Detroit's sputtering Big Three turn to Washington for help......... - Page 6 - Mercedes-Benz Forum

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post #51 of 70 (permalink) Old 11-10-2008, 08:11 AM
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So the Big 3 is squeezing the very last drop of profit out of each fastener (using your example), then gang rape goes both ways. I go back to my original point. Why bother to prolong a dying industry? We already know the end results.

Until they are willing to make the most fundamental changes across the board, its like feeding a crack addict on one arm and driving him to the rehab at the same time. Its time to cut off all supplies.

Meanwhile, AIG gets $40B in new aid. It is news like that sickens me. I am sure the Christmas party at AIG this year will be no worse than last.
It really doesn't go both ways. The 200 suppliers are all bidding for the same 10 manufacturer's work. They are doing whatever is possible just to keep the doors open for their companies. I don't know where you get the impression that suppliers somehow are on a gravy train when they get in with a manufacturer. It usually just means they have a steady flow of income instead of a fit and start income.

As for just cutting the industry off. Calculate what the costs are of just dumping 5 million people onto longterm unemployment. Add to that the further reduction of the manufacturing base in America. Which of the two has the most long term negative impact to the US economy's foundation?

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post #52 of 70 (permalink) Old 11-10-2008, 08:16 AM
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^^^
Profit margins are so slim that in some industries, it's all about a few pennies. While I'm in retail, grocery would be a bitch as far as I'm concerned.

Airlines? Forget about it.



Profit Margins of Selected Industries
I've got a friend who is a regional manager at Krogers grocery chain. The margins are just nightmarish. 1% is the difference between a profitable store and being on the "should we close it" list. And from friends who are in retail, I know it is not much better. You have a bit more leeway as you have less "shelf-life" issues. But the issues are the same.

Most of the small manufacturers who supply to the bigger manufacturers are on such a tight budget that I frankly don't see how they make it. I know of one who has not brought home a check in the past two years. He makes enough to pay his employees, keep the biz open and his credit good. He says that he will take money again when biz is better. He has 130 employees in Eastern Kentucky that are unknowingly depending on his generosity.

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post #53 of 70 (permalink) Old 11-10-2008, 08:20 AM
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Here's an interesting thought. Wonder how it would affect pricing from "The Big One"?


IS AMERICAN MOTORS MAKING A COMEBACK??
Thu Nov 6, 2008 9:29 PM EST

As I am typing, the leaders of Detroit’s Big 3 automakers GM, Chrysler and Ford as well as Ron Gettlefinger, president of the United Auto Workers Union are sitting down with House Leader Nancy Pelosi to discuss the dire position the American Auto Industry is in. Could this result in government aid for the three to merge into one viable company? A friend (an industry insider) has suggested that it could be called American Motors (AMC)!! In a couple of years Renault could acquire it – wait a minute I think I am sensing déjÃ* vu! It is suspected that General Motors will reveal that their cash burn actually exceeds the astronomical figure of $1 billion a month that has been speculated. Analysts also believe that they will reveal a cash reserve of less than $20 billion with $14 billion being the magic threshold number for insolvency. Ford and Chrysler are likely in a little better shape, but not much.
The automakers are looking for government aid to help them survive the current economic meltdown which was not of their own making- it was made by those greedy wall street types who were all over cable business news channels today saying that the automakers should have to live in the bed they made for themselves! REALLY??? The automakers have been making mistakes for decades, but it seems to me that many industries have (Wall Street anyone?). The credit crunch did not descend from the sky, it was made by the banking institutions in this country, and I seem to recall that they are receiving government aid. Why didn’t they have to sleep in their own bed? Are the automakers paying for their mistakes? Big time! Is the current liquidity crisis stemming from incorrect product mix? NO! It will be far worse for the economy to let the big 3 fail in bankruptcy than to loan them cash at reduced rates for the short term. CNBC has a poll out asking if the government should give more money to the auto industry. More money??? They haven’t gotten any money at all yet. And the $25 billion loan program that the Department of Energy is running is in response to the new regulations that Congress imposed on the automakers earlier this year. It was known that the timeline they imposed on the automakers to comply with the new CAFE standards would require them to spend $100 billion in the near term. And by the way, in reading the rules for the DOE program which just came out today, you don’t have to worry about the big 3 using these funds, they won’t qualify, as they have to prove long term viability which cannot be done when they have no access to a market for short term funding!!!

Tracey A Smith
The Karma Report Editor , thekarmareport.com

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post #54 of 70 (permalink) Old 11-10-2008, 08:27 AM
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Quote:
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I've got a friend who is a regional manager at Krogers grocery chain. The margins are just nightmarish. 1% is the difference between a profitable store and being on the "should we close it" list. And from friends who are in retail, I know it is not much better. You have a bit more leeway as you have less "shelf-life" issues. But the issues are the same.

Most of the small manufacturers who supply to the bigger manufacturers are on such a tight budget that I frankly don't see how they make it. I know of one who has not brought home a check in the past two years. He makes enough to pay his employees, keep the biz open and his credit good. He says that he will take money again when biz is better. He has 130 employees in Eastern Kentucky that are unknowingly depending on his generosity.
I attended a small meeting between two of our buyers and the owner of the chain for which I work. The man took his buyers to school and in just a few short minutes, I witnessed a demonstration of how to pit one vendor against another with the ruthlessness that it takes to keep a retail business in operation.

At a time when other retailers are shuttering stores (Circuit City), this man is opening new locations and carries no debt. The bank comes to him and OFFERS to loan him money. The plan was for 2 new locations this year but the opportunities were so numerous that 2 became 10 in 2008.

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post #55 of 70 (permalink) Old 11-10-2008, 08:27 AM
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Wouldn't this all be solved with a sensible, working trade policy? I know nobody likes tariffs, but we need to make domestically produced products competitive. (After making a quality product, that is.) We can pay for it now, or pay for it later with bailouts on credit.

Or, is it just too late?

Actually, nevermind. The big 3 can't seem to make a good car. If extinction can't motivate them, nothing will. Tariffs would just give them incentive to maintain the status quo. We can't legislate desirablility beyond 35 MPG, and I don't think we want to if we could. Tariffs might have saved Curtis Mathis, but not these guys.

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post #56 of 70 (permalink) Old 11-10-2008, 08:37 AM
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Hey. I had a response all ready to go.

Unexpected, to say the least.

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post #57 of 70 (permalink) Old 11-10-2008, 08:43 AM
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I attended a small meeting between two of our buyers and the owner of the chain for which I work. The man took his buyers to school and in just a few short minutes, I witnessed a demonstration of how to pit one vendor against another with the ruthlessness that it takes to keep a retail business in operation.

At a time when other retailers are shuttering stores (Circuit City), this man is opening new locations and carries no debt. The bank comes to him and OFFERS to loan him money. The plan was for 2 new locations this year but the opportunities were so numerous that 2 became 10 in 2008.
It can be very good for the retailer/manufacturer at the onset. The problem comes later down the pike. By having the vendors reduce each other to rubble, one survives, the other oft times does not. And should something happen to the "winning" vendor, the retailer/manufacturer now has nobody to quickly turn to for materials. He is then reduced to propping up the vendor himself or having his business impacted while he rebuilds a vendor network. I watched Square D do this as then moved from 100+ vendors to 13 and then got greedy and tried to take it one step further. I was in the 100+ to 13 rationalization project and it was just brutal.

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post #58 of 70 (permalink) Old 11-10-2008, 08:47 AM
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Bear,
That attached link is a little outdated, but you get the picture.

http://www.ita.doc.gov/static/auto_reports_jobloss.pdf

By the way, I don't see where we have 5 millions people in the industry you mentioned that may be on the street if the Big 3 goes belly up unless there was a huge spike in the ENTIRE auto industry employment since the report came out. If and when the Big 3 goes under, rest assure there are other car companies will pick up the slacks. Those who choose not to stay in the industry will find another line of work, it's human nature. Where are all the GE toaster and TV workers nowadays?

The continued path to rewarding bad behavior only make matter worse, this will come back to haunt us again in 15 -20 years from now.

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post #59 of 70 (permalink) Old 11-10-2008, 08:50 AM
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Wouldn't this all be solved with a sensible, working trade policy? I know nobody likes tariffs, but we need to make domestically produced products competitive. (After making a quality product, that is.) We can pay for it now, or pay for it later with bailouts on credit.

Or, is it just too late?

Actually, nevermind. The big 3 can't seem to make a good car. If extinction can't motivate them, nothing will. Tariffs would just give them incentive to maintain the status quo. We can't legislate desirablility beyond 35 MPG, and I don't think we want to if we could. Tariffs might have saved Curtis Mathis, but not these guys.
I think it is a misconception that the Big Three can't make good cars. Now I don't know if I would compare their entry level cars with a C Class or a Acura TL but then again they cost a bunch less. If the build quality can be made to equal my GMC truck or the Corvettes or the Caddys or Buicks or even the new Malibus, there is plenty of hope that they can build good cars. And at Ford, the Focus in a hit all over the world, The F150 is a very good truck, the Mustang has is well built, the new Milan is a well built car.

Chrysler still builds one of the best, and child proof minivans in the world. Some of their new lines are very well built [but styled odd to me].

I don't think it is a problem with apples to apples quallity comparos. I think folks compare the base rental Malibu with their loaded Camry or Accord and see it coming up short.

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post #60 of 70 (permalink) Old 11-10-2008, 08:54 AM
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Originally Posted by Gregs300CD View Post
Wouldn't this all be solved with a sensible, working trade policy? I know nobody likes tariffs, but we need to make domestically produced products competitive. (After making a quality product, that is.) We can pay for it now, or pay for it later with bailouts on credit.

Or, is it just too late?

Actually, nevermind. The big 3 can't seem to make a good car. If extinction can't motivate them, nothing will. Tariffs would just give them incentive to maintain the status quo. We can't legislate desirablility beyond 35 MPG, and I don't think we want to if we could. Tariffs might have saved Curtis Mathis, but not these guys.
What makes you think they will learn? After the energy crisis in the '70s, what did they do? They produced more gas hogs and SUV. Instead of retooling and producing alternative energy vehicles, they went back to the merry way of producing junks till the 2-stroke Honda Civic came to the American shores and got a toe hold to the auto industry. Did they learn anything? Nooooo.

I say sink the Big 3. The sooner the better.

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