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If G.M. Was a Canadian Company It Wouldn't Be Asking for Help
The Detroit automakers have made many mistaken business decisions that have been important factors contributing to their current crisis. However, they are not responsible for some of the factors that have brought them to the brink of bankruptcy.
Most obviously, they are not responsible for the collapse of the housing bubble and the subsequent loss of more than $15 trillion in housing and stock wealth. This falloff in wealth has sent consumption plummeting. The auto industry has been especially hard hit, with sales falling by more than 30 percent year over year in the last two months.
The Big Three are also not responsible for the broken U.S. health care system. If we paid the same amount for health care as Canada, G.M. would have accumulated an additional $22 billion in profits over the last decade.
That would be the savings if we assumed that General Motor's health care expenditures were reduced by roughly 48 percent to be in line with expenses in Canada. Of course, not all the savings in this counterfactual would have gone to profits. Some of it would have gone to workers in the form of higher wages or to consumers in the form of lower car prices.
On the other hand, G.M. is also picking up the tab for many spouses and dependent children. It would not have to pay these health care expenses in a Canadian type system. So the $22 billion figure is probably not a bad first approximation of the additional money that G.M. might have today if the United States had a more efficient health care system.
Even with these additional profits G.M. and the other domestic manufacturers would still face serious problems. They have made some bad choices in betting their future on SUVs and other low-mileage vehicles. They also have lagged foreign manufacturers in producing high quality, reliable cars.
But the real reason that Big Three are on their deathbeds right now is the economic crisis created by the Wall Street crew and their friends in Washington. It will be tragic if the people of the Michigan, Indiana, and Ohio are made to suffer through a depression because of the failed financial dealings of the Wall Street crew.
This situation is made even worse by virtue of the fact that most of the Wall Street executives who are directly responsible for this disaster are still quite wealthy, in large part because of the generosity of Congress and the Bush administration. While they demanded that the auto manufacturers produce plans for returning to profitability in exchange for providing loans, no similar conditions were imposed on Citigroup and the rest of the Wall Street gang.
As the autoworkers at the Big Three look at their last paychecks before an indeterminate period of unemployment, they should think about the portion deducted for income taxes. With this money, they have helped to ensure that Robert Rubin and other Wall Street types continue to enjoy pay packages in the millions or even tens of millions of dollars.
Happy Holidays!
- Posted in
49 Comments so far
Show AllAs much as I am an advocate for single payer health care I feel this premise is wrong. GM had an electric drive train in production cars ten years ago. In 1969 they had a functional testbed for a series hybrid, the Stirlec, that they shelved. Putting new engineers on that project over the years would have perfected the system long ago with basic engineering advances.
All along GM has had the ability to make hybrid electric vehicles and instead put money, energy and political clout into opposing increases in CAFE standards. It's been obvious since at least 1980 that the oil would eventually run dry. The multi-millionaires running GM, Ford and Chrysler were still caught flat-footed when the crisis came.
The problem at GM is the same problem that Wall Street has; cronies paying each other millions to pretend to work while making bad decisions. Where was the "free-market" when it came to paying the salaries of theses executives? I'm sure we could have put those jobs out to bid and found somebody cheaper to ruin America.
Fighting the forces of rather dim lighting wherever they may be found!!
Pangolin December 12th, 2008 12:34 pm, a friend who worked selling cars at GM and Chryler dealerships (he's now out of work as the dealerships cut personnel) told me a few things:
-- He had people coming in years ago asking to buy hybrid, electric or flex-fuel vehicles, but they weren't available through any of the Big Three. What's more, he was told to push SUVs -- they were the highest profit margin vehicle the US auto giants sold.
-- When some of the dealers he worked for asked to stock smaller, more fuel efficient cars, they were told by the manufacturer there was a shortage. There was never any shortage of SUVs and light trucks. Later, he found out there was never any shortage of smaller fuel efficient cars, but the manufacturer wanted the bigger ticket items sold first.
-- When, on his last job, gas prices started rising and few of the SUVs were selling, he asked the owner of the dealership how he planned to stay in business if he couldn't sell these gas-guzzlers. Presciently, the owner said not to worry, the Feds would step in if it looked like the auto companies were going under, and the company would help the dealers stay in business. A year later and that dealer has gone under, but the Feds have stepped in.
Of course we could have electric vehicles and alternative fuel cars, but the incestuousness of stock ownership between the chief officers of the car and oil companies is rampant and guarantees that the Big Three will not produce these sorts of environmentally-friendly vehicles until every drop of oil is brought up out of the ground. I don't think this bailout, or the upcoming Chevy Volt electric car, will radically change that mindset.
Right now, Chevron oil currently holds the patent to the GM EV1 electric car battery -- the EV1 was the subject of the 2006 documentary "Who Killed the Electric Car?" -- and they aren't letting anyone build more. GM destroyed nearly every single one of the EV1s, even though they had buyers for them -- that is the true face of the US car manufacturer.
"Who Killed the Electric Car?"
http://en.wikipedia.org/wiki/Who_Killed_the_Electric_Car%3F
Senator Shelby never did like the Union...
-30-
I agree with the poster pangolin. The health care system is part of the problem, but the larger problem with our economic system is the whole philosophy behind it. GM has participated willingly in keeping new technologies away, and helping big oil stay in business. What they didn't count on was high gas prices? They got stabbed in the back by Wall Street speculators who care only for their own wealth and no one else. I wrote a blog about this whole ignorant situation. It's posted here:
http://shankarikali.wordpress.com/2008/12/12/reality-of-political-incompetence/
Let gasoline prices stay at their current level for a year or so, and the hummer will be on the comeback trail. Consumers DO NOT WANT The tradeoffs in comfort, range, cargo space, etc... that come with a fuel efficient vehicles (at least the current ones) unless high gas prices force them to want it.
Actually what you loose is "performance" ie the ability to accelerate off the line and maintain speeds over 100mph.
A small engine of 60 to 70 hp, with a well-mached cam and gearbox is all a mini-van needs.
Yes, poor accelearation will kill any new vehicle with consumers. There is no way you could have a 60 HP minivan unless you want to measure 0 to 60 with a sundial. My 500 pound motorcycle is over 100 HP.
You forget that people might find it more important to save money now, and might well be willing to buy a vehicle with less horsepower (which goes hand in hand with the level of testosterone in he driver, ha ha). With most of your posts, fish, you seem to defend the status quo, but I think the economic reality to come will change things in ways none of us can as yet fathom. Maybe it's time for a new hat, wouldn't you say?
I always thought that the size and expense of a man's car reflected his concern over certain shortcomings in his pants...
ha, ha, they may well be. :D
Certainly not applicable to me as I have a quite large penis. I just enjoy vehicles that go fast. It's called "having fun" you might have heard of it.
You are pathetic.... You consider the destruction of the earth upon which we live to be called "having fun?" Grow up and control your libido, okay?
Peggy
Just because it's bigger than your pinky doesn't make it quite large. (evil grin)
Some people will be willing to make that choice, many will not, some will have no alternative, some will. Given the choice of (arbitrary numbers) 60 mpg and the acceleration of a big wheel or 40 mpg and decent performance, large numbers of people will choose the later. Have fun trying to merge onto a 70 MPH highway in your 0 to 60 in 39 seconds minivan. You also assume a return to expensive gas which isn't going to happen unless the global economy rebounds. As long as we are in a global recession, we may even see the return of $.99 gas in the US. I paid $1.39 a couple days ago.
11 grown people took a '66 vw bus from san jose to the 10,000ft mark above tahoe in a driving snow storm..all the ski equipment also..that is a 1600cc engine generating 40 horsepower..i drove old vw buses on cali freeways for many yrs..and still have all ten fingers and toes..when i wanted a fast thrill i rented an airplane..
ken
they did Ask for money in Canada --- 6 billion dollars.
GM Canada is merely a wholly owned subsidiary of the US company and not a Canadian company.
As I've said before this is the PERFECT TIME for the Democrats to play SHOCK DOCTRINE economics.
The Democrats should be using the automaker bailout firestorm to push through HR 676, Medicare for All.
But you and I both know that the Democrats no longer represent the people.
Their inaction tells you everything you need to know about them.
Nicely done piece; just remember, Detroit as well as all auto makers have SUV's-why? Because the consumer demands the vehicle. We will get better healthcare when the consumers' demand better, until then, we have a mess on our hands.
"generosity of Congress and the Bush administration"
DEMOCRATS in Congress gave Bush the plurality he needed to get just about everything he wanted. We need to remember this and not allow them to re-write their pathetic recent voting history.
We need a website that will give a CLEAR rundown of EACH ONE and how they voted on key bills. Please post any that you know are already involved in doing this.///
Actually, you can see the breakdown of every vote.
http://projects.washingtonpost.com/congress/
or just Google congressional vote record
Clearly, the global economic crisis is not entirely related to the crisis in housing and heath care. A massive increase in public housing, rather than gentrification, would have prevented inner cities from decaying, and make it possible for moderate income people to be able to keep their homes rather than be victims of foreclosure. The World Health Organization makes it cleay that companies and citizens can benefit from affortable health care provided by business and workers.
David Duboff
Re: public housing, you're kidding, right? You would rather live in a housing project than a gentrified neighborhood?
Well, they can't afford the gentrified neighborhood, but the larger point is why in the hell should I pay to subsidize housing in some inner city I will never even vist much less live in?
A public housing project beats living in the streets or in housing unfit for human habitation owned by a slumlord. I lived in a housing project as a young child. None of us living there had any complaints. We were happy to have a home!
Peggy
.Completely apropos of nothing...
I went to High School with guy named David Duboff....Could it be?...Naaah, four hundred years ago. Does MVB ring any bells.David?
.
We see things, not as they are, but as we are.
Anais Nin
Could it be University of Michigan School?
David
This has all been such a one-sided class war against the autoworkers in particular and all workers in general. It is sad to see how many supposed progressives seem to miss this point, yabbering on as if the failure of the Big Three would sure show those autoexecs a thing or two. True progressives must always look for the unity of all progressive forces, greens and blue collars, and not be so cavalier about a loss of livelihoods for millions. It's about, as Leonard Cohen put it, "the homicidal bitchin' than goes down in every kitchen, over who will eat and who will serve." For more about the lives of autoworkers dealing with in-plant pollution, see www.autoplant.info.
lmagine the position poor President Bush must be in, he must chose to bail out the friends of his that he'll be hanging around with or support the union workers that voted for Obama and other Dems. Wow, tough choice!!!
I'm sure many will be buying new cars as soon as their existing vehicle (on the 10-15-year Home Equity loan) is paid off!
America borrowed up it's future "demand" over the last decade. Without new borrowing and indefinite postponement of the payback, we have to face the wage/price inequity and thus the inevitable deflation or recession.
The "Big Three" are an auto cartel that has systematically wrecked the car market in the name of destroying competition to guarantee their profits. That's the nature of the corporate enterprise.
he auto cartel colludes with the oil cartel to control the demand for oil and guarantee oil co profits. More than 40% of oil demand is cars. The fight against high CAFE standards has always been a tactic to limit fuel efficiency so that the oil cos can sell more gas, the government can reap its tax revenue from taxes on gas, and the auto cartel can avoid the capital investment required to meet high CAFE standards. The technology exists to make the internal combustion engine much more efficient than it is. But without a functioning market, there is no innovation and no real consumer choice.
The auto/oil cartel actively destroyed the electric car alternative in 1912 ( or was it 1914?) when Standard Oil of California and GM sabotaged the plans of Henry Ford and Thomas Edison to mass produce an electric Model T. They went on to destroy electric trolleys across America in favor of smoke belching rubber-tired buses. A campaign against fuel efficiency has been going on for years in the suppression of fuel vaporization systems. At least 900 patents for such devices exist.
First poster, pangolin, is on the right track. The Big Three are their own worst enemies. It is not suprising to me that Dean Baker parrots the usual defense of these corporate scumbags, but commentators here are also abysmally ignorant about this matter, and that is distressing.
Really shitty commentary.
First off, the Canadian arm of GM is asking for bailout money from the Cdn Govt ; the fact that GM Canada is owned by GM Detroit doesn't make much matter anyhow - different wage contracts, different vehicles are made, and ya, health care is paid for. So its not the same ; a USA bailout will insist that the Canadian plants do not get any of it anyhow, right?
By the way, if GM had brought in lots more money over the past 10 years, it would have just been paid out as dividends anyhow - corporations do not generally "sock it away".
But what I really want to say is:
Last night [Dec.11/'08] David Letterman asked the failed Pres. Candidate Sen.John McCain if the govt. bailout of US automakers should include a demand to start building alternative fuel vehicles, hybrids, hydrogen, electric and so on, so that the workers would then be at the front of the pack worldwide, trained and ready for the future".
McCain just coughed a bit and started talking about something else.
So, no. And thats too bad. Catering to the old oil-based economy is partly what got the US automakers into the slide in sales, whereas there are WAITING LISTS of people who want electric cars from Tesla, as there were when GM offered their first effort at building electric cars.
And don't tell me it cannot be done... enough of a 'battery technology breakthrough' has been made, and it will just get better from here on ; regular garage mechanics are doing retro-fits with lead acid batteries and customers are happy.
In fact, it just might be the Chevy Volt that is causing GM trouble - maybe there has been an effort to sink GM before it can start producing them??
Sell the corporate jets, ask CEOs to work for $1 a year, and get wages cut for the workers, and perhaps then it would seem reasonable to American taxpayers to hand The Pig Three taxpayer money.
After reading these comments I can only come to one conclusion:
market forces alone, free trade, unregulated markets, the structure of corporations, free enterprise in healthcare
do not work!
The conservatives are wrong and are leading us over a cliff.
as the GOD of the UNIVERSE - Chairman Alan Greenspan was forced to ADMIT after severe questioning by one senator who DARED ask (a no no in america until then) :
:"chairman greenspan , after 20 years of your chairmanship of the Federal Bank, can you please answer yes or no: WAS YOUR BELIEF in the free market delivering everything WRONG?"
his answer after hemming and hawing:
"I was SHOCKED and in DISBELIEF that my belief in the ability of our insitutions to REGULATE THEMSELVES failed...absolutely there is a flaw that I failed to see"...........
er,,,uhm......you had 50-60plus years to study dear....
OR you KNEW it wasn't TRUE and just LIED through your teeth for decades anyway!
All anyone ever needs is a 240 Volvo. The 240 volvo was the apex of automobile design. Everything after that has been downhill. If Ford started producing brand new 1993 240 Volvos they'd sell millions of them. I'd sure buy one. It would replace the 1989 245 wagon with 243,000 miles I'm currently driving (after it finally wear out.)
I'm not sure about having no choice in cars but I do think that car manufacturers worldwide need to reduce the number of models they produce. They should eliminate the wasteful ones that are on the market simply because they meet someone's non-transport related needs. The big three should be told to merge and rationalise, operate as the North American Motor Company and compete more efficiently with Asian and European carmakers.
Yeah, you tell 'em. I've got a 90 SAAB 900 5-speed with 242,000 miles on the original clutch (which still works without any problem), and brakes that last 90,000 miles or more. The clutch and brakes on the GM/Chrysler products I used to have lasted only 30,000-35,000 miles. Most American cars and trucks are better than they were 20 years ago, but compared to current global standards they're still crap. The Big 3 earned their plumetting market share.
The irony is that the Big 3 are largely being killed by their escalating health-care costs when they fought for decades against a national health-care system (for strictly "ideological" reasons) that would have benefitted and probably saved their businesses.
I like to refer to the current financial meltdown as the xGreed bust. The X is
short for executive. Executive salaries were out of control, governments
worldwide failed to act. Executives believed they were untouchable. I am sure the executives of GM also paid themselves out of all proportion for the work they did.
Executives got higher wage packages for increasing profit. This was easy to
do by discarding basic principles of financial management. How hard is it to convert equity into profit?
The banks were the first to have their indiscretions come back to bite them.
They tried to cover their losses by increasing interest rates and started to look
at the loans they had issued to business. As banks demanded higher rates from
borrowers who did not have sufficient assets to back their loans, the borrower
could not pay the interest and we had corporate collapses. This further reduced
the capital of the banks, more grabbing at straws.
Most investors with real money only received mediocre returns. Company
executives in banks and other businesses received a king’s ransom.
Will investors ever be in a position to sue executives whom they trusted to run
their business with due diligence for a modest return to themselves? I don’t
think so.
Will the governments act? I don’t think so.
Historically the rapists and plunderers of the world have always been the most
successful people of the world.
Now you think GM is not that bad.
Globalisation exists to lower wages for the masses.
this seems to be a particular American invention in economics dogma:
a CEO or management level people get RAISES if they "succeed" in CuTTING employees out or lowering wages.
in a socially decent world - or even for a culture and society that CLAIMS being civilized -- that ought to be considered a mark of FAILURE by management rather than something to be REWARDED...
but then that is one of the "american ways" of being...
one might call it "barbaric" but what did CHINA do a month or so ago?
when the tainted bottles or some product for export became clearly a real matter -- the big man was jailed or executed. PERIOD!
It should have been pointed out as well that the number one reason for foreclosures was the fact that most the the debtors couldn't afford to pay unexpected medical bills. That's a big reason why Canadians north of the border aren't losing their homes left, right and center as they are in the U.S. Unfortunately though the American medical industrial complex controls the media (through billions of dollars in ad money) thereby keeping the majority of Americans in the dark about universal healthcare in general.
Obama meanwhile (I suspect) made a deal with the devil (The medical mob) in which he wouldn't pursue universal healthcare in return to very lucrative campaign donations. The few democratic candidates who refused to make such a pact with the medical healthcare and insurance companies (like Kucinich for example) quickly found themselves blacklisted by corporate America. This translated into a virtual media blackout (Kucinich wasn't even allowed to particpate in the televised debates!), and the absence of any meaningful corporate sponsorship and finally even a couple of frivolous lawsuits just to tie up any extra funds the campaign might have had.
Correct! americans really are the most CAPTIVE people on the planet, behind the facade and notions of prosperity.
with all the riches and technology and infrastructure and institutions so advanced - which OUGHT to make life more TOLERABLE and decent. those living in america are like hamsters in a cage or guinea pigs scrounging, working untold hours, sacrificing the very things that life is supposed to be about and the reason for work -- which is to truly have pleasure at being alive...instad americans are just mostly running after the clock , running after bills, trying to get to the next day or week or month..and ALWAYS, ALWAYS in fear for their security.
captives.
I'm of the opinion that companies which fail, should be allowed to fail. However I also think BushCo. decided to pass on this auto bailout because doing so also kills the last big labor union (autoworker's) with any political clout.
A good movie to see is "DAVE" . Some political humor about American politics .
mr. baker,
in case you haven't noticed, this economic debacle is inter-connected.
you state that "they have made some bad choices choices in betting their future on suv's and other low-mileage vehicles. they have also lagged foreign manufacturers in producing high quality, reliable cars", almost as an afterthought, when in fact those are two of the top four or five reasons for their demise. another being the simple fact that many of their employees are/were bringing in $30-70 plus dollars/hour to produce these "low-mileage" and low-quality and low reliability vehicles. my last three autos, all japanese engines, produced 172,000 miles (4 cylinder), 300,000 miles and 253,000 miles, respectively, with only ONE major repair between the three of them, spanning almost a quarter century. why buy an american-made piece of shit that's going to get, on average, 70,000 miles before facing it's first major repair?
back to the auto manufacturing employees who are suddenly (as if they didn't see this coming) facing the cold, hard facts of life. anyone living in the detroit area, unable to stash away a sizeable nest-egg at said $30-70 bucks an hour (and we'll exclude the easter egg basket full of employee benefits here - of which mr. baker refers to - for sake of argument) doesn't deserve, nor will they receive, any pity on this end. yet, in interview after interview with these slacking and overpriced workers, they say it's not just them who will suffer, but all of us. the common people. duh. almost all of the common people i know don't get anything near the 30-70 dollars/hour, with little or non-existent employee benefits, that these crybabies are raking in.
also, mr. baker, if the auto manufacturers had to pay regular advertising rates - like the rest of us - in all the daily newspapers and on all the radio/tv stations that they pollute with their nauseating ad campaigns, then their $22 billion in accumulated profits from unrealized health care expenses becomes a wash.
if the government, yes, that includes you, mr. obama, are really interested in stimulating the economy, then bail out the citizens of this country. get serious about all the blue-collar blahblahblah. as long as we continue to allow white collar america to receive welfare of the most magnificent proportions, then we, as many posters over the course of many months here suggest, deserve what we get.
I happen to live in Canada.
And the Big Three are screaming for Canadian cash here as loud as they are in the states.
The only difference is that here in Canada, they might actually get it.
Not that it will actually help in the long run.
The car business is dying, if not already fatally wounded.
GM and Chrysler only had enough cash to see them through the end of this month. After that, they were in either Chapter 11 or 77 bankruptcy. Their suppliers are demanding cash up front for parts as we speak.
It amuses me to think that the first mass production car company in North America, Ford, will soon be the last...
Walk in peace.
To tell you the truth, I'm laughing out loud as heck knowing these greedy b-tards are down and close to being out. More of our so called politicians of this country should have the same fate. I'm from Niagara Falls, N.Y., and real familiar with our dear neighbors of the north. God bless you all.
So WHO OWNS GM Canada? Who are the MAJOR SHAREHOLDERS? Who is Robert Rubin? I went to the financial news websites, etc. and found these major shareholders of GM Canada, none of them actual people:
- State Street Bank and Trust, GM's largest shareholder;
- Capital Research, the second-largest shareholder ;
- Brandes Investment Partners, the third-largest ;
- Kirk Kerkorian's Tracinda Corp. is the fourth-largest shareholder
- Southeastern Asset Management is GM's fifth-largest shareholder. Its Longleaf Partners Fund [14.2-million share holding].
So who owns GM Canada? - "Wall Street Types" is who, like the article suggested.
So why can't some of the 'private wealth' be asked to make loans? All their money tied up in various investments of course, but still, they must be able to make a loan somehow, on paper, like the banks do.
We have heard that "90% of America's [or Canada's] wealth is in just 5% of people's hands". They are totally dependant on the economy, and the currency, holding together, or their wealth is meaningless. Lets lean on them to prop up the automakers.