Large Scale Central

A Business Man's Response to GM's Bailout Requests

General Discussion
#1

Sometimes I think I am alone in my views on the current financial and business situation in our country and the world, but then I read something like the two letters below. This exchange is about a month old, but is even more valid than when it first took place.

First is a plea from the President of General Motors for their employees and suppliers to contact the government and ask for bailout money for what used to be a private, money making company.

The second letter is from a long-time supplier of high performance production machinery to the auto manufacturers. I have previously dealt with Greg Knox’s company, so can vouch for the letter’s authenticity and I can also tell everyone that Mr. Knox speaks from direct, inside knowledge of the automotive industry.

Mr. Troy Clarke, President of General Motors, North America said:
Dear Employees & Suppliers,

Congress and the current Administration will soon determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history. Your elected officials must hear from all of us now on why this support is critical to our continuing the progress we began prior to the global financial crisis… As an employee or supplier, you have a lot at stake and continue to be one of our most effective and passionate voices. I know GM can count on you to have your voice heard.

Thank you for your urgent action and ongoing support.

Troy Clarke
President General Motors North America


++++++++++++++++++++++++++++++++++++++++++++++

Mr. Gregory Knox, President of Knox Machinery, Franklin, OH said:
Gentlemen:

In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clark, President of General Motors North America.

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new “messiah”, Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”… Believe me folks, The dream is over!

This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities…this dream where you still think the masses will line up to buy our products for ever and ever.

Don’t even think about telling me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s throughout the Midwest during the past 30 years and what I’ve seen over those years in these union shops can only be described as disgusting.

Troy Clarke, President of General Motors North America, states: “There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not.”

You’re right Mr. Clarke, it’s not JUST management…how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass…so they can come in on the weekend and make double and triple time…for a job they easily could have done within their normal 40 hour work week.

How about the line workers who threaten newbies with all kinds of scare tactics…for putting out too many parts on a shift…and for being too productive (We certainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?)
Do you folks really not know about this stuff?!? How about this great sentiment abridged from Mr. Clarke’s sad plea: “over the last few years …we have closed the quality and efficiency gaps with our competitors.”

What the hell has Detroit been doing for the last 40 years?!? Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke!

We are living through the inevitable outcome of the actions of the United States auto industry for decades. It’s time to pay for your sins, Detroit .

I attended an economic summit last week where brilliant economist, Alan Beaulieu, from the Institute of Trend Research , surprised the crowd when he said he would not have given the banks a penny of “bailout money”… “Yes, he said, this would cause short term problems,” but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day… and the following very important thing would happen…where there had been greedy and sloppy banks, new efficient ones would pop up…that is how a free market system works…it does work…if we would only let it work…"

But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn’t work - that we need the government to step in and “save us”…Save us my ass, Hell - we’re nationalizing…and unfortunately too many of our once fine nation’s citizens don’t even have a clue that this is what is really happening…But, they sure can tell you the stats on their favorite sports teams…yeah - THAT’S really important, isn’t it…

Does it ever occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?.. How can that be??? Let’s see… Fuel efficient… Listening to customers… Investing in the proper tooling and automation for the long haul… Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning… Treating vendors like strategic partners, rather than like “the enemy”… Efficient front and back offices… Non union environment…

Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know down deep in their hearts.

I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into - my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) - I make them stand on their own two feet and accept the consequences of their actions and work through it.

Radical concept, huh… Am I there for them in the wings? Of course - but only until such time as they need to be fully on their own as adults. . .

I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins.

Bad news people - it’s coming whether we like it or not. The newly elected Messiah really doesn’t have a magic wand big enough to “make it all go away.” I laughed as I heard Obama “reeling it back in” almost immediately after the final vote count was tallied…“we really might not do it in a year…or in four…” Where the Hell was that kind of talk when he was RUNNING for office…

Stop trying to put off the inevitable folks … That house in Florida really isn’t worth $750,000… People who jump across a border really don’t deserve free health care benefits… That job driving that forklift for the Big 3 really isn’t worth $85,000 a year… We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe. .

That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home… Let the market correct itself folks - it will. Yes it will be painful, but it’s gonna’ be painful either way, and the bright side of my proposal is that on the other side of it all, is a nation that appreciates what it has…and doesn’t live beyond its means…and gets back to basics…and redevelops the patriotic work ethic that made it the greatest nation in the history of the world…and probably turns back to God.

Sorry - don’t cut my head off, I’m just the messenger sharing with you the “bad news”. I hope you take it to heart.

Gregory J. Knox, President
Knox Machinery, Inc.
Franklin, Ohio 45005

#2

Jerry,
I understand the passion but it seems that in both circumstances, the employees are being blamed as responsible for the economy. In the auto industry one really needs to look at business decisions made. In the early 1970’s Detroit saw the need for small compacts to beat the energy crisis. It was soon learned that the crisis was contrived and a standover tactic to gain more income for oil producers. Did American industries continue to produce compacts? Immediately, the ‘big three’ embarked on the road to big iron and even in today’s climate the SUV is still the car of choice. Twenty years ago, Toyota was a bit part player with minimal intrusion in the American market. Today it outsells the second and third place manufacturers combined. How did it achieve this? It looked to the changing market and concentrated on smaller cars, much as America did thirty-five years ago.

   One cannot say that employees have a vested interest and put the blame squarely on their shoulders.  Management controls how a company operates.  Employees are a production cost,  as are steel and plastic and OE suppliers.  Sure highly paid non-performers are a debit to manufacturing,  but so is a CEO paid in the tens of millions of dollars.  How much does Mr. Troy and Mr. Knox make per year,  including bonuses and allowances?   People have lived beyond their means and what the economy is able to sustain.  The current situation is like a volcano erupting.  For years pressures have developed under the volcanic crust.  The volcano erupts destroying the area around it.  In time the eruption ceases and life begins anew.  However,  things do not change and the pressures build up again awaiting the next eruption.

   An auto industry bailout needs assurances that the big iron and the monster SUV's are long gone.  Japan learned that from the beginning of car production and rarely ventured into the large car market,  except to appease the American appetite for big is best.  Management failed to see worldwide consumer demand moving away from monster truck.  Now consumers are unable to even afford subcompacts as finance is crippled.
#3

I don’t think the auto industries problems are just management related… It’s been coming to a head by poor management, unions rules and dictating, and the workers…

Management is not a company, nor is just a union, nor is just employes, it takes all 3 to really screw it all up…

:slight_smile:

#4

I work in computers. I know all about screwing it all up :smiley:

#5
Andy Clarke said:
I don't think the auto industries problems are just management related.... It's been coming to a head by poor management, unions rules and dictating, and the workers...

Management is not a company, nor is just a union, nor is just employes, it takes all 3 to really screw it all up…

:slight_smile:


Firmly agreed!

I also think Mr. Knox makes those thoughts very clear in his letter.

There is a great tendency for folks to say “Yeah, everyone is responsible, except for . . .” That being the individual’s specialty or interest group. Nowhere does Mr. Knox say that it is only the employees, or the management, or the unions, or the product choices. His point is that these companies have failed, and that pouring more money into them is just throwing good money after bad.

The only thing more disgusting than financially supporting the status quo at our failed auto companies is the idea that Congressman Barney Frank can run these companies better than the folks that have been running them. That is truly ludicrous!!

Happy RRing,

Jerry

#6

I admit that I am not very well read on this subject, but I haven’t heard anything that explains how a multi-billion dollar company, who has been very profitable in the past, doesn’t have reserves enough to weather bad economic times. Did they have all their reserves invested in the market?

The parent company of the maker of my 2 year old RV (Moaco Coach) went belly up last week. If GM fails, I’ll be puling an orphaned travel trailer with an orphaned SUV :frowning:

#7

Jon:

I’m no expert, but they haven’t been very profitable for years, while they have continued to spend like they were very profitable.

Consider some corporate perks and the top guy for example:

Until recently, GM North America operated a fleet of 7 high cost luxury jet aircraft. These airplanes were used to take the top executives to various meetings and to their vacation hideaways. The 7 airplanes were paid for and maintained 24 hours / day, 7 days / week and 365 days / year, on call, just in case an executive decided to go somewhere.

Mr. Richard Wagoner became GM’s CEO in 2000. Their stock was trading at ~$60 / share. Under his ‘leadership,’ GM continued to pay large dividends to stockholders while he allowed their employee pension and health care benefit obligations to increase at a staggering rate. Mr Wagoner also found it much easier to simply agree to all union demands, rather than to say, “Sorry folks, we need to draw the line on some wages and benefits.”

Mr. Wagoner also bet that American consumers would continue to purchase gas guzzling SUVs, which was correct until the price of gas went to $4.00+ / gallon. One source reports they have recently lost over $2 billion on defaulted SUV leases.

In 2007, with the stock price down to ~$15.00 / share, Mr. Wagoner took home $14,415,914. That’s $14.5 million, and doesn’t include the cost of transporting his stupid a$$ around the world on his private airline.

GM lost ~$31 billion in 2008 while Mr. Wagoner’s compensation was $14.9 million. Their stock is currently trading at ~$1.50 / share and the same Mr. Wagoner is agreeing to take a salary of $1.00 / year, but plans to continue providing his great leadership into the foreseeable future, or at least until he has run through all the money Obama and company can shovel into the U.S. Treasury printing presses.

Ford and Chrysler are in similar circumstances. Too much wastage, high employee costs at all levels, virtually zero in the way of leadership, poor product decisions, and signed up for long-term benefit payouts that permanently choke off the hope of recovery.

IMHO, there is a small chance that this can be fixed through the massive government intervention that is currently going on, but the certain fix is to let these companies sink under their own weight, to be replaced by better managed, more efficient and better staffed companies with better products and operations. That’s how capitalism is supposed to work.

Happy RRing,

Jerry

#8

11.9 million of his salary was stock…now worth less than $650,000.
I bought new GM cars in 2001,2003 and 2006.
They were all great cars. Pretty much trouble free.
Ralph

#9
Jerry Bowers said:
The only thing more disgusting than financially supporting the status quo at our failed auto companies is the idea that Congressman Barney Frank can run these companies better than the folks that have been running them. That is truly ludicrous!!
Could he possibly do worse?
#10
Greg Knox said:
That house in Florida really isn't worth $750,000... People who jump across a border really don't deserve free health care benefits... That job driving that forklift for the Big 3 really isn't worth $85,000 a year... We really shouldn't allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe....That couple whose combined income is less than $50,000 really shouldn't be living in that $485,000 home.
Andy Clarke said:
I don't think the auto industries problems are just management related.... It's been coming to a head by poor management, unions rules and dictating, and the workers.

Management is not a company, nor is just a union, nor is just employes, it takes all 3 to really screw it all up.


Andy has hit the nail on the head. The causes of the current financial downturn are complex, and not just down to unions.

I wouldn’t be surprised if Greg Knox sees the causes as complex, too, though the quote Jerry’s posted could easily be interpreted as an anti-union diatribe. There are pieces in it (see quote, above) that are, in my opinion, 100% accurate.

When union dues go to benefit members (e.g., subsidised health insurance, a credit union), members are substantially better off financially than their non-union compatriots. My union does that.

Many of us are old enough to remember the Brando classic “On The Waterfront”. The sort of bully-boy tactics it portrays are alive and well in the construction industry here. They went a long way to costing the Western Australian Labour government the last state election.

#11

Don’t start the “class envy” thing about the eeeeevil CEOs. Hell, A-Rod just got $250million (?) to hit a baseball?

The socialist Unions and the cosanostra that owns them are ruining this country. The average UAW worker, with salary and benefits is paid $144 per hour. Yet, all my Union buddies I discuss Unions with, none of them will hire Union carpenters, etc. to work on their homes because it costs too much. Hypocrites.

#12
David Hill said:
Don't start the "class envy" thing about the eeeeevil CEOs. Hell, A-Rod just got $250million (?) to hit a baseball?

The socialist Unions and the cosanostra that owns them are ruining this country. The average UAW worker, with salary and benefits is paid $144 per hour. Yet, all my Union buddies I discuss Unions with, none of them will hire Union carpenters, etc. to work on their homes because it costs too much. Hypocrites.


David,
I don’t know where you get that figure for UAW workers…but it is a load of horse crap. The figure is around $79 an hour and includes the large cost of retirees. Toyota and Honda don’t have these costs, as their US plants have not been in operation long enough to incur retirement costs.
So, if you work 30 years for a company…do you not believe you deserve a pension?
As for the hypocrites…yes they can all kiss my a**.
Ralph

#13
Ralph Berg said:
David Hill said:
Don't start the "class envy" thing about the eeeeevil CEOs. Hell, A-Rod just got $250million (?) to hit a baseball?

The socialist Unions and the cosanostra that owns them are ruining this country. The average UAW worker, with salary and benefits is paid $144 per hour. Yet, all my Union buddies I discuss Unions with, none of them will hire Union carpenters, etc. to work on their homes because it costs too much. Hypocrites.


David,
I don’t know where you get that figure for UAW workers…but it is a load of horse crap. The figure is around $79 an hour and includes the large cost of retirees. Toyota and Honda don’t have these costs, as their US plants have not been in operation long enough to incur retirement costs.
So, if you work 30 years for a company…do you not believe you deserve a pension?
As for the hypocrites…yes they can all kiss my a**.
Ralph

Now don’t get nasty, Ralph. The $144 figure is the wages and all benefits: salary, health insurance, dental insurance, vision insurance, paid holidays, paid sick days, paid vacation time, FICA, disability insurance, uniforms (?), bonuses, retirement, 401 (k) matching funds, etc. etc. etc.

Toyota, et al is around the $79 figure you mentioned.

The company or union does not “provide” anybody’s pension. You work for every dime of it, and then some.

#14

Not getting nasty with you, David. Your figures are incorrect.
The hypocrites can still kiss my a**.
Unless you are a hypocrite…it does not apply to you.
Ralph

#15
Ralph Berg said:
Not getting nasty with you, David. Your figures are incorrect. The hypocrites can still kiss my a**. Unless you are a hypocrite........it does not apply to you. Ralph
I meant the "load of horse crap" remark. But I'm a 1970's sensitive male kinda guy anyway. So ignore my comment, please.
#16
David Hill said:
Ralph Berg said:
Not getting nasty with you, David. Your figures are incorrect. The hypocrites can still kiss my a**. Unless you are a hypocrite........it does not apply to you. Ralph
I meant the "load of horse crap" remark. But I'm a 1970's sensitive male kinda guy anyway. So ignore my comment, please.
Sorry! No insult intended. I'm a loud, tell it like I see it kind of guy. Only place I've ever been accused of being sensitive is here........as in over-sensitive. So, I guess that makes me a mis-understood kind of guy! Ralph