You Can't Get Different Results Doing The Same Thing

Comments (Archived):

1. I am not going to argue the merits of bailing out wall street but I do think that the failure of banks and brokerages, at least the large global ones, would have caused way more global financial damage than the loss of the us auto industry

   1. So, fred, it’s OK to have given away that money to Wall Street without exacting concessions because they’re important to the economy? That’s poor logic. You’re right in this post, but wrong that the same exact logic does not apply to the financial companies. It does. It’s a far bigger insanity to have given away a trillion dollars without forcing concessions than it would be to give away $14billion. If you’re going to make a principled argument be consistent.

      1. Two wrongs don’t make a right.

2. Doing the same thing over again and expecting different results by definition is called “Insanity”.

   1. A clever statement, frequently made in many contexts. However, some people, in some situations (athletics and music, to pick two examples) call it “practice.”

      1. Here their expected result is “improvement”. Which is consistant throughout each round. Now insanity will be, when they perform some form of “practice”, find that it actually decreased their performance, but continued repeating it expecing a different result the next time.

3. i don’t agree with this thinking. It seems very penny-wise/pound-foolish.We’re giving away a trillion dollars to shore up financial companies, with nearly nothing asked in return. The CEOs keep their multimillion dollar bonuses earned during the “profitable” years. But of all things, the republicans stand in the way of this simply because there is a union involved?If we hadn’t had 8 years of Republican rule, maybe I’d be less weary that this was the shock doctrine in full effect. The unions are far from perfect, but at least they’re the ones standing up for workers in this whole crisis. I don’t see anyone else doing the same.The auto industry has made its mistakes – but let’s not forget that their crisis was largely precipitated by the collapse of the financial markets, and we have no problem throwing unchecked billions at those companies.

4. The Republican party seems to be quietly reinventing themselves during this period of federal bailouts. They almost scuttled the TARP and now are throwing wrenches in the auto bailout. Hopefully they will prove that an intelligent, conservative opposition in DC is a good thing for the nation, and make the angry screaming at the left a thing of the past.

   1. I think the key word is “intelligent”. The republican party always seems to “get it” when they are the minority.

   2. I already like them more as the minority!But seriously, they are playing an important role here is asking the important questions that need to be askedEvery good venture firm has a ‘naysayer’ in the partnership. One firm I worked with had a partner they called ‘dr no”. Its important for every decision making entity to have a dissenting party and the republicans are doing well with that right now

   3. Conservative? The Republican’s can’t lay any credible claim to fiscal conservatism after the last 8 years. They’re not doing this from principle, but because they have nothing to lose.

5. Bridge loans with conditions is fair. But the way it is being structured with regards to the Auto Industry is to demand conditions of the workers not of the management. Also They want to walk away paying out the Benefits to retirees who contributed tot eh Voluntary Employee Benefits programs. Agreed if you loan or give money you expect something in return, but hopefully what you expect is FAIR. Question is how you define FAIR

   1. Fair is everyone gets skewered. I agree with you that mgmt change should be part of the equation here

6. Fred, I couldn’t agree more. I’ve written the same stuff ad nauseum but nobody in Washington seems to care. One could argue that the same thing is happening with the bank bailouts. Are the institutions receiving capital really doing things differently? Are they being forced to address fundamental business model issues? Not unless our Government starts adopting “tough love” policies that force radical restructuring, management changes and a clear path for exit. We are so far off the mark it’s not even funny.

   1. RogerI should have mentioned it in the post but I’ve been inspired by your recent posts and your thinking is embodied in mine on this stuff. Don’t lose heart. Your posts are being read and making an impact. You just have to keep it up. You might want to get them back on seeking alpha btw. More distribution equals more readers equals more impact

      1. I appreciate that, Fred. I do, however, perceive that we (you, me and many other popular bloggers who aren’t recognized as “political bloggers”) are operating in a large echo-chamber that is firmly outside the Beltway. I’ve been thinking of ways of getting more active in the dialogue by commenting on posts in more traditional political blogging venues, e.g., Politico, etc., because I feel as if the blogging world is a giant Venn diagram with multi-topic blogs (like ours) in one sphere and Politics in another, with no overlap. Concerning Seeking Alpha, you know where I stand. I was very clear with them about my unhappiness with parallel conversations and wanting to merge them via my Disqus feed. They have not seen clear to do this, or to adapt in the way Silicon Alley Insider has by accomodating your Disqus comment thread. I don’t like managing multiple threads which I feel I have to do because of the intensity of the SA community, and I don’t have the time. So if and until they make this change, I will forgo the readership in order to maintain my sanity.

   2. Unfortunately it’s not just an isolated thing. The U.S. economy has fallen behind for many reasons over the past decade, but Americans still want to live as if they were in the long boom. Now we’re having to pay the piper, and we’re in massive denial. That’s the explanation behind the flailing bailouts of the financials, of the car companies, of the entire real estate industry … Everybody wants to prop up an unsustainable situation no matter the cost. It’ll take a long time for people to come to terms with it. Until then we should expect a lot more denial, scapegoating, and terrible policy ideas from all sides.

7. How can any of us expect anything different if we elect either a democrat or a republican to office? both these parties are corrupt greedy bastards. we asked for it we’re gonna get it and it’s gonna hurt real bad. when we don’t like the pain any more we will make the changes. here’s a couple of podcasts to make us all think. http://www.guyfinley.com/Wi… and http://patrickwanis.com/Rad…

8. Letting a Union into your business is creating a new competitor for your business. They will constantly bargain to reduce the profit of a business to the benefit of their workers. They will create barriers to management to change how the business runs to help their members avoid disruptions to their lives. They will compete on every aspect of your business which will naturally limit the total amount of success you can achieve. Is there a venture investor which would fund a unionized startup company? This is why there have been no new car companies created domestically in this country.I am not the first to like the idea that the Detroit car companies should contract our all their manufacturing and focus on design and marketing. They should do it in 2011 and put the RFP out on the street early next year for bid on the manufacture of 400,000 or more cars as a start.

   1. That’s a very provocative thought. I like it

   2. You could say the same thing about any employee, couldn’t you? The difference being that unions have leverage.

   3. The problem is an imbalance between shareholders and non-unionized employees. Shareholders get to bargain collectively through management, but workers have to bargain as individuals.Obviously, you would workers in a capitalist society to try get as much money for their work as they can, and they’ll get more if they unionize. Whining about it isn’t very productive.

      1. The flaw in your argument is the supposition that there IS an imbalance between workers and management. Your kind of outdated thinking is the reason why Unions can not move past the ossified practices of the past. The car companies should go out of business and will because of the incompetence of agreeing to this document. http://laborpains.org/2008/…

9. “”” I’m with Corker and the republicans on this one””” I guess we now have an explanation for why there was snow in New Orleans this week – hell has frozen over 🙂 Seriously, though, this is indicative of how the UAW and Ettleburgerfingermixerburkowitz has approached this situation. They act like they’re giving true concessions, when in reality, they are doing the equivolent of a multi-billionaire compromising with a hundred thousand dollars – insignificant. Simply put, they want their cake and to eat it too. And, I don’t think you can deny the power the UAW has over Democratic lawmakers, specifically Pelosi, Barney Frank, Harry Reid et al, regardless of which side of the aisle you lean towards. Either way, there is no real pro-market argument for bailing the automakers out, at least not one that I have seen thus far.

10. I think Bush is offering this bridge because Obama asked him to.

    1. I think so too. Its up to obama and the new elected legislators to get this right

    2. funny, this is exactly what I was thinking before I even opened my laptop… It sure smells like W is working hard for his pardon from Obama.

11. Exactamundo. This type of situation is exactly what bankruptcy is for. Twenty years ago, the managers of this corporation agreed to terms that have now become totally dysfunctional. That was really dumb, and they shouldn’t have done it. Agreed.But this company should go out of business, and something new (and competitive) should rise from the ashes. If that means that autoworkers can’t make the same wages, I’m sorry. If it means that people who thought they had pensions now don’t, I’m sorry. (That’s happening to a lot of people…)But there will always be a huge need for pickup trucks in the US. And if a company can be formed that can build and sell pickup trucks at a profit, those factories will be humming. There will be jobs for guys who can weld, put on wheels, and install engines. There will be a need for millions of batteries and mufflers.But it may not say “G.M.” on the door. Go out to the airport. There are no “TWA” or “Braniff” signs anymore.

    1. Or pan am either

    2. A pension is not a gift. It was part of the agreed upon compensation for the work they did.

       1. It’s certainly not. But if the UAW kept taking the short-term route, locking in unsustainable pension guarantees for its members without asking if the auto companies can actually pay on those guarantees, isn’t it actually doing a disservice to its own members, by encouraging them to count on a pension that’s not reliable?People have been warning about defined-benefit pensions for decades now, at the UAW and in many other parts of the U.S. economy. The UAW chose not to listen to those warnings, and unfortunately its their own workers who are going to bear the terrible cost of their mistake.

       2. Never said it was a gift. But any agreement to “Pay You Later” can be canceled by Bankruptcy. That’s the risk that is taken by agreeing to take low wages now and a big retirement payoff later. The union members may not think of it as a risk, but it’s always there.I may see this more clearly, because my generation thinks it is more possible that UFOs exist than that we will actually get a meaningful return on the money we’ve put in to Social Security…

    3. “If it means that people who thought they had pensions now don’t, I’m sorry. (That’s happening to a lot of people…)”They’ll still get their pensions, it’s just that it will come from the tax payers. Read up on the Pension Protection Act. letting these companies fail would cost the government far more in terms of pension payments and reduced tax revenue then the cost of the bridge loan so far. Now obviously if we had to make these payments every year it would be a problem.But if it’s just a one-time thing, it could save the government hundreds of billions in pension protection payments over decades.

12. Couldn’t agree more – great post. And a great example of why divided government – although messy – is a very good thing.

13. My god we agree on something.

    1. It could be a trend developing!

14. After his terrible march to the sea, William T. Sherman once told an assembled group of Atlanta citizens that “their failure was in thinking that the general defeat of the south would not be a personal defeat for each of them.”This is probably what GM needs to hear.In general, I believe that people working in manufacturing deserve a better life than they probably get, but trying to stave off compensation changes until 2011 when the auto industry is failing now seems gallingly arrogant.That said, Bush should not let the auto industry go bankrupt in the last month of his administration. If your partners were about to hand over the firm to other partners, you would probably bridge a portfolio company until the new partners could figure out what to do with that company.

    1. Totally agree and that’s what going on here. But the new partners also ought to communicate now to the portfolio company what the terms of their deal will be. And obama had better be telling the UAW what reality is now, and not be waiting until inauguration

       1. Who’s pretending that additional union wage concessions are “make or break”? The Big Three aren’t pounding the table and blaming the unions for the failure of the bailout bill. The only people pointing their fingers at the unions are the Republicans who prevented its passage.Putting it into their words: “This is the democrats first opportunity to payoff organized labor after the election. This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it.”Where in the party memo can I find concern about the viability of the auto industry without additional wage concessions, as opposed to talk about punishing the unions for supporting Democrats and “taking shots” against organized labor?

       2. The reality is the republicans will only have 41 senate votes in January (with a slim chance of 42 if they win the MN recount, which is looking less likely lately), and an auto bailout bill will be much easier to pass. And they’ll be able to access the rest of the TARP money and pay them out without any concessions at all (except for the weak ass ones put in for financial companies)Face it, Obama ♥ the unions and it’s you who should be dealing with reality.

15. I agree with what you are saying, but my understanding of the auto bailout is a little different. I would be interested to see the books of the Big 3 because there are too many people trying to influence the public opinion.What I have heard is that the Union labor expenses are an almost inconsequential sum of money. Obviously if the new union contract was going to save $0.2bn per month it wouldn’t be reasonable to expect different results.So yeah, the Big 3 should have to change their ways, but in some ways trying to negotiate the Union down is trying the same thing over again expecting different results.

    1. It’s healthcare payments that are really killing them. Surprise surprise, the countries where cheap, small cars can be made profitably all have universal healthcare..

       1. I am with you on this one ‘example’We need universal health care in this countryAnd would you mind commenting here in your real name. Most everyone else does and its part of why the conversations here are usually pretty good

16. Agree wholeheartedly. I think part of the problem is that until you see what can be done during bankruptcy, it feels like the end and not the means. Its not just payroll and associated costs, but management teams, product development, relationships with dealers and suppliers etc. I have to believe that if some of the folks who have been creating wonderful new companies online, had turned their attention to the auto industry, we might see something different – what would it take to make that happen?Finally, why not bring in some folks who know about turnarounds? Why not find a way include firms like KKR, Bain et al (politically this couldn’t get worse, could it?)? Surely they have a better shot at making a turnaround work. Perhaps the are just waiting for Bankruptcy to begin their plays.Thanks for a thoughtful post, as usual,

17. Blame the horrible unions all you want, but the auto companies won’t be able to balance their books on the backs of their workers. The delta between the wages earned by Michigan-based auto workers and nonunion auto workers only accounts for a few hundred dollars in the cost of a car (this from a NY Times piece that ran this week).Corker isn’t standing up for truth and justice and he’s not interested in saving the country’s economy. He’s engaging in a kind of regional trade protectionism, trying to help workers in his state at the expense of Michigan-based workers.

    1. I read that NYT piece and it’s just not that accurate. What about how many workers they have and the staffing mix? A huge problem with union contracts and seniority rules is the difficulty they create in reducing the size of the workforce when demand drops. If they make cutbacks, they have to cutback all of the lowest paid workers.

    2. It should not go unnoticed that Corker, as mayor of Chattanooga, probably played a significant role in marshalling over $0.5 Billion Dollars in incentives to have a foreign automaker, VW, build a plant in Chattanooga – all in the name of 2000 plus automaker jobs in Tennessee.

18. I’m not sure how any company can survive paying it’s employees not to work.Ford lays off workers, they get unemployment and the company pays them the difference up to 80% of base salary. No one will quit or retire because they are working less than 50% of the year.

19. With GM, we are seeing the same thing that one can see throughout history. When entities, be they religious institutions, economic systems, nations, empires, civilizations or auto companies become so complex and trapped by mistakes of the past, they collapse because they can’t adapt to new circumstances.Collectively, we can prop this sector of industry up for a little while longer, but the end result is inevitable. I for one would rather take the pain now as it will only get worse. To me that means a pre-packaged Chapter 11 proceeding that converts debt to equity, throws the pensions onto the PBGC where they will inevitably go anyway and tears up the union and dealer contracts. The notion that people won’t buy cars from companies in reorganization is a red herring. Many people are not buying cars from GM today because they think the company is going out of business tomorrow. A GM reorganizing in bankruptcy would be an improvement in this regard.As far as the “the banks got it so why shouldn’t industry” theory goes, if we don’t make fundamental reforms like requiring greater levels of equity capital for market participants, regulating the CDS market for what it is — which is insurance — and discontinuing our policies that promote the purchase of a home as something other than an economic transaction, then we will see more of the same there too.

20. I agree the UAW must play ball with the automakers. But the focus on concessions, while obviously important to the companies’ immediate survival, is small cheese compared to the real issue: building better cars. A restaurant that’s losing customers to the killer joint around the corner can force the chef and kitchen staff to work more for less, but that won’t do much to improve the quality of the cooking. As for the automakers, beyond stuff like mandating higher fuel-efficiency and battery R&D, I question whether the feds can really extract the kind of commitments that would lead to better vehicles. As an aside, some of my cohorts at The Deal think GM is sure to go bust whether they get the dough or not (For anyone who’s curious, here’s what a GM bankruptcy would look like: http://bit.ly/frci)Just an opinion here, but I think much of the commentary attacking unions fails to appreciate just how much the American labor movement has done to empower–create, in fact–the middle class in this country. No middle class, no economic superpower. By that standard, collective bargaining has done as much to propel the U.S. economy as any supply-side tinkering with the tax code. Sure, the unions are part of the problem today. But as a society–as an economy–do we really want to go back to the good old days when the Henry Fords of the world held all the cards? If so, I can tell you where you can pick up a nice shirtwaist.

    1. Good comment. I am sure the post came across as blaming the unions. That really wasn’t my intention but their negotiating posture sort of shocks me given the stakes here

       1. The UAW has already made concessions with the auto makers. It’s not the Auto makers trying that is trying to lower wages and pension payments, they aren’t asking for anything as far as I can tell. The only people who are saying the Unions should accept less compensation is the republicans in the senate as a condition of getting a bailout.And it has nothing to do with the viability of the Automakers. There are a huge bunch of intrested parties that need to be negotiated with to lower the Auto maker’s cost structure, bond holders, suppliers, dealers and workers.But the focus is on the UAW because the republican party sees this as their chance to destroy the union that helped get Obama into office. They are only asking for concessions from the UAW, and none of the other interested parties.The senate republicans not the auto makers are willing to play Russian roulette with the economy because they hate unions.But the point is, the only one asking for these additional union concessions is the senate republicans, not the Auto makers, not Bush or Obama or democrats, or anyone else.

       2. No, I didn’t read your posts as blaming the unions. I’m referring more broadly to some of the criticism I’ve seen directed at the UAW.I can’t say I’m surprised at labor’s intransigence, even as doom approaches. In their institutional reflexes, the UAW (and AFL-CIO) are reflections of the sclerotic industries they serve. Like GM and other mature companies struggling to evolve, the unions are configured to resist change. The main goal of collective bargaining over the last several decades has been to preserve a rapidly eroding status quo. In some ways it would be more shocking if the unions were acting any differently.

    2. Going back to the world of Henry Ford might actually work out for the UAW. Henry paid wages well above the market rate at other auto manufacturers. The popular conception is that he wanted his workers to be able to be able to afford the vehicles they produced. The reality is much less egalitarian – he wanted a stable, professional, quality oriented workforce. His competitors paid “market wages” and as a result they faced high turnover and serious quality control problems. But he might remind Congress that there can actually be a financial return on treating workers like something more than a fungible commodity.I’ll grant that the UAW, through required disciplinary processes and, perhaps particularly, featherbedding, has been at times a serious impediment to plant efficiency and vehicle quality. That’s almost inevitable in a system that pitches employers and unions as adversaries; I can think of some “off the top of my head” approaches to try to remedy that problem, but all seem to carry a significant actual or potential downside. That’s probably why those vexing problems remain.

       1. True, Ford Motor paid well in its day. I was referring more generally to Henry’s longstanding resistance to unionization. If memory serves, Ford was the last big car maker to recognize unions as workers’ official representative in collective bargaining. And of course Hank had this unfortunate habit of using thugs, or the local cops, to beat up (or mow down, in the case of the Hunger Massacre) striking workers.

21. I didn’t say I wouldn’t have forced concessions. If I was in that position, and thankfully I am not, I am sure it would have been my first instinct. For the same reasons I outlined in the post

22. “You can’t get different results doing the same thing” is sound thinking. The twist here is that the union can say, look, over the past 5-10 years we’ve made material concessions to wages, benefits, penions, job security, etc in the name of restoring the industry’s competitiveness.In their view, then, you can’t keep doing the same thing — cutting employee compensation — and expect different results.In other words, if Hummer’s are $1000 cheaper, do we foresee Detroit being any more sustainable?

    1. If gas prices are $1.50/gallon? Hummers will sell and be extremely profitable for Detroit. If gas prices are $4+/gallon? They won’t sell in sufficient quantity to sustain the brand. A thousand dollars or so in the sales price? Much less significant.One of the reasons the Big Three are in so much trouble is that they have built a business model based upon their ability to sell high margin, gas guzzling vehicles, and have not found a way to profitably sell smaller, more fuel efficient vehicles. Congress has been complicit in this problem, creating and maintaining loopholes in CAFE standards you can literally drive that Hummer through. And states, through their franchise laws, have made it very difficult for the manufacturers to try to introduce innovations and efficiencies into vehicle distribution and sales. There aren’t any innocent parties involved, including the Republican senators who are presently squawking about unions.

23. The wages at US companies are already lower then at US-based, foreign owned factories in the south. The $71 dollar/hr rate includes pension payments. It’s the total compensation cost for the company divided by the total hours worked, but it includes pension payments for people who worked at those companies for years and years. In other words, the $71 figure is a lie.Toyota and BMW in the south have new plants, so they don’t have that legacy of older workers from decades past.But the actual compensation paid for working employees is actually lower.It’s really disgusting to see a millionaire venture capitalist whining about some poor blue collar worker “making to much” in this economy. Really it’s sick and you should be ashamed of yourself!

    1. I am not whining. I am simply saying that if GM and others are going to survive, labor costs are going to have to come down

       1. Fred -I think it would be well worth your time to read this brief article from the NY Times – http://www.nytimes.com/2008…In short, I don’t think you really responded to “example” and his point re: wages.I didn’t do my own independent analysis of the math but the article states that getting UAW costs roughly in line with the non-union costs @ Toyota and Honda will save ~ $800 / car….hardly the windfall that the Big 3 need to survive and become competitive again.This is much more than that in play here – in particular one point made in this article*********************And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.*********************In my family we have a saying – “if money can solve it, it’s hardly the world’s largest problem”….this looks like it could be a problem that money alone can’t solve.r.

24. York and Kerkorian told GM in 05 they had 1000 days left. They didn’t do anything. What makes us think the Feds will restore order. The government doing anything right is laughable.This is really sad

25. Eliot Spitzer is writing for Slate these days, which is pretty strange, but he’s still got some great ideas. He thinks the government should only save two of the Big Three, and basically choose the bid they like best:”Why don’t we tell the current Big Three that $25 billion in capital is available—but only to two of them? The surviving two will be those that submit the best, and final, binding bids, supported by all the necessary constituencies: boards, managers, suppliers, vendors, creditors, and the UAW…. The company with the least impressive plan will be denied funding.”http://www.slate.com/id/220…I actually like this idea a lot, because it forces some actual _competition_, which last I heard was sort of a big deal in capitalism. Of course, the hearings would end up looking a lot like that scene in The Dark Knight with the broken pool cue, but that’s okay.

    1. Eliot is smart

26. Arlington Bliss McCrum Jr to be exact. He’s a great guy too

27. Bliss McCrum sounds like a made-up name. Are you sure the cold medicine you’re taking isn’t causing you to remember things a little differently than they really happened? Because I’m pretty sure Bliss McCrum is like Captain America’s alter ego or something like that.

    1. lol, that’s what i was thinking too. arlington bliss mccrum jr sounds even more made up, for it implies the existence of an arlington bliss mccrum sr. it’s a cool name, though. parents made a good call on that one.regarding bailouts, remember the criminals in govt have no money and have made it clear they plan on borrowing it all via the issuance of treasury bonds. venture capitalists, remember that each dollar that private investors stuff into govt treasuries is one that won’t be going to you and your investment fund. and those funds received from the sale of treasuries will be invested into……drumroll please……the auto industry. lol. the whole thing is so ludicrous it would be funnier than bliss mccrum’s name, were it not so tragic.more importantly, though, this pushes us closer to the argentina/iceland point of currency devaluation. excessive debt leads to central bank insolvency which leads to a run on the currency. and when that happens…..oh boy. we’re going to need arlington bliss mccrum III to keep that joke running, ’cause lord knows there won’t be anything else to laugh about.

28. Excellent, excellent post. The US auto industry is in the toilet for two main reasons: management who will not innovate and give consumers what they want and labor costs that are way out of line and unsustainable. I find myself thankful that there are not 60 Democrats in the Senate for just this reason. Gridlock is not always a bad thing.

29. I think it was Benjamin Franklin who said “The definition of insanity is doing the same thing over and over and expecting different results.”? Bring on Joseph Schumpeter’s creative destruction – through the destroying of old industries new ones are born an grow.In my own humble experience I changed through necessity from steel -> chemicals -> engineering – > telecoms -> digital -> web 2.0 -> business services. As Plato is siad “necessity is the mother of invention”.

30. Well put

31. If I were UAW Management I would ask for the entire board and all senior management to go before any wage cuts were inacted, and they must all go without bonuses or parachutes. It is simply unbelieveable that the workers are the only ones who are really being asked to take the hit for this management idiocy.

32. Btw, I saw a part of the MS play today. The kids did great!

33. That’s interesting. How do the asian car companies do distribution and is there a better model out there?

    1. According to the New York Times, “Industry experts note that Chevrolet, G.M.’s flagship brand, has about three times as many dealerships as Toyota but sells about the same number of cars. That network is a legacy of the era when G.M. controlled 60 percent of the domestic market, instead of 20 percent or so today.” The article goes on to detailing why the dealership networks have become an unsustainable burden for the Big Three. In any case, restructuring Detroit amidst the toughest recession since WWII will have deep social costs.

       1. Ah, that’s a very good insightThey need to be able to shutter a large number of themOr do they simply need to change the whole distribution model?

          1. Any decent turn around plan should aim at cutting costs by shutting down unnecessary distribution points. Hopefully, removing unnecessarily protective state regulations could bring back enough competition into the system and allow more efficient distribution models to emerge.

34. There is an awful lot more focus on union contracts than there is on Detroit’s utterly outdated and bloated networks of car dealership, which they could have shed a long time ago, save for crippling state regulations. In all fairness, any Detroit bailout package should allow the big three to free themselves from their distribution networks.

35. It’s a muddy situation. To continue Fred’s analogy: the VC should offer a bridge loan, but only on condition that the company cuts salaries for the software development team, so that the company can survive long term. Which sounds reasonable, until you find out that one of the software engineers had slept with the wife of one of the VCs, another one had called another partner an “ignorant hick” in public, and a third one’s son had bloodied the nose of the kid of yet another partner. So you just don’t know what is reasonable and what is personal. Or in the case of the GOP vs. the unions, how much is rational and how much is ideological.That’s the unfortunate legacy of the Bush years. After they told us that Iraq was a legit threat, only to find out later that it was a pure lie and posturing, we don’t trust that party anymore. Consider, “drill, baby, drill”, too. Sure, getting more domestic oil sounds like a legitimate goal, but then you remember Bush and the GOP’s relationship with the environmental movement and you don’t know anymore what is behind it, concern for the energy supply or desire to stick it to the tree-huggers…

36. If there are two investors in the deal, and you know that investor A will do the bridge on good terms, then you can happily ignore investor B’s harsh demands. It seems pretty obvious that Obama has the UAW’s back, operating through Bush and the TARP. That’s why the UAW can turn down a deal that seems pretty reasonable to most people. The big loser from Corker’s deal would have been the Union itself — after all, why would the rank and file pay dues if their union doesn’t get them higher pay?If you were a manager of a pension fund, would you put your money into GM right now? Surely you’d be fired if you did. Take a look at the US budget and interpret the government as a business. It is basically a highly armed pension fund with a scary long-term balance sheet. Now look at the deals this fund has done the last few months. Does it make you feel better about the fund’s future?The sooner we get the focus on saving, working hard, investing, and innovating, the better off this country will be. Relics like GM are just in the way. Break it up and put it in the hands of people who will make something valuable out of the pieces. A bad bridge just prolongs the inevitable, and squanders more resources that could be put into productive investment. It might look scary and uncertain for the moment, but we have to have faith in the US, and believe that we will all be better off if we put resources in the hands of people who build value, not people who destroy it.

37. Let me see: The US give billions away annually in foreign aid yet the same Senators who vote for foreign aid won’t give auto makers a cent; Natural disaster victims get billions of dollars in US government aid to Southern states; Southern states give hundreds of millions of dollars in tax breaks to foreign car companies to build plants in their states providing foreign care companies with a competitive advantage; yet when one of industries woven to the fabric of our country is going down the tubes the Senate Republicans lead by the Southern Senators basically tell the auto industry unless they immediately lower costs including wages that the auto industry can go to hell.I say the next time those Southern States need aid they should go to Japan and Korea for help.Understand this. It is legacy costs (pension and healthcare benefits) that are making them uncompetitive. So basically what many Senators are saying is file bankruptcy and eliminate those legacy costs. Do any of these “WISE” people understand that those costs won’t go away those cost will simply be transferred to the federal government thru the Pension Guaranty Board where pensioners get about 50% of their pension) and Medicare/ Medicaid. WOW, transferring those costs to government will save US taxpayers tons of money. Give me a break!If the Congress believes there should be no bridge loan until significant wage concessions I say all federal government employees should take the same reductions because the deficit is much more severe than anything happening at the automotives.In closing let me say that the auto industry has been idiots for years. That said in the last few they have delivered on things that customers and the government are asking for. They are getting their costs in line; quality is equal to or exceeds many of the foreign car companies (See JD Power). and they have more fuel-efficient cars in their fleet than foreign auto companies.The biggest problem with US auto industry is perception. Since their reputations stunk so bad for years people are not even looking at their new cars. The US Auto companies need to get people in the show room to change the perception. The bridge loan will help keep the autos afloat but the auto companies still need to do their part.

    1. One step in the right direction is to stop giving Michigan’s Federal Tax dollars to Alabama, Mississppi, and Tennessee. Return them to Michigan. According to http://www.nemw.org/taxburd…, MICH Return on Federal Tax Dollars is 0.94. TN is 1.29, AL is 1.63, and MS is 2.02. Why should Michigan federal taxes subsidize building more automotive manufacturing capacity in the South, when this nation already has enough capacity? Give Michigan its money back.

    2. Welcom to A VC, Mr. Mike Moore! (just kidding, but there are similaritie: http://www.dailykos.com/sto…

38. Another story about union workers, hapless management and political support:http://www.dailykos.com/sto…

39. Here is a copy of a 2,200 page UAW contract agreement (Ford, 2007): http://laborpains.org/2008/…A random page:Subject: Computer Systems Access for UAWRepresentativesDuring the course of these negotiations, the parties discussedthe importance of certain International Union representativeshaving access to certain Corporate databasescontaining information pertinent to the accomplishment oftheir responsibilities.The Company recognizes the potential for efficiencies thatmay be gained by expanding certain access to differentCorporate data systems. At the same time, it must berecognized that the widespread availability of e-mail and thepublic Internet, increases the possibilities for the misuse orimproper control of the Company’s proprietary information.As such, the Company must ensure that access is limited tothose individuals with a demonstrated business need relatedto primary job functions. Furthermore, to protect the Company’sintellectual properties, the handling of such data mustcomply with security policies and procedures, and regulationsgoverning the public disclosure of this information. Tomeet these standards it is essential that the Companydatabase business owner has reviewed and approved anyaccess. Inappropriate access or misuse of data related to theFord Motor Company can lead to potential unauthorizeddisclosure of data, which could cause reputational damage,compromise the competitive position of the Ford MotorCompany, create potential violations of consumer privacyprotection, and could result in financial harm to the Company.Consistent with the guidelines listed above, and within 30days following the Effective Date of this Agreement, UAWand Company representatives from the Joint Programs,COMPUTER SYSTEMS ACCESS FOR UAW REPRESENTATIVES428

40. Fred:Because I get your posts a day late on FeedBlitz, I can read all the comments for interesting and topical items with the back and forth and thrashing work pretty much done by someone else. FWIW they shd bridge the car companies for 3months, 3 quarters, heck maybe even 3 years. We shd have learned our lesson from LEH that no matter how stupid and self-interested jerks like Waggoner, Fuld or Gittelfinger are, they run companies that are central to large parts of our economy. When LEH went down it took a lot of good people with it. The same will happen if GM goes to liquidation. (DIP bankruptcy is a dream).But that’s not what I want to talk about. It’s Bernie Madoff. Everyone wonders where the money went? Bad trades? Personal shoppers? Houses in Palm Beach? UJA donations? Sure, but not $50B. In the best traditions of Ponzi schemes, most of the money went from the latecomers to the oldtimers — from the yinge pischers to the alte kakkers. It was a massive generational transfer. And guess what? The UAW and Big 3 made the same kind of deal back in the 70s and 80s. So now there’s nothing left for the heirs. That’s what Reagan did back in 1981 with his tax cuts. The Greatest Generation got theirs.If you can think up a fix for the auto industry, keep it. It should work for the families that were ripped off by Bernie Madoff and our kids who have to pay down the enormous national deficit.

41. This is a messed up situation. It’s hard for us to know everything that is going on but I agree that everyone has to buy in to the ‘bailout’ which means executives and workers. It’s a tough time right now and now is when a true leader needs to stand up and get them through. They (and we) are in the same ship and we need to all ‘cut into muscle a bit’ as an investor friend of mine recently said to make it through. Those who aren’t willing to do that, need to go do something else or be fine with not having a job at all.

42. I do think we should be extracting significant reforms from banking andbrokerage in return for tarp funds

43. It’s one thing to be pro-union (I am at times) but it’s another thing completely to be using taxpayer money to protect an unsustainable cost structure that is partially based on above market labor costs.Well, by the same token, it’s one thing to be pro-banking, but another thing completely to be using taxpayer money to protect an unsustainable securities scheme that is partially based on outright fraud.You tried to draw a distinction between your position on TARP and the auto bailout in your responses to Nick Davis, but you didn’t make clear how you were going about this. Why is it different? Why is it important to get commitments from auto makers, but not from banks?I think it’s kind of besides the point to try and apply investment thinking to government, anyway, but