something? A pay cut would be a heck of a lot better than no paycheck at all. What do you think?
Their are various reasons why Toyota can turn a profit and GM can’t. The UAW is a big reason. They have given up some consessions in the last contract, mainly they are going to manage their own retirement funds. Also, the cost of labor is now two tiered (new employees are not paid at the same rate as those grandfathered in) GM along with the others have to provide billions to fund the pension and healthcare. Toyota does not have a union nor do they have 100 years of operation, hence, retirement, benefits, etc. to pay. They don’t have those carrying costs.
Also, the sentiment behind not wanting bankruptcy is that people won’t buy cars from a bankrupt company. Remember what happened to Daewoo? The company went bankrupt and then the consumer was stuck with a vehicle and no warranty.
I don’t know if that helped clarifiy your question.
What michelle said is how I see the problem. The profit for the company is not the same because the price has quite the markup for benefits promised when times were really good, and the difficulty with negotiating with a union.
The UAW is caught between a rock and a hard place. It may die if all of the auto workers are out of a job, or it will be significantly less powerful through concessions.
That is why I don’t get it. If UAW sees this coming, why don’t they give real concessions? This whole “we won’t negotiate new contracts until they are up in 2011″ is STUPID. 2011 might not come for them.
Even I know that if my job is in jeopardy, I would rather take a pay cut than to take a job loss.
Did you even look at the concessions that the UAW already made? They are actually making LESS in some cases than Toyota workers.
But remember, that the majority of Toyota is NOT in this country, and their Japanese workers get their healthcare from the government, something we still insist on the companies paying for here.
And the union didn’t refuse to new concessions until 2012, they refused to new concession until 2012 unless EVERYBODY (including management) took concessions as well, but since this is a union busting exercise, the GOP is not going after management, only the unions.
The simple math seems to be these days, those with White Collars get bailed out with no strings attached, while Blue Collars get the blame.
Remember, Detroit already has a history of having taken a loan from the government, and paid it back… early. Wall Street has not done so well.
Much like the argument that we weren’t in a recession, it seems your “sources” are only giving you half a picture.
This is a great discussion — thanks for the insight, everyone. Like Kelly I have been in the dark on the whole thing.
All I know is that a lot of families will be hurting. Does anyone know if the upper echelon of these companies will be insulated from the fallout from this whole thing?
Glad you brought up the topic, Kelly, and I’m looking forward to checking back for more comments from your readers!
Heidi Rafferty
Harrodsburg, Kentucky