IMHO the Big 3's largest problem is their lack of Toyota's track record of making reliable cars, that can go 200K+ miles without the cost & wasted time of random breakdowns each year.

Americans probably require reliable cars more in 2008 than in 1998 or 1988, since so many have long drives, due to many reasons such as long commutes, taking a job 100-300 miles from their parents/siblings, being divorced & needing weekend roadtrips to visit their children, etc.

Even if the Big 3's 2008 can match Toyota's reliability record as some are claiming, they don't have the track record of Toyota.

I am more likely to believe my car mechanic who has several customers with 1990s Toyota cars with 200K+ miles, than Big 3 Mktg's dept promise that their 2008 cars have 200K+ mile reliability. Track record matters to car buyers.

actually the increasing reliability of cars should lead to a slow steady decrease of total US car sales. This trend is good for consumers & the environment, it's only bad for car companies.

The benefit to the economy of consumers' saving money & time from repairing & replacing cars less frequently should dwarf the loss to the economy of the lower car sales.

The car industry might get a 1-time 5-10 yr sales boost from plug-in electric cars become a mass market & the predominant type of car.

It is predictable that blame be placed on the union. However, a large argument in favor of lending the car manufacturers a big hunk of cash is that so much of the US's work force is involved in the auto industry. I heard BBC America (on this morning's report) claim that 1 in 5 US workers are involved in the auto industry. How many of those workers are actually unionized? This would be relevant because the cost of the industry as a whole directly affects the profits of the auto manufacturers and the assumption is that unions reduce the profits of a corporation.

If it is true that 1 in 5 workers in the US are involved in this industry, does it make sense to bail them out? Shouldn't we follow the lead of Denmark (a large part of their population manufactures wind turbines) and get the US's work forces involved in producing wind turbines and other non petroleum based energy production methods? Do people really think their is a long term future to the auto industry?

Also, why doesn't GM reorganize their financing subsidiary (?division?) into a bank? Then they could tap into the banking bail out. I understand AMEX is considering this strategy.

The problem is the legacy costs for the Big 3. The net hourly wages are 10-20% higher than the transplants. But the transplants do not have hundreds of thousands of retirees to deal with. And the transplants were not so stupid to agree with a job bank whereby workers show up and receive 95% of the wages. These 2 costs add about $30/hour making the Big 3 gross wages vastly more than the transplants.

This difference caused the Big 3 to focus on higher margin vehicles (SUVs, trucks, etc) which are out of favor now due to the oil shocks this past summer.

And now that the Big 3 have their hand out, consumers are afraid to buy their cars bcs who knows if they will be around.

Yes the UAW is a huge part of the problem - not the only part -- but to absolve them is simply not reality based.

http://en.wikipedia.org/wiki/NUMMI

is the plant in California, a JV between GM and Toyota

The Post and other media outlets are also fond of complaining about the "high wages and benefits" of union workers. CNN reported that GM spends $1635 per vehicle on employee and retiree health care. National Review says they are losing about $800 per vehicle. Single-payer health care will put GM back in the black. That would be a heck of a lot better use of taxpayer money than handing it over to the auto companies.

Had the U.S. automakers gotten their wishes and shed both unions and legacy costs, they still would have made awful decisions on the designing and marketing of vehicles, still would have backed the fight against higher fuel economy standards, still would have backed keeping passenger SUV's under the truck fuel economy standards instead of passenger vehicles, still would have backed tax subsidies for SUVs as work vehicles, still would have backed tax deductions for ultra-heavy pickups & SUV's over passenger vehicles...

Which of the Big 3's idiot decisions, crappy performance, and bad judgment would have been fixed by just having cheaper and more disposable labor?

We don't hear a lot of whining about the cost of union labor in Canada, even though the UAW represents Canadian auto workers. That's because Canadian auto workers receive their health insurance through the government--it's not a direct labor cost.

I think Jim Kunstler was absolutely correct a few weeks ago when he stated that the majority of Americans have already purchased the last car they will ever buy - only they don't know it yet.

The subtext beneath the rhetoric here about "producing high-quality popular cars" and "reliable cars" serves to reinforce mass delusion, in my opinion.

The proposals to use the automobile manufacturing (to the extent feasible with dwindling fossil energy supplies) base to produce wind turbines deserve serious consideration. It would be criminal if that base were partialed out to creditors or otherwise destroyed or dissipated rather than used for some national purpose, should the auto industry come apart.

The problem right now is not the unions nor the management: it's the money.

Gobally, the consumers are cutting their spending. They will keep their actual car more longer i.e. they will buy less new cars. They have also less collateral and less good credit. And the bank are asking a better credit and a better collateral than before, for the ones who still want a new car.

So, manufacturers will have to shrink their production, want it or not, and with all the problems resulting from that.

Government money will not stop that to happen. It is a waste of people money.

Lets face it !

I drove my Toyota to the moon -- 333 miles. It was still going fine when we got a new one.

A correction to Peoninchief's comment that "We don't hear a lot of whining about the cost of union labor in Canada, even though the UAW represents Canadian auto workers." The Canadian auto union is CAW - Canadian Auto Workers - "the largest private sector union in Canada", as their website says (www.caw.ca). CAW used to be the Canadian section of UAW, but broke away in the 1980s and has since been an independent union (a pretty effective one too - no, I'm not a member). That said, I think the basic point about health care costs is sound.

People all over the world are buying less automobiles but it is not the fault of the industry but only the fault of the economy. If it was only the American brand whose sales were off the blame would be on them, but every auto maker in the world has the same problem. The only solution is to cut costs until the market returns to normal.

It is not fair for the taxpayers to support automobile manufactures. We sympathize with them but if the economy is bad they must cut their staff in order to make ends meet. They say that they cannot do that because they have a contract that obligates them to their employees.

The only solution for them is to tear up their employee contracts by going bankrupt and starting over again. With a smaller overhead they can wait until the economy recovers and again become a profitable organization.

Giving the auto industry the 35 billion that they are now asking would pay their expenses until the economy recovers. But that is just a welfare check. Cutting expenses was always the answer when the economy went bad. Lets be practical instead of giving away the taxpayers money.

Blame the workers, not the 'leaders.'

Another case where the 'leaders' like the title and the paycheck but not the actual responsibility.

El Cid - yes, the Big 3 made some bad decisions but part (not the entire) of the problem is that their higher labor/retiree/health care costs propelled them to make higher margin vehicles like SUVs + light trucks. Their vehicles choices were driven by the need for more profitable vehicle margins which were a result of their failure to take on the UAW with their stupid job banks, retiree costs, etc. It is no where as simple as you make it out to be.

Anonymous post (12/4 10:40am) is correct. Bankruptcy is the best solution. 2 weeks ago they need 25 billion. Today it is 34 billion. What happened in 2 weeks to increase their needs? Where will we be in 2 months? The big 3 do not know. Bankruptcy is the best solution for them which will allow them to reset their contracts AND their archaic dealer network.

And it would be overall the best solution for American taxpayers in the long run.

A big chunk of car and truck owners have been upside down for years, and a lot longer than homeowners going underwater. Cars sales and prices have been inflated by financing games. Of course, this must be because of some union trick, not anything to do with management.

The Big Three speak of health care legacy costs and as I understand the car makers, they are speaking of ALL health care for retirees including both UAW retirees and salaried retirees. When the media report on legacy health care costs, they foget that salaried retirees' health care costs are a large fraction of the total legacy health care costs. I would like to know the precentage.

OBTW, I understand that GM has more 10,000 retirees over 90 years of age (a very large percentage being salaried NOT UAW retirees).

Once again shallow reporting makes for splendid strawman arguments.

random, but does anyone know if Kia is unionized? or is this something that depends on the country/location?

This is why this country is falling apart. Supposed liberals attack middle class workers for making a living wage, while it it ok for them to make one. These are just Republicans who believe in abortion or something like that. We don't need them.

WaPo can't even bother to report the wage differential - $25 an hour for foreign rivals v. $28 an hour for the Big 3. Thanks to Rachel Maddow is a much better reporter than these 2 WaPo clowns. BTW - legacy costs were the deferred wages of producing cars in the past so for the National Review et al. to bring this up shows how little they get this issue.

"actually the increasing reliability of cars should lead to a slow steady decrease of total US car sales. This trend is good for consumers & the environment, it's only bad for car companies."

Not only this. Americans already have more cars than they could ever need. They bought cars when financing was easy and cars were sold at a loss by the manufacturers (what kind of business model is that?). Nobody is adressing the elephant in the room: that in an already oversturated market the supply has to decrease. No bailout wizardry will make that fact go away. There is no way around the need for the car industry to downsize. Yes, they need to manufacture more efficient, more reliable models (and yes, Honda is already serving that market very well). But most of all, they need to manufacture radically fewer cars. Any recovery plan based on the premise that the car sales figures of earlier years will come back "after the crisis" is an illusion.

The Big3 have very high fixed costs. Legacy costs are only part of the equation. They also have longer changeover times and costs. They have too many brands. They have too many dealerships.

Big3 profitability is based on making more cars than Americans want to buy. Until they come up with a new model that allows them to make a profit on a lower level of manufacture they will struggle.

I-man @ 5:36 and bakho @ 11:57

Help me out here. I'm confused. You say "legacy costs" are killing the big three. What are "legacy costs"?

I remember being a young lawyer in the early 1970's when ERISA was called the "lawyers' and accountants' full employment act".

That aside, the stated purpose of the act was to require employers to fund -- on an actuarially sound basis -- the future costs of their retirees. Employees' Retirement Income Security Act was the real name.

That was 40 years ago. Are you saying that those costs NEVER WERE funded and have to be paid now?

What happened? Did the employers cheat? Did the actuaries screw up? Did the trust funds vanish even prior to the current downturn? Just why do these "legacy costs" still exist when they were required by law to be funded?

Let's clear the decks a little bit. Say that the only thing in the economy, save Washington, were the Big 3, and the transplants.

What would we see? Transplants making better, fuel efficient, longer lasting, value retaining cars, built by young people, and driven by upper income, educated liberals that won't buy American cars.

Washington taxing young transplant workers, to give money to old industry, with old union people that all ready had their bite at the apple. Think public housing projects for the unfortunates. Or, now, government run employment projects, soon to make YugoElectricPeoples Car.

Kind of like how College, which is a employer of old liberals, is out priced younger people.

I see things as generational. Old people, old industries, with old people in offices taxing and costing young people. And leaving them massive debts.

Nice.

Why do Americans continue to believe that domestic auto makers should be able to compete with government subsidized foreign car companies ? The American car business has been targeted by Japan, South Korea, and Germany. Parts manufacturing has been targeted by China.

One of the failures of American economic policy these past 8 years has been the misapplication of the Keyenesian stimulation as a cure for the trade balance induced deflation. Consumption has to be stimulated in the countries with large current account surpluses. America is destroying itself by borrowing money to stimulate consumption to support foreign industries through lop-sided trade, without insisting on trade reciprocity or balance.

The US has no choice but to limit import penetration. Now that the domestic savings have been demolished, serial asset bubbles are collapsing all around us, the domestic jobs and income are collapsing, we are on the cusp of a depression, America is still filled with idiots mindlessly masterbating over there crappy foreign vehicles.

I like the one where America will substitute wind mill production for car manufacturing. The lunacy of the bush electorate lingers. Professor, is that you ?

I quite agree with you,Dean.It seems that management style of these three auto companies are very flamboyant.Look at it,they operate and compete in the same open market.Why are they particulary hit more unlike others?This question is very important and must be answered before having any public fund.Though,i would support congress to bail them out with stringent pre-condition to be met to secure tax payers money.Letting them close down would further unemployment rate and loss of our image abroad.

I'm a former union member (construction trades) and trust me, the UAW caused many of their own problems.

See the Sunday (12/7) Toledo Blade online edition for a small sample.

To be fair though, both the Big 3 and the UAW have made significant reforms since 2003, but the credit collapse will not allow those reforms to play out.

Time ran out.

Excerpts from the following article are very much worth mentioning here.

Znet Cutting wages won't solve Detroit 3's crisis
http://www.zmag.org/znet/viewArticle/19861

"According to the latest figures from the U.S. Commerce Department, every worker in Big Three factories could work for free and only shave 5 percent off the cost of their cars.

Data from the Harbour Report -- the industry's gold standard -- reveal that even including their benefits, labor costs in the Big Three's plants account for less than 10 percent of the sticker price.

In every other industrialized nation, government has stepped in and given their auto companies a significant edge. Most important, they all adopted national health care and pension systems decades ago.

General Motors alone provides health coverage to a million people -- workers, retirees and families. The annual price tag is about $5 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM spends on steel.

That burden could be lifted, to the benefit of 47 million uninsured Americans, by adopting a Medicare-style program for everyone. It would save the nation as much as $350 billion per year now spent for insurance companies to shuffle paper and deny claims."

As expected, the corproate media are taking advantage of ignorance to attack workers - and right in the middle of a cris caused by the super rich.

Dean, you missed the mark ENTIRELY with this post.

First of all, the NUMMI plant in Cali (joint venture between Toyota/GM) was Toyota's ground-level introduction to the US supplier network - nothing more, nothing less. GM product rolls off the line. The plant is operated PURELY based upon Toyota's Lean Manufacturing principles.. chiefly, NO UAW. Repeat: NO UAW. The workers have a higher take-home pay than their union counterparts, the cars have the lowest defect count of any GM plant worldwide, and worker satisfaction is higher there than any other. Shocking.

Secondly, the error in the WaPo's statement is that the non-union labor has a lower wage. Non-union auto labor in the US has a HIGHER take-home. Workers at Honda plants in Ohio take home more per hour than GM in Michigan - after the UAW haircut is taken out.

Industrial engineers hate working for GM, because you can't make any process improvements thanks to the blatant stupidity of the UAW. The principles of lean manufacturing were figured out decades ago.. it's not just a Toyota thing, they're merely the company that has taken the improvements the farthest. Lean is the antithesis of a unionized workforce.. and lean is the centerpiece of all successful factories.

Until and unless the UAW unequivocally embraces lean manufacturing, they will be deservedly marginalized.

really good post, thank you for sharing this information.

Unsympathetic is wrong. The NUMMI plant is a union shop. http://www.nummi.com/us_roots.php

"NUMMI and UAW as Partners

Another historic first was the participatory labor agreement between NUMMI and the United Auto Workers. In return for NUMMI’s acceptance of the UAW as the bargaining agent for NUMMI’s team members and its willingness to pay prevailing U.S. auto industry wages and benefits, the UAW agreed to be an active participant and take a cooperative role in labor-management relationship at the plant. The UAW also agreed to accept Toyota's production methods and to work with the company to improve productivity and quality."

Unsympathetic is right that Toyota management has made NUMMI quite successful compared to other GM plants, but it has all happened with a unionized UAW workforce.

Something I haven't heard, and doubt I will hear, from these anti-union commentators is how absolutely catastrophic the union-shafting bankruptcy plans they propose would be to the financial industry.

Those union pensions they complain about so much, though paid into by the companies, are administered by the unions themselves as investment funds. If the big 3 are put into bankruptcy and excused from paying those pensions, then those pension funds become insolvent in a stroke; the largest investment players in the U.S. would be instantly without capital. Imagine the effect that would have on an already reeling financial sector.

If, however, failure of these companies cannot be avoided then I would propose this;

1) The Fed assumes full responsibility for all Union health and retirement benefits, folding the plans into the existing Medicare, Medicaid, and Social Security programs, possibly to act as the core around which a nationalized health care program can be built.

2) Instead of liquidating the companies' assets, auction them off, including their ips such as the successful F150 line, as distinct properties to other, solvent, car makers. Do the same for their staff, in effect selling their R&D departments, factories and factory employee contracts to other, better employers who will, of course, have the option to renegotiate union contracts. Considering the widely pro-union stance of German companies and the significant dedication to employee well-being seen in Japanese and Korean manufacturers, I doubt this would lead to a significant loss to Union workers.

3) Seize the financial assets of the big three corps and use these, along with the auction proceeds, to pay off what debts can be paid off. What is left over would likely have to be nationalized as well; might as well pay it off upfront than through the hidden costs of lost jobs, destroyed local economies, and bankrupted parts suppliers.

Obviously, I'm not an expert on the auto industry, bankruptcy proceedings, or economics, but I've been thinking over these proposals for a few weeks now and they seem logical enough. That doesn't always translate well to reality, of course.

To Julian.

What about the pensions already paid? Where is that money? Is it not in the investment funds administered by the unions themselves ?

I believe that direct labor is only 10% of GM's costs to produce a car.

To Gerry: Most of our current financial problems are the result of over-leveraged investors. Leveraging is the act of using the money that you already have invested to get more money on the promise of the investing you will do with future monies. My thinking is that, as the Union investment funds are major players in our financial system, particularly Hedge funds, and those who invest in such instruments are precisely the people over-leveraged at the moment, that the union pension funds operate in a similar way.

Now, not being the accountant for these Union pension funds, perhaps I'm wrong. But I see no reason why they would be acting any differently than anyone else over the last 3 decades.

It is never the Unions fault. Most people buy cars based on quality i.e. the one that would last longer

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