Re: [Amc-list] Big Three Bailout (was Interesting article)

[Frank Swygert <farna@xxxxxxx>]

It's a good article. Those retirees aren't as much of a problem as the author thinks though. Retirement funds are paid by the company for the workers they have now also, and those funds are supposed to be put in a different account which draws interest. I don't know exactly how the big three are accounting for retirement funding, but we all know invested money hasn't been making much lately. The retirement funds work kind of like social security is supposed to -- the take in should be more than is drawn out. The only reason SS is in trouble is that congress has borrowed from the SS funds several times since the 60s and never paid the funds back. How well the scheme works for the big three IS impacted by the number of retirees, so they do have a bit of disadvantage, but if the finds have been managed well that shouldn't be as much a problem as we are being led to believe. I believe negotiations with the unions a year or two ago put management of those funds in union hands, so 
 GM doesn't have that much liability for past retirees any more, just the cost share they have to put into the fund. 

$800 a car savings doesn't sound like much, but you have to remember that GM produces a LOT of vehicles! In January and February 2008 GM produced 170,000 vehicles (http://74.125.47.132/search?q=cache:Y-cnRfkomxYJ:www.gm.com/corporate/investor_information/docs/sales_prod/08_02/production_0802.pdf+gm+2008+production&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a).
That's a total savings of $136,000,000 in just two months. The total savings wouldn't be passed on to the consumer, maybe none of it would, but assuming that they build around 150K vehicles every couple months that's $120,000,000 x 6 = $720,000,000 yearly. So the idiot who wrote the article missed something, I think!

The only benefit to not bailing the big three out is that they will have to go into bankruptcy. Most of the general public thinks that means they will go out of business, but that's not the case. It means they have to go into government supervised reorganization to streamline the business and make it more competitive. GM especially has a large bureaucracy, and the only way to trim it is to go into bankruptcy. I think bankruptcy court would make most of the "golden parachute" contracts the big execs have null and void, or at least renegotiable -- same with union contracts. They NEED that supervised restructuring. The government would have top economists go in and restructure -- experts in the area without any corporate baggage to tote. They would do a general house cleaning first, and THAT is what the big auto companies NEED more than anything else. Then they can talk to the unions about making concessions. It needs to be a top-down cleaning. If GM could show that top execs we
 re taking big pay cuts then the unions might be more willing to negotiate. Otherwise, why should they? 

I agree that the bailout is a form of economic stimulus and I'm not totally against it. From what I read there would be some government supervised reorganizing similar to a bankruptcy as part of the agreement (though not as much, I'm sure). I don't think that the public is stupid enough to think that a bankruptcy is worse than begging the government for money though. Sort of six of one, half dozen of the other if you ask me! 

-------------
Date: Thu, 11 Dec 2008 22:50:46 -0500
From: Don <don_nsx@xxxxxxxxxxxx>

I know its longwinded, but it does clear up some misconceptions that are 
rampant.
Don



>> >> December 10, 2008
>> >> Economic Scene
>> >>
>> >>
>> >>   $73 an Hour: Adding It Up
>> >>
>> >> By DAVID LEONHARDT 
>> >> <http://topics.nytimes.com/top/reference/timestopics/people/l/david_leonhardt/index.html?inline=nyt-per>
-- 
Frank Swygert
Publisher, "American Motors Cars" 
Magazine (AMC)
For all AMC enthusiasts
http://farna.home.att.net/AMC.html
(free download available!)


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