I understand the trouble in the housing/financial sectors, but how did it reach the automakers so severely?
why caused the automakers to almost go bankrupt?
- Thread starter Dear Summer
- Start date
"why caused the automakers to almost go bankrupt?"
Did you pass a 4th grade level of English/grammar courses?
Oh and it's not almost, it's 2/3 will unless they get a bailout from the government.
Did you pass a 4th grade level of English/grammar courses?
Oh and it's not almost, it's 2/3 will unless they get a bailout from the government.
MrChad
Lifer
- Aug 22, 2001
- 13,507
- 3
- 81
There are many reasons, but the major ones are:
1. Years of failing to compete with Japanese automakers, making cars that Americans did not want to buy.
2. Huge overhead costs related to healthcare, wages and pensions for unionized labor that limited their ability to adapt to the market and reorganize.
3. Poor decision making by executives and inflated executive pay (especially when compared to foreign competitors).
4. A global economic recession that is lowering demand worldwide.
1. Years of failing to compete with Japanese automakers, making cars that Americans did not want to buy.
2. Huge overhead costs related to healthcare, wages and pensions for unionized labor that limited their ability to adapt to the market and reorganize.
3. Poor decision making by executives and inflated executive pay (especially when compared to foreign competitors).
4. A global economic recession that is lowering demand worldwide.
An utter lack of foresight, vision and planning.
A dependance on staus quo.
Their resistance to change of any sort, coupled with intractable greed.
Notice the UAW gave concessions while management did nothing in terms of wage concessions. Even when asked they declined to consider it. It wasn't until they were sent packing and the emails started flooding their offices did they reconsider.
Everytime someone says "The forign car builders here don't pay UAW style wages" they forget that they also don't pay their executives such exorbitant salaries either.
A dependance on staus quo.
Their resistance to change of any sort, coupled with intractable greed.
Notice the UAW gave concessions while management did nothing in terms of wage concessions. Even when asked they declined to consider it. It wasn't until they were sent packing and the emails started flooding their offices did they reconsider.
Everytime someone says "The forign car builders here don't pay UAW style wages" they forget that they also don't pay their executives such exorbitant salaries either.
Dude. The bailout yesterday fell through, basically because of the UAW refusing to make any concessions. CEO's have agreed to get paid $1 in yearly salary. Unless I heard that wrong this morning.
K1052
Elite Member
- Aug 21, 2003
- 51,611
- 44,192
- 136
The most immediate cause was the rampant speculation in oil over the last few years that drove prices far beyond anything rational. This had the effect of killing the sales of their most profitable lines (trucks and SUVs) and created a sharp profit falloff and started to consume their cash reserves. While the companies have renegotiated their labor contracts the major provisions that will start to save them money won't kick in until 2010 and reworking a large percentage of their lines takes years.
What put them on this path in the first place are the crippling legacy costs that they have to contend with (healthcare/pension) and a union that hadn't come to Jesus (so to speak) until pretty recently. Poor management decisions also played a signifigant role.
What put them on this path in the first place are the crippling legacy costs that they have to contend with (healthcare/pension) and a union that hadn't come to Jesus (so to speak) until pretty recently. Poor management decisions also played a signifigant role.
Reading comprenhension takes it up the ass again.
AFTER they were sent packing.
Furthermore, BONUSES based on phantom sales figures doesn't help either. GM consideres a car made a car sold, regardless of if that car ever sells at a dealer or not. Bogus bookkeeping
We agree, that executive compensation is way over the top. However, the UAW refusing to make concessions now is what is driving the big 3 to the brink of bankruptcy. These companies are not going to stay viable, paying these workers as much as they do.
moshquerade
No Lifer
- Nov 1, 2001
- 61,504
- 12
- 56
this.
so this.
and notice how the unions are doing whatever they can to help the car companies out so they can salvage their businesses.
They didn't anticipate 4 dollar + gas and the effect it would have on the industry. I'm tired of the "they don't build cars people want" argument. They made SUV's because people wanted them, they just didn't see the sudden shift in demand coming. They finally are catching up with the demand shift and now it may shift again because gas is cheap.
dullard
Elite Member
- May 21, 2001
- 25,839
- 4,412
- 126
Many reasons caused their demise. Some issues are discussed above, but the important two are missing:
1) The credit market crashed. Most people buy cars with credit. When they can't get a loan, they can't buy a car. Most businesses can wait out a period of low sales by borrowing money - but not this time. Heck, even the dealers use credit to get their cars. The dealers themselves can't afford to sell cars right now.
2) The economy crashed. People in the US have for the first time since records began reduced their amount of debt. People are actually saving or paying off debt to prepare for a possible lost job. This means no big purchases like cars.
#1 and #2 combined means that many people who would buy cars aren't buying. Of those who still want to buy cars, they can't get a loan. This was the reason the bankrupt ideas happened NOW. Of course, there were other looming problems that would likely have made a bankruptcy possible in years to come:
3) Unfunded liabilities. The manufacturers promissed big health care plans and big pensions. But they never put enough money aside to pay for these. Their promisses are now too big for them to realistically pay for them. This came from making a choice between a rock and a hard place. When negotiations with the unions happened, they had to choose between bankruptcy then (strike) or bankruptcy now (ran out of money due to signing impossible to meet union contracts). They chose bankruptcy now.
4) The unions. Sure, unions recently made a big concession that allows NEW hires to be paid less. But the majority of workers were basically unaffected by the concessions. At least as of last week, they STILL have the rule that if you are laid off that you must be paid until 2011 at least. That means that the manufacturers CAN'T reduce costs to get through this tough time.
5) The executives. Sure, there was a token gesture of a ~$2M cut in their salary down to $1. But they aren't touching their $20M of other perks that they each get every year. Sure, $20M is chump change. But, if the leadership won't lead, why do they think their workers will follow?
6) Short-term thinking. For decades they've been told to make sustainable cars that people will want. For decades, they've been refusing. Instead they make cars that are a short-term fad. Sure, you have profits right now, but you aren't prepared for any glitches like high gas prices.
7) Stubborness combined with ignorance. The car manufacturers decide that we want big powerful engines in SUVs. Then they shove them down our throats with heavy advertising and don't make any alternatives. When we buy them because we have no other choices, the manufacturers decide that they were correct. The circle repeats. They never once considerded the wants and needs of the majority of buyers.
8) Success breeds failure. On a positive note, quality has been increasing in recent years. On the flip side, your current vehicle now runs well and doesn't need replacing. They've basically created a new competitor - reliable used cars. A competitor that is very powerful in times of recession.
9) Horrible pricing. They made too much money on the short-term fad items, and $0 profit or even a loss on the long-term sustainable vehicles. Sounds great in the short term, but this pricing scheme never works in the long run. If you don't make money on an entry level vehicle, making millions more of them won't help.
1) The credit market crashed. Most people buy cars with credit. When they can't get a loan, they can't buy a car. Most businesses can wait out a period of low sales by borrowing money - but not this time. Heck, even the dealers use credit to get their cars. The dealers themselves can't afford to sell cars right now.
2) The economy crashed. People in the US have for the first time since records began reduced their amount of debt. People are actually saving or paying off debt to prepare for a possible lost job. This means no big purchases like cars.
#1 and #2 combined means that many people who would buy cars aren't buying. Of those who still want to buy cars, they can't get a loan. This was the reason the bankrupt ideas happened NOW. Of course, there were other looming problems that would likely have made a bankruptcy possible in years to come:
3) Unfunded liabilities. The manufacturers promissed big health care plans and big pensions. But they never put enough money aside to pay for these. Their promisses are now too big for them to realistically pay for them. This came from making a choice between a rock and a hard place. When negotiations with the unions happened, they had to choose between bankruptcy then (strike) or bankruptcy now (ran out of money due to signing impossible to meet union contracts). They chose bankruptcy now.
4) The unions. Sure, unions recently made a big concession that allows NEW hires to be paid less. But the majority of workers were basically unaffected by the concessions. At least as of last week, they STILL have the rule that if you are laid off that you must be paid until 2011 at least. That means that the manufacturers CAN'T reduce costs to get through this tough time.
5) The executives. Sure, there was a token gesture of a ~$2M cut in their salary down to $1. But they aren't touching their $20M of other perks that they each get every year. Sure, $20M is chump change. But, if the leadership won't lead, why do they think their workers will follow?
6) Short-term thinking. For decades they've been told to make sustainable cars that people will want. For decades, they've been refusing. Instead they make cars that are a short-term fad. Sure, you have profits right now, but you aren't prepared for any glitches like high gas prices.
7) Stubborness combined with ignorance. The car manufacturers decide that we want big powerful engines in SUVs. Then they shove them down our throats with heavy advertising and don't make any alternatives. When we buy them because we have no other choices, the manufacturers decide that they were correct. The circle repeats. They never once considerded the wants and needs of the majority of buyers.
8) Success breeds failure. On a positive note, quality has been increasing in recent years. On the flip side, your current vehicle now runs well and doesn't need replacing. They've basically created a new competitor - reliable used cars. A competitor that is very powerful in times of recession.
9) Horrible pricing. They made too much money on the short-term fad items, and $0 profit or even a loss on the long-term sustainable vehicles. Sounds great in the short term, but this pricing scheme never works in the long run. If you don't make money on an entry level vehicle, making millions more of them won't help.
glenn beck
Platinum Member
- Oct 6, 2004
- 2,380
- 0
- 0
Originally posted by: moshquerade
this.
so this.
and notice how the unions are doing whatever they can to help the car companies out so they can salvage their businesses.
and that
SearchMaster
Diamond Member
- Jun 6, 2002
- 7,791
- 114
- 106
Originally posted by: moshquerade
this.
so this.
and notice how the unions are doing whatever they can to help the car companies out so they can salvage their businesses.
It worked out so well for the Eastern unions, why wouldn't you use their blueprint?
cKGunslinger
Lifer
- Nov 29, 1999
- 16,408
- 57
- 91
^ this, but only if you're a complete simpleton who cannot understand more complex issues and factors.
^ this, and the issues AlienCraft and dullard posted, for the rest of us
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