The New G.M. Begins

By Justin Gardner | Related entries in Cars, Economy

It’ll be a while before we know if this arrangement will work or not, but I can’t help but think a new G.M. that builds better, greener autos will be competitive in the future.

From NY Times:

“We deeply appreciate the support we’ve received during this historic transformation and will work hard to repay the trust and the money that so many have invested in G.M,” the chief executive, Fritz Henderson, said just a couple of hours after the company closed the sale of its good assets to a new, government-backed carmaker.

“The last 100 days has shown everyone, including ourselves, that a company not known for quick action can indeed move very fast,” Mr. Henderson said. “Starting today, we want to take that intensity, the decisiveness and the speed of these last several weeks, and transfer it from the battlefield triage of the bankruptcy process to the day-to-day operations of the new company.”

G.M.’s goal, Mr. Henderson said, is to design, build and sell the best vehicles in the world, something that the company had forgotten. He listed the company’s priorities, in order, as its customers, its cars and its culture.

Here are some of the changes that have already happened…

The new company will be much smaller, with brands like Saturn, Hummer, Opel and Pontiac in the process of being sold or closed. It will also have a smaller sales network, with thousands of dealers having been cut during the reorganization.

Its management ranks also will be smaller. Mr. Henderson said the company is eliminating 35 percent of its executive positions, including the job of Troy Clarke, who has served as G.M.’s North American president. Mr. Henderson will assume control over the company’s North American operations, and he was not specific about Mr. Clarke’s future.

Also, it looks like they’re partnering with eBay to auction cars in California, so they’re already starting to innovate and find unique ways to connect with consumers.

What are your thoughts? Should they have been liquidated instead of going this route? And, if so, why would that be better for us?

Discuss.


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26 Responses to “The New G.M. Begins”

  1. rob Says:

    Looking back only matters if it’s with respect to current decisions yet to be made. What’s done is done and all the taxpayers can hope for is to not get left holding the bag.

    Just my 2c.

  2. kranky kritter Says:

    For some time there have been no good answers to the sad unwieldy monster GM had become. So I won’t waste time shoulda-woulda-ing.

    I just want to say that we should at least not go overboard happytalking this with stuff like “Look! They are innovating and finding unique ways to connect with customers.”

    Here’s the thing: I think it’s positive that we have managed to preserve some portion of our domestic auto industry. In the coming years, we’ll need all the domestic production of exportable goods we can muster. But out of respect, I ask folks not to lose sight of the very many people who have gotten screwed quite badly, like auto dealers and creditors, both of whom acted in good faith and yet were simply deemed SOL and left holding an empty bag.

  3. TerenceC Says:

    That was the plan all along. Does anyone really think GM wanted to stay in business in the US? What company would want to fund unions, offer a living wage, obey environmental regulations, and pay taxes – not to mention all the other weight GM was carrying due to poor planning and even poorer decision making. All they wanted to do was move their production facilities over seas and avoid all of it – and they still will in a few years when the pressure is off and things are looking “rosey” again. What did we gain exactly for the investment?

  4. Nick Benjamin Says:

    Here’s the thing: I think it’s positive that we have managed to preserve some portion of our domestic auto industry. In the coming years, we’ll need all the domestic production of exportable goods we can muster. But out of respect, I ask folks not to lose sight of the very many people who have gotten screwed quite badly, like auto dealers and creditors, both of whom acted in good faith and yet were simply deemed SOL and left holding an empty bag.

    That many people includes the autoworkers. They didn’t get a totally empty bag, but they have been agreeing to progressively worse contracts every few years for decades. Which means they acted in a lot better faith than many GM creditors, as those creditors were mere speculators.

    Also include the many, many, many businesses dependent on autoworkers. I just came home from a drive through Livonia, and it seemed like there was a for lease sign on every commercial building.That didn’t happen a few years ago.

    And TerenceC,

    What would you have Obama do? We all know that unless something major changes in the global marketplace American manufacturing is dead. And I haven’t heard any idea to change the marketplace that isn’t a) impossible, or b) really cruel to the impoverished countries that are taking our manufacturing jobs. And cruelty to people who have trouble buying food is not a Good Thing.

    As for the original post I just hope this works. I love Detroit and I want to stay here. But if the local economy doesn’t turn around that’s going I’ll have to leave. And it won’t turn around until the auto companies do.

  5. SpkTruth2Pwr Says:

    I think they are on their way to being competitive. Building greener and more efficient cars is the future. American car companies USED to be the innovators, the trendsetters. SO we not only have to get American car companies to embrace this greener and efficient model, but already be thinking about the next big thing. I think that partnership with EBay sealed the deal for me as far as G.M.’s restructuring going well. That was such a great idea and i hope it takes off the ground with flying colors.

  6. Jimmy the Dhimmi Says:

    What company would want to fund unions, offer a living wage, obey environmental regulations, and pay taxes

    No kidding. Look what happened to GM. They did all of that for years and it drove them into bankruptcy.

  7. bruce Says:

    I have a few questions for you. 1st – How is having fewer dealers saving money? I have read several articles but they don’t make sense for the future of the company. The dealers took the risk, hired the employees, etc., no company money. Competition between the same brand dealers in the same town did not make GM give rebates, etc, it was other car companies. Shutting down viable dealers (and most were) will cost this country hundreds of thousands of jobs. 2nd – If GM will benefit from streamlined management and it will, will Obama do the same in government, since he is building a much bigger, layered federal government now? 3rd – why were chapter 11 laws subverted to reorganize the way Obama wanted, and not the way a real chapter 11 would have done? if you say it doesn’t matter, or it was good, what is the next law that will be deemed okay to break? 4th – Obama complains about the lack of concern by big banks, businesses, and the rich, etc that caused our economic recession, but yet laying off hundreds of thousands of dealers and their workers and taking away the value of stock that people invested in GM, and ignoring the needs of non-union workers is exactly the same thing. He doesn’t care unless they supported his campaign. We have got no new hope in washington, it is just the same old thing, except it is another name in charge. Clinton-Bush-Obama, all the same.

  8. gerryf Says:

    Jimmy,

    Do you ever actually think before you post?

    If you really think GM went under because they paid workers a living wage, were required to follow environmental rules and paid taxes you simply don’t get it.

  9. TerenceC Says:

    Nick
    It’s obvious what happened to the American auto industry. A system of inter-locking corporate directorates created an environment conducive to big oil, big cars, big insurance, big, big, big – and massive political influence to suspend common sense in the auto industry for 40 years. They have no one to blame but themselves, but the American tax payer had to pay the price rather than the organizations responsible.

    The American auto industry was built primarily on technical innovation and bringing those innovations to market regardless of dominant technology at the time. Then it stopped after a stunning 60 + year run. Does anybody have a good reason as to why that happened? I wish I did, but I really don’t.

    I can only look at the facts as they have presented themselves and come to the conclusion that Americans love and need their big corporations, but when it comes to making quarterly profits what is best for America (and most of the word) is the last thing on the mind of corporate America. The lack of a national industrial policy in this country only acts to hurt Americans. There’s no shortage of brains here when it comes to great ideas – there’s only a shortage of integrity, political courage, and leadership that makes the right decisions for the greatest number of our people.

  10. kranky kritter Says:

    That many people includes the autoworkers. They didn’t get a totally empty bag, but they have been agreeing to progressively worse contracts every few years for decades. Which means they acted in a lot better faith than many GM creditors, as those creditors were mere speculators.

    So if you loan someone money, you are “speculating: because you expect to get aid back?That’s so idiotic it’s beneath contempt.

    If you really think GM went under because they paid workers a living wage, were required to follow environmental rules and paid taxes you simply don’t get it.

    By any sane, reasonable measure, the compensation rates that UAW autoworkers once enjoyed were WELL beyond what most folks would consider a “living” wage.

    And if you don’t understand that businesses at a substantial disadvantage regarding labor costs cannot compete, then there can’t possibly be much of anything that you DO get. It must be lovely to believe autoworkers and their unions are blameless and that our current problems are simply evidence that we have all been bamboozled by evil giant corporations. As the progressive litany always foretells.

    The irony, of course, is that we’re currently experiencing the ongoing re-balance of the American standard of living downward to a new equilibrium, tomatch the concurrent rise of the standard of living in other nations that outproduced, outsaved, and outcompeted us. The scandalous gap between the US standard of living and that in other nations was always bemoaned by the progressive litany. And now it is being eroded, not by foolish rhetoric,but by economic forces that are easily predictable if you merely understand the basic economics regarding the relationship between production and consumption.

  11. Nick Benjamin Says:

    So if you loan someone money, you are “speculating: because you expect to get aid back?That’s so idiotic it’s beneath contempt.

    Uhh….

    I wasn’t talking about people who actually lent GM money. I was talking about people who bought GM debt from third parties cheap, and then tried to block the bankruptcy when they realized they weren’t gonna make a huge profit.

    Many GM debt-holders were not in that category, but some were.

  12. Jimmy the Dhimmi Says:

    Tell me gerry, how much do you think GM paid its workers? Do you honestly think that the average auto-woker in Michigan couldn’t live off of wages and benefits that combined to nearly $80 per hour?

  13. Tully Says:

    Nick — MOST GM debt-holders were not in that category. MOST GM debt-holders were ordinary investors, among them hundreds of pension funds. Some investors even lent GM money when it was clear the company was in trouble, on the condition that their notes had priority in case of bankruptcy, as allowed in bankruptcy law. The vast bulk of GM debt — including that preferred senior debt — was indeed held by ordinary investors in one form or another. And they got royally screwed by the government for doing so, blackmailed and stong-armed into surrendering their legal rights so that the government could take a big share and give a big share to the unions.

    HopeChange™!

  14. Nick Benjamin Says:

    No individual employee had that kind of salary.

    What happened was that in the 70s GM agreed to all kinds of retiree benefits, including a great pension and health care for life. By 1995 a lot of those UAW guys were retired, and a lot of their jobs were gone. GM was using robots, Mexicans, Mexican robots, or Canadians*. Which meant that if you added all salarys, plus benefits, plus pensions, plus retiree benefits up and divided by GM’s total employees you got a ridiculously high number.

    The actual salary these guys were making is in $40k-$60k range, or $20-$30 an hour. That’s a fairly typical salary in the Auto industry, even if you’re a non-Union guy working for Honda. The UAW’s benefits package can’t have been that expensive. There’s a 20% co-pay, which can get mighty costly if mom gets breast cancer or dad develops a heart condition.

    Keep in mind the guys who work for Honda are non-union and they’re not stupid. If UAW guys actually made 50% more than non-union autoworkers they’d all unionize in a heartbeat. They don’t do it because there’s no guarantee they’d get a raise, even if they did it wouldn’t be much, and there is a guarantee that they’d owe union dues. So despite intense efforts from the UAW no non-UAW plant in the country wants to unionize.

    *Canadians get a lot of auto-work because their health costs are very stable. State-side the health industry is overjoyed if costs only rise 8% a year, and is not surprised at 15% increases. With an employer-based health system GM’s on the hook for that increase. Canada’s taxes are higher than ours, but they don’t increase very quickly.Sometimes they even go down.

  15. Tully Says:

    The actual salary these guys were making is in $40k-$60k range, or $20-$30 an hour.

    According to UAW, base pay for a GM UAW assembler was about $28/hr. That’s a base salary of about $60,000/yr. That’s for an assembler — other functions make higher wages. For example, an electrician pulls in around $75K/yr. This includes the 34.5 paid days off they’re entitled to, but not pension contributions, health care costs, disability coverage, or layoff benefits.

    The UAW’s benefits package can’t have been that expensive.

    Yes, it can, especially in a long-established union shop. Benefits and pensions and such are indeed also part of total labor cost, whether they show up in the weekly take-home paycheck or not. The rule of thumb in non-union industry is for total labor cost to be figured at roughly 1.5*base salary. Toyota, Honda, and Nissan fit the non-union model assuming similar wages paid, coming in at about $45-47/hr total labor cost.

    Overall total labor cost for GM in 2008 was pushing $80/hr, over $20/hr of which was health care costs.

  16. Nick Benjamin Says:

    Nick — MOST GM debt-holders were not in that category. MOST GM debt-holders were ordinary investors

    That’s why I said “many investors.” If I’d meant them all I would have said all, or just said investors.

    According to UAW, base pay for a GM UAW assembler was about $28/hr. That’s a base salary of about $60,000/yr. That’s for an assembler — other functions make higher wages. For example, an electrician pulls in around $75K/yr. This includes the 34.5 paid days off they’re entitled to, but not pension contributions, health care costs, disability coverage, or layoff benefits.

    Uhh…

    I was responding to Jimmi’s claim that GM workers brought home $80 an hour. If that was true he’d be absolutely right to claim they were hideously overpaid. But no individual employee earns anything near $80 an hour. They get about $30 in take-home pay plus benefits.

    Thanks for proving my point.

    Overall total labor cost for GM in 2008 was pushing $80/hr, over $20/hr of which was health care costs.

    To a large extent the per employee cost is a red herring. It makes you think that if you simply cut GM hourly wages by 75% their labor costs would be fine. Back in the real world they can’t cut most of their employees hourly wages by 75% without violating Michigan’s $7.25 an hour minimum wage. Even if they reduce everyone to minimum wage their labor costs are sky-high because they have hundreds of thousands of retirees.

    But their total labor costs did have to go down. So the UAW made a huge concession in 2007. The Big Three faced huge retiree health costs in the future. $115 Billion or more. But they Union agreed to take on all those obligations in exchange for $60 Billion. You will note that this saved the Big Three $55 Billion. And this isn’t the first time they’ve given up lots of ground on health costs. In 1980 there was no 20% co-pay.

    So please don’t tell me the Union wasn’t screwed enough by the bankruptcy. They have been screwed before by many deals. Investors, OTOH, were only screwed once.

  17. Tully Says:

    LMAO at the idea that the union got screwed, when the union in concert with GM management created the problem. I’m sure many of the workers feel like they got screwed, but that the company and union made them promises they can’t keep is not MY bad. Nor the taxpayer’s even though we get hooked on the bailout costs. Somehow I’m not holding my breath for Obama and crew to mail me my proportional shares of GM from the chunk the Gov’t is receiving.

    I supplied the breakdowns because Jimmi was indeed wrong as concerns take-home pay, but that does not remotely change the ongoing labor cost problem nor does it change the fact that one’s compensation is not remotely all wages, but includes all benefits as well. You low-balled the wage figures to make cash wages seem smaller than they actually are, itself a dodge. Example: GM’s own figures for average worker’s cash compensation including overtime and holidays came out to $40/hr in 2006 ($39.83). That’s an average cash compensation of $83K/yr before taxes, a far cry from “$40-60K.”

    You also repeat the oft-advanced claim that much of the cost figure is payments for current retirees, and that’s flat-out false. I’ve been through the SEC filings for GM and am familiar with the reporting requirements and associated GAAP reporting standards. The figures stated are for payments made and liabilities accrued for currently working employees in the year they are incurred — costs for retirees are separate line items in the filings.

    The per-hour total labor cost for currently working employees includes cash compensation (wages); hospital, surgical, and prescription drug benefits; dental and vision benefits; group life insurance; disability benefits; Supplemental Unemployment Benefits (SUB); pension payments to workers pensions accounts to be paid out at retirement; unemployment compensation; and the employer’s share of SS/Medicare/payroll taxes.

    Those costs are ALL recognized in the financial statements in the year they are incurred, NOT when they are paid out. The total labor cost figures of $75+/hr are all for CURRENT employees, and do NOT include costs for already-retired employees. GM says this explicitly in their 10K filings:

    GM maintains hourly and salaried benefit plans that provide postretirement medical, dental, vision, and life insurance to most U.S. and Canadian retirees and eligible dependents. The cost of such benefits is recognized in the consolidated financial statements during the period employees provide service to GM.

    If retiree benefits were included in the total labor cost hourly figure, they would raise the hourly total labor cost of GM employees by roughly another $33/hr, pushing it over the $100/hr figure.

  18. Nick Benjamin Says:

    LMAO at the idea that the union got screwed, when the union in concert with GM management created the problem. I’m sure many of the workers feel like they got screwed, but that the company and union made them promises they can’t keep is not MY bad.

    Uhh…

    You do realize you got into this conversation claiming that “ordinary investors” deserved our sympathy because GM couldn’t keep it’s promises to them?

    It ain’t my fault that those investors put their money into a sinking ship. And it’s not like investing a productive occupation. But I can still acknowledge that they got screwed.

    The per-hour total labor cost for currently working employees includes cash compensation (wages); hospital, surgical, and prescription drug benefits; dental and vision benefits; group life insurance; disability benefits; Supplemental Unemployment Benefits (SUB); pension payments to workers pensions accounts to be paid out at retirement; unemployment compensation; and the employer’s share of SS/Medicare/payroll taxes.

    You have also said that a) GM spent almost $80 an hour compensating active employees in 2008, b) roughly $30 went to salary, c) roughly $20 went to health care. Which leaves $30 an hour totally unaccounted for.

    I’ll be nice and pretend GM’s average hourly wage of $40 is all UAW. That their CEO, CFO, Board, Management team, Automotive Engineers all make less than that. So you’ve only got to account for $20. Payroll taxes on $40 are $3. So we’re down to $17. And we’ve only got pension fund contributions and unemployment compensation left.

    Enjoy those numbers.

  19. Tully Says:

    BS, Nick.

    You do realize you got into this conversation claiming that “ordinary investors” deserved our sympathy because GM couldn’t keep it’s promises to them?

    Nope, I was refuting your assertion that GM debt-holders deserved to be screwed because they were trying to game the system for obscene profits. And I pointed out that ordinary and all debt-holders got screwed by the government, which blackmailed and arm-twisted and bullied them out of their legitimate legal claims to leave them with a fraction of what they should have gotten in a non-gamed bankruptcy. It wasn’t GM’s “promises” that were broken, but binding legal contracts that ordinarily carry the full forceof law in a bankruptcy case — when Uncle Sugar isn’t busy obliterating the legal code.

    You have also said that a) GM spent almost $80 an hour compensating active employees in 2008, b) roughly $30 went to salary, c) roughly $20 went to health care. Which leaves $30 an hour totally unaccounted for.

    That is not an accurate reflection of what I said. Did you completely and utterly fail to read and comprehend the paragraph you just block-cited? It lists those other items.

    I’ll be nice and pretend GM’s average hourly wage of $40 is all UAW.

    How nice of you to pretend to only half the actual cost. However, once again you’re just flat-out wrong. The $75+/hr total labor cost is for UAW production employees. You know, UNION employees. It is actually calculated from the sum total of all compensation and benefits paid to and on behalf of all current (NOT retired) UAW production employees, divided by the hours reported worked by same.

    Nice try at diverting to GM management, but that’s not the issue here, is it? Not that I have any pity at all for them — they’re at least as instrumental in the busting-out of GM as the UAW. I’m sure they too were (are) overpaid. Especially given the results. I do have some pity for the union workers (though none for the union itself). They trusted the union to get the best sustainable deal for them that could be had, and it over and over proved to be non-sustainable.

    IOW, to recap, the $75+/hr total labor cost figure is accurate, does NOT include costs for retired employees, and does NOT include management salary costs. It is the actual cost to the company of that current pre-bankruptcy UAW labor. I realize that’s not what the union claims, but it IS what the audited books of GM actually show and what IS actually (and consistently) reported in their required re-audited financial filings.

  20. kranky kritter Says:

    Uhh, Nick, you do realize that all your uhhs can’t save you from looking like the misinformed one, right?

    You didn’t make a single data-based argument that wasn’t incorrect.

    I also noticed that as soon as the current labor cost figure was supported in a way that you couldn’t really refute or further obscure, you became eager to talk about other stuff, like the “many” speculative debtholders who don’t deserve your sympathy. That’s some pretty agile mental gymnastics right there. The vast majority of these debtholders were not in the “speculative” class you’ve described. But you still want to talk about this minority as “many.” Well done.

    What you still haven’t done is come up with anything resembling a good reason to justify the screwing of the debtholders who made those loans in good faith because GM needed the money. Due to this screwing, the big, serious long-term question for our country going forward is

    Why would anyone in their right mind ever again loan money to a struggling enterprise of national importance in similar circumstances after the government has set such a troubling precedent?

    If the President asks private capital to step in and help out a struggling enterprise, how deafening do YOU think the silence will be?

  21. TerenceC Says:

    Tully – The numbers you reference are “fully burdened” (real estate tax, lights, cleaning crews, facilities maintenance, etc) and are never used in any actuarial claims in any industry. It’s laughable that the UAW gets slammed for being too greedy in your estimation. It’s nice to have a vampire to “stake” with the unions but that isn’t reality. GM and Chrysler have a long history of very poor decision making, poor product development, average engineering, poor quality control (although that has been improving for a few years), horrible brand identity, and crappy worker loyalty. These aren’t union problems, these are management problems – and the American tax payer is bailing out bad management, not greedy unions.

  22. Nick Benjamin Says:

    It wasn’t GM’s “promises” that were broken, but binding legal contracts that ordinarily carry the full forceof law in a bankruptcy case — when Uncle Sugar isn’t busy obliterating the legal code.

    Uhh…

    Union contracts are also legally binding. And were changed, drastically, several times in a vain attempt to prevent the December ’08 collapse.

    If you want to get into the technicalities of bankruptcy law go right ahead.

    But you do have to acknowledge the Union has made huge sacrifices every year for decades. In 2007 alone the Union gave GM tens of billions when they made a single contractual concession. OTOH, the bondholders didn’t give up a dime until the company entered bankruptcy.

    You may have the letter of the law on your side. I really don’t care. But you gonna have to acknowledge that everybody got really screwed on this deal.

    You have also said that a) GM spent almost $80 an hour compensating active employees in 2008, b) roughly $30 went to salary, c) roughly $20 went to health care. Which leaves $30 an hour totally unaccounted for.

    That is not an accurate reflection of what I said. Did you completely and utterly fail to read and comprehend the paragraph you just block-cited? It lists those other items.

    I’ll be nice and pretend GM’s average hourly wage of $40 is all UAW.

    How nice of you to pretend to only half the actual cost. However, once again you’re just flat-out wrong. The $75+/hr total labor cost is for UAW production employees. You know, UNION employees. It is actually calculated from the sum total of all compensation and benefits paid to and on behalf of all current (NOT retired) UAW production employees, divided by the hours reported worked by same.

    Uhh….

    If you actually read my post you would have realized I was trying to re-create that $80 number from the numbers YOU gave. $28 an hour in salary was YOUR number. You quoted it. You later upped it to $40, I didn’t think that was valid but I was going along with your numbers for the sake of argument.

    $20 an hour for health costs is also your number. July 11th, 4:48 PM. $3 for payroll taxes was my number, but apparently it’s not controversial.

    Which still leaves $29 an hour of your mysterious $80 an hour labor costs unnacounted for. “Group life insurance; disability benefits; Supplemental Unemployment Benefits (SUB); pension payments to workers pensions accounts to be paid out at retirement; unemployment compensation” ain’t free, but they don’t add up to $29 an hour either.

    Using your revised numbers you only have to account for $17 an hour. And it still doesn’t add up.

    I obviously don’t have insider knowledge about SEC filings. But I passed third grade.

    Nice try at diverting to GM management, but that’s not the issue here, is it?

    So a bunch of MBAs from Harvard agree to overpay a bunch of high school educated guys from Flint, and the guys from Flint are the ones to blame when the company runs out of money?

    I’ve never had an issue with blaming the unions for their part in this mess. I’m not gonna single them out as evil bastards responsible for the fall of GM, but they ain’t perfect either.

    Not that I have any pity at all for them — they’re at least as instrumental in the busting-out of GM as the UAW. I’m sure they too were (are) overpaid. Especially given the results. I do have some pity for the union workers (though none for the union itself). They trusted the union to get the best sustainable deal for them that could be had, and it over and over proved to be non-sustainable.

    So we do agree on some things.

    It’s not hardto find bad guys in this story.

    IOW, to recap, the $75+/hr total labor cost figure is accurate, does NOT include costs for retired employees, and does NOT include management salary costs. It is the actual cost to the company of that current pre-bankruptcy UAW labor. I realize that’s not what the union claims, but it IS what the audited books of GM actually show and what IS actually (and consistently) reported in their required re-audited financial filings.

    You come up with a realistic explanation for those missing $17 (or $29) and I’ll agree with you.

  23. Nick Benjamin Says:

    Uhh, Nick, you do realize that all your uhhs can’t save you from looking like the misinformed one, right?

    You didn’t make a single data-based argument that wasn’t incorrect.

    Let’s see:
    $20-$30 an hour. Tully put it at $28. His $40 an hour figure is apparently based on all GM employees, including the CEO, so it cannot be representative of UAW wages.

    The VEBA is only supposed to get $60 Billion from the big three, but is assuming $115 Billion in obligations.

    US Health Costs increase at a prodigious rate, but Canadian taxes are quite stable.

    I could go on if you want.

    I also noticed that as soon as the current labor cost figure was supported in a way that you couldn’t really refute or further obscure, you became eager to talk about other stuff, like the “many” speculative debtholders who don’t deserve your sympathy. That’s some pretty agile mental gymnastics right there.

    Uhh…

    I made those comments in my first post on this thread. I’ve continued expanding on them because you guys guy keep responding to them.

    The vast majority of these debtholders were not in the “speculative” class you’ve described. But you still want to talk about this minority as “many.” Well done.

    Oh dear I believe I’m being accused of hyperbole.

    It also seems you’re conceding that I’m exactly right about many of GM’s debtholders.

    What you still haven’t done is come up with anything resembling a good reason to justify the screwing of the debtholders who made those loans in good faith because GM needed the money.

    I’m not really trying to prove anybody deserved this. I’m trying to prove none of the players in this game deserves to be singled out uniquely moral.

    For example workers agreed to work for GM in good faith because GM needed employees and said it could give them great pensions. The union agreed to those pensions because finance whiz-kids employed by GM said they were sustainable, and when those whiz-kids turned out to be dead wrong they let their employers off the hook for tens of billion$.

    When the agreements between bond-holders and GM turned out to be unsustainable those bondholders sued.

    If the President asks private capital to step in and help out a struggling enterprise, how deafening do YOU think the silence will be?

    Despite the fact legal employment contracts were thrown out by the bankruptcy proceedings I’m pretty sure everyone’s gonna show up at work tomorrow.

  24. kranky kritter Says:

    I’m not really trying to prove anybody deserved this. I’m trying to prove none of the players in this game deserves to be singled out uniquely moral.

    Oh, really? Let me refresh your memory. Emphasis mine:

    That many people includes the autoworkers. They didn’t get a totally empty bag, but they have been agreeing to progressively worse contracts every few years for decades. Which means they acted in a lot better faith than many GM creditors, as those creditors were mere speculators.

    That sounds suspiciously like trying to single out who is more moral.

    When everyone saw that GM was in extremely serious financial trouble, no one was eager to loan them money. No one who could do the math. Eventually loans were granted with special conditions, in good faith by uneasy creditors. The overwhelming majority of them were not “mere speculators.”

    I am not even interested in any argument about the rest of the creditors who were so-called speculators. All investors are opportunists in some sense, and that includes every person who ever had a 401k. Oh well.

    The big point is that when creditors make big loans in good faith and the government arm-twists them out of their agreements, that means that the next time around, it will be very hard to find creditors, whether those creditors are evil speculators, evil big banks, or virtuous giant pension funds.

    For example workers agreed to work for GM in good faith because GM needed employees and said it could give them great pensions. The union agreed to those pensions because finance whiz-kids employed by GM said they were sustainable, and when those whiz-kids turned out to be dead wrong they let their employers off the hook for tens of billion$.

    This qualifies as high comedy for me. The only bad guy in the tale is a group of unnamed financial whiz kids? With all the money at the UAW’s disposal, they had no whiz kids of their own? Fact is, the real tale is a multi-decade cooperative effort between management, union, and employees at gilding the lily. No one from any of these groups would ever listen to anyone except Rose E. Scenario. That’s management’s bad, and it’s the union’s bad, and it’s the employees’ bad for assuming unsustainable trends could be made sustainable.

    Virtually all generous pension and benefit plans are based in large part on the assumption that the company generating those benefits remains a viable ongoing concern. The vast majority of employees choose to ignore this or are not fully aware of it. That’s unfortunate, but ignorance makes a poor excuse.

  25. The Peanut Gallery: 7/12/2009 « The Sad Elephant Says:

    [...] Justin Gardner for Donklephant. [...]

  26. Nick Benjamin Says:

    That sounds suspiciously like trying to single out who is more moral.

    Or I was pointing out that nobody in this fiasco has entirely clean hands, and thus nobody deserves to be singled out as uniquely moral.

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