While I wouldn't want this "supposed" collapse to last too long because of the hardship it would cause for thousands of people but often it seems like something drastic like this is needed for many car corps (GM especially) to be able to make the tough decisions that they currently can’t make.

There just seems to be too much over capacity in the marketplace and when you consider the millions of used low-cost cars that come to the market after their 3+ year lease has expired you can see that this problem is only going to get worse.

The fact that the fed-funds rate (the % rate that banks charge each other) dropped to historic lows over the last few years helped a lot of companies and consumers restructure their debt after 9/11 and often its not the size of your debt that's the problem but the terms of how that debt is to be paid. So in other words this money provided by low rates allowed a lot of companies to flood themselves with cheap cash to offset any major loses after the dot.com bubble collapsed in 2000 and took everything down with it. While this was a good decision at the time it unfortunately prevented a lot companies like GM from correcting major problems within their infrastructure and management that manifested themselves during the 1990's and before.

A lot of these infrastructure problems were never resolved in the last recession since it was so short and mild (historically speaking) and the whole 0% financing really helped save companies like GM at the time (temporally of course). I think that low interest rates have run their beneficial course for both businesses and the consumers (restructuring their debt by refinancing their mortgages) and hard times might indeed be coming to the entire auto industry soon considering that a car is the most expensive thing that “most” people buy that suffers depreciation (of course housing can depreciate if a recession is long and severe but that's a different problem).

Does anyone really think that companies like GM can ever make the right decisions or do they need to have all other options removed by facing an economic collapse? Or do you think a companies like GM can’t make the right decision regardless because their infrastructure is to strongly rooted in the way things were in the past and are doomed to be beaten by a more agile competitor?

 

I think GM makes great vehicles. I have owned GM vehicles the last 15 years. All still running (different owners), and all around or over 200k miles with one over 330k miles originial "unbalanced" 4.3L 90deg V6. Most reliable "unreliable" engine I've ever seen...

I like GM's products currently and always have. They haven't produced anything that has ever dissapointed me. The Aztec was alittle wierd, but actually grows on you.

The Japanese have snuck in with Slave Labor and stolen a bit of the market share. I wouldn't worry though and in fact buy GM stock. As the Asians destroy themselves (look at China and Japan now, lol) they will have problems.

I wouldn't be too concerned about GM. If GM would really *really* have problems we should be concerned not about GM, but the future of the American economy which is wrapped around GM. But there again, things still look ok. There will be ups and downs with every large company. Hell we all have depressing days don't we???

I think your starting to see shifts into a more "global economy". Which is not really a bad thing. But at the same time, American companies should stick to their roots as so should the Germans and the Rice Burners theirs, etc....

I would be more concerned about Ford right now, then GM. Ford's in trouble... I wouldn't be suprised to see a Toyota/Ford merge even though I wouldn't like it. I don't think it's in GM's best interest to buy Ford. But Toyota would LOVE too. Honda as well...

 

Given that GM needs to save money, and given that there seem to be people on the payroll whos sole purpose is to hinder development speed, I would suggest that it would be better for GM to get rid of some white collar positions than it would be for the whole economy to crash... But then again they wouldn't have any control over an economic collapse anyway. I'm not sure anyone does.

 

I don't think my bank account would agree.

 

It would be good for Toyota

 

Sometimes recession is good and needed. In times of boom and expansion, efficiencies suffer and overcapacity becomes the norm. Recession forces consolidation and makes business leaner and meaner.

It hurts short term to both laid off employees and anyone who owns company stock, but in the long term the cycle helps ensure companies stay around for decades.

Certainly the auto industry right now suffers from some overcapacity, overemployment, etc. It probably wouldn't be a bad thing to have some consolidation. Look how its helped the banking industry.

 

did I read this right???? something about the hardship it would create for 'thousands' of people??

--how 'bout millions?????

OK.........so GM and Ford go under......

let me ask you this: have you looked at the trade deficit lately?

have you looked at the exchange rate of our greenback lately?

It would have devastating consequences ...not only to the employees.......but Suppliers........and moreover, the economy in general.


It is very easy to say that GM is making all bad decisions....but I also think that it's easy to sit at a computer and claim the decisions are bad without understanding ALL of the issues.

I gotta tell you........you think GM has problems with Legacy costs? Just wait...most other businesses that have been around for any length of time are going to face similar problems..........the Airline industry is just one example.

I wish GM could take a portion of that nearly 6 BILLION DOLLARS that will be spent on health care in the next year and put it toward a new car program!

 

I was speaking more in generalities of the business cycle than specifically about GM, but realize the point of the thread was more specific, which I guess is what you were addressing. Points taken!

We are all more or less armchair CEOs in here. You'll have to forgive us that.

But I think it would be hard for you to argue against some self-imposed belt-tightening on GM's part. Hopefully that's where it stays and it is not forced upon GM by market conditions.

 

A voice of reason (Fbodfather), thank god someone is awake!

Nothing as complicated as the economy of this country can be reduced to black and white reasoning that making people unemployed as some sort of short sharp shock is good for us, that unions are plain evil (in truth they are a mixed bag) and that slashing production costs to bare minimums by any means at all, including shipping all the jobs to Mexico or otherwise abroad is the answer.

The domino effect of the auto-industry collapsing would be huge as pointed out earlier. Those of you who say it's dog-eat-dog and you're okay with it consider what happens when the stock market slumps as the big three crash. When something huge like that happens, it takes the prices of stocks in a lot of other, even unrelated market sectors with it. You're gonna feel that too unlesss you are one of the very, very wealthy who can afford to soak it up. And what about Joe Blow who doesn't even work in the auto industry but has a 401k. When the whole market plummets, divserifed portfolios only limit the damage. So he should loose his money too? What did he do? Do you want to watch your own retirement spending power cut in half (esp. if you're close to retirement age and your portfolio is not going to recover quickly enough).

I mean some of you guys are so incredibly myopic in your reasoning. Can't you see, we are all tied up in the fortunes of this country and it is in our long term common *capitalist* interest to support our country and our workers and our industries, so that we don't slide into a huge depression. Even if in the short term, it mean paying a bit more for that car cause it was made in the US of A by Americans who take home a paycheque rather than by some Mexicans on slave wages. If millions of Americans are out of work as was noted, those people don't have money to buy goods. And so the domino effect spreads. And spreads. And you know what comes with mass unemployment? Poverty, crime and all the rest. And that affects all of us. The only people who are immune from all this are those top 5% of people holding the financial reigns in the first place, since they control the money flow. And by the way... you guys clearly have no idea about how hard it is to bring industry back once it's gone.

So please for the love of God, why does this have to be such a battlefield?

 

Marcus,

I think the whole "auto industry collapse" part of this thread is hyperbole, nothing more. Nobody could legitimately hope for an honest to goodness collapse.

But, recessions are good as long as they are short. They are necessary to straigten things out. The last one we had here was a bit longer and deeper than others but it had to happen. If it had not we'd just be sitting waiting for an even bigger one. One thing everybody learned in the dotcom bubble burst is that you cannot short circuit the business cycle. You can, however, be prepared for it, as a worker or an investor or a CEO.

If someone is out there working and doesn't have at least 6 mos salary in savings as a safety net, they're an idiot IMO. That's the best way an individual can insulate himself against a downturn.

You make some very good points but I think the question John was originally asking is if a leaner-meaner detriot wouldn't actually be better equipped to come back strong and fend off the import brands than the situation we have now. RP's point is that its not so simple to lean-up as we all want to make it out to be.

 

A "slimming down"... yes, that is somewhat different to an "economic collapse in the auto industry" as the first poster so bluntly put it .

If slimming down means among other thing that unions need to get more realistic on some of their demands, there is some truth in that I'm sure; along with ending the current corporate mindset of attempting to get rid of unions accross all sectors of industry (I'm not in a union BTW). The truth so often lies between two extreme viewpoints.

 

I realize that its very difficult for GM to do all things they want and need to do to secure their own survival. A company the size of GM can't make rash decisions like a small company can since so many people (investors and workers) depend of them.

All I want to see is a leaner, more agile, more efficient GM that can be profitable with 18% marketshare in the US and can sell products around the world at a profit as well. Unfortunately "Nessesity is the mother of invention" and often both inviduals and corporations (a collective of individuals) wont make the needed changes until they are forced to face certain disaster. This truth is what the Auto Unions will be forced to face this along with GM as well as all those part suppliers and individuals who depend on the auto industry as a whole and GM in particular for their survival.

Its sad that the American worker is getting beat up in the battle between GM and the auto unions and in the end it the American worker who will lose. The US will never impose larger tarrifs on foreign goods since almost every large American company depends on cheap foreign goods and labor in one way or another. If the US ever started to apply large tarrifs it would cause a huge upswing in retail and wholesale inflation which would cause our economy to be rocked and interest rates to skyrocket.

I personally dont think there is one easy solutions but luckily people will rise to the occasion when the luxuries of apathy and complacency have been taken from them. I don't believe struggle creates one's character, since struggle only reveals ones character that was there all along.