Another Blunder by the Detroit 3

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Nov 19, 2008 8:13 pm

Chances for a bailout around zero as consumers shun buying American cars due to the fact they may not be around if any warranty work is needed.

The CEOs of the big three automakers flew to the nation's capital
yesterday in private luxurious jets to make their case to Washington
that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.

Nov 19, 2008 9:23 pm

Where'd you hear that?

Nov 20, 2008 5:59 pm

Lets just say I have a "friend" in the industry

Would anyone buy a Ford without knowing what sort of existence they will have in the next decade?  What do you do if it needs warranty service Ford has eliminated most of its dealerships?

They are zombies --- dead but they do not know it yet

Another nail if the coffin today -- Rep. Waxman replaces Rep. Dingell as chairman on the Committee on Energy and Commerce.
Dingell was a good friend of Detroit and his replacement is a committed environmentalist.

“I am running for the chairmanship of the Energy and Commerce Committee
because we have a once-in-a-generation opportunity to advance health
care, achieve energy independence and tackle climate change”
Translation -- lock up the woman and children and prepare for the largest tax increases and corporate overhall this country has ever seen.


Nov 20, 2008 6:02 pm

I had a client tell me the same thing about the Big 3 CEO's trip to DC.  Would it be too much for them to drive one of their own cars up there?  Or fly coach?  Stupid people. 

Nov 20, 2008 6:08 pm

You can see it here:  http://crooksandliars.com/media/play/wmv/6821/24171

Nov 20, 2008 6:16 pm

American auto makers have lost touch in so many ways.  For one, who can afford a $40-50,000 for a new pickup truck?  Not homebuilders or agg workers.

 
Something else, you're telling me we create huge stealth bombers but we still can't create effective long lasting alternative energy for our automobiles?  We should have been plugging our cars in 30 years ago. 

Detroit got fat and lazy and now they're getting what they deserve.
 
Also, unions.  What a joke.  They're a cancer.  $75 an hour for working on the line at Ford?  They're paying extremely high wages to people who are building junk, then over pricing it, and everybody acts suprised that there's a problem. 
 
Taxpayers are the customers of the Big 3.  So let me get this straight.  You (the Big 3) want us (your customers) to bail you out, so you can keep making low quality cars and overcharging us for them?  Get outta here!
 
 
Nov 20, 2008 6:34 pm

Dumb move by the Big Three.
On the other hand, I bet the banking honchos at Goldman, etc., also take private jets on their way to collecting their share of the TARP handout.

Nov 20, 2008 6:39 pm

"Bankruptcy" doesn't mean "out of business", bho44. Ask Delta airlines (the world's largest carrier).

Nov 20, 2008 6:56 pm

True....but travelers are not avoiding Delta to fly on foreign carriers
20 years ago Detroit was having meetings on how to beat the Japanese....Unfortunately time has stood still for them and the same conversations are happening today.

Delta is in the midst of an industry-wide problem, while Detroit's problems are self inflicted.

Bad example


Nov 20, 2008 7:04 pm

My point is simply that filing for bankruptcy protection does not force a company out of business. In fact, it allows them to re-negotiate contract with suppliers and, more importantly, labor. The UAW is what has been the real bane of the Big 3 and busting the union will allow them to compete. Your original point was that warranties would not be honored. That is simply not a realistic assumption. Not at this point, at least. Oh, and the labor (union) issue was PRECICESLY why Delta filed. They survived by being able to negotiating realistic compensation agreements with labor.

Nov 20, 2008 7:43 pm

YHWY,

The companies are on record saying that a bankruptcy would cost more than the bailout.  They would be required to file for a DIP loan in order to continue during a chapter 11.  You think there's a big market out there for DIP loans in this environment? 

I guess my big fear is that even with a bailout, it'll take them too long to reorganize and have to file for chapter 11 anyway.  God forbid they have to liquidate. 

Nov 20, 2008 8:22 pm

The private jet thing is nothing more than lawmakers showboating for the home crowd. Disingenuous considering the number of congressman and senators who fly around the country for free in private jets and using OPM to pay for it. That part of the hearing yesterday shows what a joke some of our elected officials are.

 
But just to show you that those planes aren't a waste of money let's take just one exec and break it down. Alam Mulally, Ford's CEO:
 
2007 Salary/bonus/options: $21,000,000
Hourly wage @60 hours/week/50 weeks/yr: $7,000
 
In other words Ford is paying this guy $7,000 dollars an hour. That's his value to the company.
 
Flying time from Detroit to DC is 1:24. I don't know what kind of Jet Ford is flying but let's give them a top of the line blinged out Gulfstream V. That plane, all up, peddle to the metal, costs $6500 an hour to operate. Total air travel cost for the DC trip, RT is $18,200. During that period of time Ford has paid Mr. Mulally $19.600. Total trip cost to Ford $37,800. A lot of money, but money well spent if your boy brings home a check for 5 or 6 billion.
 
OK, as an alternative let's put Mr. Mulally on United Airlines. The best we can do is a united flight that gets him to DC at 7:34am. total flying time one way is 1:34. Not bad. But there is aproblem. Alan is expected to testify until about 2pm, needs an hour to get to Dullas, and an hour and a half to get hrough security. The plane leaves at 5:11 but doesn't pull into the gate in MOtown until 9:45PM. Mulally needed an hour and half on the morning flight to clear security, as we all do at busy airports, so he's been on the Ford clock for 17.45hours. It's how Ford values his time. That's  17.75 hours of Mulally time at $7000/hour to complete the mission. he can't be doing anything else so that time is lost to Ford for other missions. Total cost to Ford = $123950 plus $424 airfare= $124,374.
 
Ford saved $86,000 by flying him to DC. That's the way the math works and that's the reason private jets exist.
 
Now i'm sure you will note that I didn't include drive time or wait time in the corporate jet costs. That's because Mulally loses no time to the company in his travel by private plane. He gets limo'd to the plane - working as he travels. His Jet, like Air Force One is a working command center were he can meet, and work on company business just as easily as if he was sitting in his office. All that gets lost if he travels by other means. Private air travel also gives Ford 100% control of his schedule.
 
It doesn't make sense to pay someone 7Gs an hour to have them sit around airports waiting for the next available flight.
 
It's about time versus cost. To look at it another way, let's say a high tech machine breaks down at the local viagra plant. Every hour that machine doesn't run costs the company $7000. How fast do you think they will fix that machine? A top exec of any Fortune 500 company who has to wait to anything is, in the eyes of the accounting department, is no different than that broken machine. He's a company asset that is isn't producing. best to keep him up and running.
 
And at 7k an hour Mulally's time is worth more than the 6.5k an hour it takes to run the plane.
 
Nov 20, 2008 8:36 pm

gvf, I respect your opinion, but the bailout v. bankruptcy argument is simply a union v. non-union argument. The attempt to incite panic by bandying about a "3MM-jobs-are-at-stake" slogan and "it will cost more to go through bankruptcy than to take a bailout" are simply the union lines to strong-arm their already fatally overplayed hand. No company can afford to pay more to those who no longer work for them than to those that do. It's really that simple. Bust the union and they have a fighting chance. Don't, and they become "wards of the state" or are, in fact, forced to liquidate which would ( I agree) be a nightmare.

Nov 20, 2008 8:42 pm
YHWY:

My point is simply that filing for bankruptcy protection
does not force a company out of business. In fact, it allows them to
re-negotiate contract with suppliers and, more importantly, labor. The
UAW is what has been the real bane of the Big 3 and busting the union
will allow them to compete. Your original point was that warranties
would not be honored. That is simply not a realistic assumption. Not at
this point, at least. Oh, and the labor (union) issue was PRECICESLY
why Delta filed. They survived by being able to negotiating realistic
compensation agreements with labor.





Which work groups at Delta were unionized?

Nov 20, 2008 8:46 pm

If you've got a team of, say, half a dozen senior executives flying off
to Washington--at least one of whom is paid about $10,000 per hour--it
doesn't make sense to have them show up at DTW 90 minutes before their
flight so they can clear TSA and wait for the flight to board when you
can drop them at the stairs of a corporate jet which will deliver them
to Washington right away.



The reason the CEOs of those car companies are on corporate jets is the
same reason high ranking government officials are on their version of
corporate jets.



Time is valuable, the CEO of GM's time is far more valuable than the
POTUS's time yet the POTUS gets to fly around on the ultimate corporate
jet.

Nov 20, 2008 8:57 pm

Putsy,
 I agree 100% that those execs. showed terrible judgment in flying to DC in their Gulfstreams (among MANY other, more important issues), it was bad theater. And, to answer your question, off the top of my head, the pilots were union, at least.
P.S. Doesn't surprise me at all to see you hear stumping for unionized labor.

Nov 20, 2008 9:02 pm
YHWY:

Putsy,
 I agree 100% that those execs. showed
terrible judgment in flying to DC in their Gulfstreams (among MANY
other, more important issues), it was bad theater. And, to answer your
question, off the top of my head, the pilots were union, at least.
P.S. Doesn't surprise me at all to see you hear stumping for unionized labor.







Hear what?



I am hardly a fan of unions.  You're the one who said that Delta
was able to emerge from bankruptcy because they worked out their labor
problems.



The reality is that there are two union groups--pilots and a dozen or
so guys who work in the private Delta control tower at ATL.  No
unionized mechanics, flight attendants, bag busters, agents or others.



The employees, including the pilots, were more than willing to make the
sacrifices necessary for the leadership to steer the firm through the
rough times.  The rough times continue, but with luck the company
will survive.

Nov 20, 2008 9:03 pm

Wait, I apologize, what the hell was your point after asking for union clarification, putsy? Your posts were so incoherent, I had to re-re-read them. POTUS isn't important enough to warrant Airforce 1 (although I'm sure our new POTUS will be, right?) but (failing) auto execs warrant their Gulfstreams, based on their salaries? Are you pro-capitalism, pro-bailout, anti-government, pro socialism, or what?

Nov 20, 2008 9:08 pm
YHWY:

Wait, I apologize, what the hell was your point after
asking for union clarification, putsy? Your posts were so incoherent, I
had to re-re-read them. POTUS isn't important enough to warrant
Airforce 1 (although I'm sure our new POTUS will be, right?) but
(failing) auto execs warrant their Gulfstreams, based on their
salaries? Are you pro-capitalism, pro-bailout, anti-government, pro
socialism, or what?







I believe that a team of executives belongs in a private jet based on the value of their time.



I am pro capitalism, anti bailout, anti most government.



I'm a successful college educated white guy, how could I be anyting else?

Nov 20, 2008 9:09 pm

Re: Delta,
 Please enlighten us all about how and why Delta filed for Bankruptcy, emerged, restructured and grew the business to where it is today, having agreed to absorb Northwest to become the world's largest carrier. I'm a little sketchy on how re-negotiating labor (and other supplier) terms were not crucial in that process.