Re: GM and Chrysler
 

Is it better to give the company money rather than helping the employees that depend on GM. Why not just end GM's Rain now and have other companies take over. I understand that Michigan depends on GM. This whole thing is a mess no matter what point you look at it. Everyone is right in their spot. This is a hard time and hopefully we get through it with minimal damage.

I do believe that Akash has a point. Is there anything that we as FIRST Participants can do for the GM employees that work hard day and night. Doesn't FIRST teach us to give back to the community. This would be a perfect HW assignment from Dean. Who knows what Dean Kamen is thinking.

-RC

Re: GM and Chrysler
 

Before I start ranting, just let me say that the country will go into a deeper hurt if we don't support the auto makers. If they go down, so will the economy (more such than it all ready has). The automakers support so much of this country that you won't even realize until they actually go down. With that said, I am from an Auto Town, the 3rd fastest-dying town in America in fact.

[one sided rant] Let's pick this statment apart, and I will try to show why we are in this mess in the first place. Now I am using you as an example, however you have a lot of the very thoughts that some Americans have that make me sick to my stomach.
"This bailout makes me sick": Sorry to hear that, I would much rather see the auto industry bailed out than the credit industry, which used that money to create more credit and hurt the economy more.
"I don't buy their cars": Really now? Well I can only assume two reasons this could be, either A) You are really fit from running/biking everywhere, or B) You would rather spend your money on foreign imports sending it away from your country (as if it wasn't bad enough all ready with outsourcing) to support a company that may put as much as 0% back into America helping worsen the economy.
"I have to pay taxes to keep them afloat?": Assuming that part B above is true, should have put your money into American companies in the first place.
"How about they make a car that I'd actually consider buying, instead?": I agree with this, I wish that the cars that come from the big 3 were better in different ways, however I would much rather put my money into an American company.
[/one sided rant]

Re: GM and Chrysler
 

GM is a big supporter of my team, 904. I don't know if they have cut off funding yet, but if they do it's not the end of the world. We will just have to step up fund raising, and get more sponsors. It might get to the point where we have to find 20 sponsors to donate $1000 each, but we won't die off like GM might. It's not the end of the world.

Re: GM and Chrysler
 

Arguably, they do. GM (maybe not Chrysler) makes several cars that are widely praised for their fuel economy (Cobalt XFE), performance (Corvette ZR1), or practicality (Malibu). GM does genuinely make good cars and has more good cars on the way (Cruze), the problem is that many people do not perceive that to be the case due to their experiences in the 80s and 90s. Further, although GM was in trouble before, they were in the middle of a long-term restructuring away from SUVs that got interrupted by this financial crisis.

I don't know if you supported the TARP bailout, but these bailouts demonstrate an immense double standard:
-One historically-profitable industry made extremely poor products that don't really exist (sub-prime mortgages and all derivatives) and are mathematically unsound (at its peak, the value of the sub-prime mortgage market was greater than the GDP of the planet) which end up getting it into a world of hurt, and they get a $700 billion bailout with very few strings attached
-Another industry which is suffering from past poor product offerings is in the middle of restructuring to meet demand more properly, but the financial crisis removes its ability to run its business of no fault of its own. After much, much fighting, they get a <$20 billion loan with all kinds of strings attached restricting what kind of cars they can make and inserting all kinds of government oversight into their decision making process.

Which of these seems more fair? The industry that got into trouble of its own accord getting a bailout, or the industry that was recovering but got hit by the side-effects of the first industry?
I just want to point out that outside of the US, the Socialism = disaster axiom is not recognized. Canada has several companies that are explicitly run by the government (called Crown Corporations), and we are still a free country (and remaining free, not a slippery slope to anything). Fascism is still bad, but I don't think government ownership of companies was the only thing that made it unpleasant.

But how can you? If I buy a Camry, it'll come out of a plant in Kentucky. Whether or not the profit heads to Japan, much of the labour, material and building costs support jobs in the states. If you buy many GM products, their component parts will come from Mexico, Canada, and further afield. There are very few 100% made-in-USA vehicles nowadays. When Ford brings the Fiesta over in 2010, it will be being manufactured in Germany (unless they build a new plant for it). If I buy a Pontiac Vibe, then I'm buying a car made in the USA, but using a Japanese design and a GM/Toyota shared plant.

I support it, but it is still a subsidy, because the private market would not supply it. Just like flood insurance is a subsidy to live in flood zones, because the private market will not. Although in this case, the private market would've supplied it if the private market wasn't so frozen up due to their own stupidity.

Re: GM and Chrysler
 

I would just like to add that government ownership of companies was one of the few elements of fascism that worked, that did not cause massive harm; you know how Volkswagen is a major car company and thrived in Germany for many, many years? Hitler founded it with Porsche and the German government owned it. They were trying to make cars available to everyone, trying to help out the "common people." Apparently, government ownership of companies is an element of fascism and socialism that we could do with adding to our own mixed economy.

Re: GM and Chrysler
 

how many teams are in some way sponsored by the auto industry, suppliers included? I'm guessing that in michigan it's somewhere around 70-80%
Just some food for thought.

Re: GM and Chrysler
 

I thought most of the teams in Michigan were government-sponsored, hence why there's a separate 'michigan district' section of the FRC schedule.

The auto industry going bankrupt might not be the end of those teams though: Delphi has been in bankruptcy proceedings for years, and yet here we are discussing it on a ChiefDelphi site. How many Delphi teams disappeared when Delphi went under?

Re: GM and Chrysler
 

Well, many Michigan teams are sponsored by the Auto industry but i believe that they chose Michigan for the District pilot program because we have the second highest number of teams in the world (Take that California!) and we also tend to be good at working around restructuring of the system. i don't know about how many Delphi teams died but i do know that many GM teams are struggling, ours included. I do agree that if the Auto industry goes under, many teams will hurt but i don't think that they will all go under. i know that in my team's case, we earn WAY more through fundraisers than all of our sponsorships put together. If teams can just keep up the good work, they wont go under financially. on the situation of mentors, that might be a little harder. our team leader, a skilled worker for GM with 33 years of seniority was laid off on Friday. i don't know if he can still keep mentoring us but i know if we keep working hard, we will pull through it.

Re: GM and Chrysler
 

Warning, this is a bit of a long winded response.

One thing people need to keep in mind is that the main portion of this issue is a cash flow issue. The auto industry is a very mature industry. From your economics courses, you will learn that the actual total margins grow very small in a mature industry. I worked at Chrysler (recently left to pursue other interests), and they took in about $65 Billion in revenues. A good year yeilds about $1 Billion net profit (1.5%). This extremely low margin is very common in a large mature industry. Back the cash flow issue, if you bring in $65 a year, and you turn very little profit, that means you spend about $65 a year. If you have a fairly stable production schedule (suppliers, workers.... really like this), that means you are spending over $5.5 Billion dollars a month in wages, parts, utilities... If you have a month where you have a 40% reduction in car sales, this is means you have a -$2 Billion dollar cash flow. If you have several of these in a row because speculators raise oil prices to record highs thus reducing your most profitable vehilce sales, and then banks collapse and clamp down on credit to where few can buy a car, and leases are no longer available, you might see 7 of those months in a row. That's a $14 Billion dollar whole. Now come the lay-offs because you have burned through all your reserves. GM is a lot bigger than Chrysler, so Double all those numbers for them. The 34 Billion dollar loan should have been submitted as a 50% return of the taxes their workers and suppliers already paid this past year.

One reason that the government is extending these loans is that the auto-industry pays huge amounts of taxes. With an average Auto-worker paying $15K or more in taxes (often way more), this means that Chrysler with its 66,000 direct employees generates between 1 and 2 billion dollars a year in taxes and medicare revenues. And it is the smallest of the 3. Once you include contractors, suppliers, and acillaries, the american auto-industry is responsible for $70 Billion dollars of tax revenues every year from salaries.

Item number two. Those great Japanese cars you are talking about were helped out by the Japanese government doing currency manipulation in the late 90's through early 2000's. It is easy to make a nicer car when your government allows for an extra $2000 of content to be in your car through currency manipulation. Even those guys are hurting after having record profits during the first 2 quarters of the year, Toyota will be posting a $1.7 Billion dollar loss for 2008 (and their company is perfect right?).

Korean cars are highly subsidized by their governments too. Chinese car makers are having trouble this year and their government threw them a billion dollars to keep them going. Anybody catching a trend yet?

Let's do a little devil's advocate. Let's let them file chapter 11. Unlike Delphi (where OEMs still bought their parts), few will buy a car from a bankrupt OEM (would you?). So that is a garuantee that they will go under. If they go under, so will many of their suppliers. Suppliers work to the same low margin mature industry model mentioned above. When they go under they stop delivering parts to the other OEMs. When those OEMs can't build their cars, they have to lay off their workers.

Maybe we should just screw the Union. Legacy costs are huge, let's just get rid of them. If you do that you will end up throwing a ton retired workers into the medicare system. Guess what that will do to the already underfunded medicare system (the same system that those guys funded through their taxes, but were not using due to their Union medical benefits).

I don't like propping up un-profitable businesses producing poor products, but I hate even more having to pay more in taxes because some short-sightedness ran some big companies into the ground.

In the 80's Chrysler recieved a loan of $1 Billion dollars and returned all of that plus $300 million in interest about 7 years later. While the $300 million may not sound like a lot of return, remember that the government also was getting a lot of tax revenue from the workers, and then a lot of tax revenue from the workers and Chrysler when it returned to profitability.

Sorry for the extremely long winded answer, but it is a very complicated topic. Partial answers (while technically correct) can lead to the wrong conclusions due to not enough info.

******************************************

People asked what can you do to help. I will ask the CD community to do the smae thing I asked of my family an friends. I think buying a foreign car is fine (many are more American than some American cars as mentioned above), but please at least look at the American cars. This is essentially a free thing that only requires some time. Take them for test drives, and let a American Car engineer know what you liked and did not like about them. Feedback like this car is crappy doesn't help. Feedback like: I like the camry interior, the Nissan has better residual value and I want to sell my car after 3 years, the dealers were mean at XXXX, is very helpful info. Make sure that you give both positive and negative feedback to ensure that they keep doing the things that are good. The biggest reason I ask for you to check out these other cars is because there are a lot of nice American cars out there. The perception difference is much larger than the actual difference (or inverted on many products). Also, don't buy crappy cars just because. This only re-affirms that they American Car buyer is an idiot, and will keep the companies making cappy cars. Buy cars you like and buy American if you find the right car.

(Also, don't be haters like the senators from the South. Those same senators helped work out deals that gave free land and 0 state taxes to foreign Auto-Companies to build in their states, but are against helping out domestics).

Feel free to PM me any opinions on Chrysler cars. I worked there 8 years and can forward info on to the people I know. I personally worked on SRT products so any direct feedback on those would be appreciated.

Re: GM and Chrysler
 

397 is a Delphi team. They have been fighting to survive for a couple years now. The Auto Industry sponsored teams are going to have to realize that their large budgets may soon be disappearing. Teams will survive, Michiganders are tough people (we have to be the weather here sucks!) It won't be easy

Michigan was probably chosen because we have a lot of teams but we also have a massive volunteer system and some crazy amazing mentors. We also have experience running low cost regionals (Rookie Regional 2008)

And IKE, thank you for your insight. I highly suggest everyone read IKE's book ;) It makes some very good points.

Re: GM and Chrysler
 

Wise advice.

My family has a "foreign" car and an "American" car and we like both. Decent gas mileage (or really good--on a recent trip, the American car--a 1999 Saturn sedan, manual transmission--got about 40 MPG highway), comfortable, and not too bad in terms of reliability. We got both of them used, and haven't had to do too much maintenance so far. (The other car is a 1991 Toyota sedan.)

In the long run, it's not whether the car is foreign or domestic, it's whether or not it's a good fit for you and whoever will use it.

As for the loan/bailout/whatever you want to call it-- I have mixed feelings. The main question is, is it going to have its intended effect (keep the automakers afloat until they can do it themselves), or is it going to hurt them worse? I've heard both points of view; I take neither right now.

Re: GM and Chrysler
 

Never said the credit industry should be bailed out. It's my opinion that no one should get a handout, but I'm a little bit of a romantic for the American "dream" of hauling your own self up.

About buying foreign cars: They aren't made in Japan and shipped here. Toyotas are made in Kentucky, by those hard working Americans that I am currently training to fight for. My dollars all end up in America, I don't like international business if it can be avoided. However, I am a slight utilitarian when it comes down to performance, and currently the USA is being smashed in these. There is no American company that owns as much of the performance and efficiency leader boards right now. Instead, the best in each category is owned by Europe and Asia.

I don't have anything against a specific company, and I hope nothing I say leans towards that. I simply want the best product for the best price, and currently American car companies aren't bringing me that.

Re: GM and Chrysler
 

....and West Virginia and Alabama....

Not to mention Honda's are produced in Ohio.

In fact, Toyota has tons of subsidiaries right here in the states that provide jobs and help OUR economy http://company.monster.com/toymot/

Re: GM and Chrysler
 

That's a great idea. I just purchases a car two weeks ago and I would love to tell the US automakers why I didn't go with them. Who do i need to send a letter to? Ford needs to know that they lost out on Interior finish (read that as cheap materials), lack of road performance and the overall 'feel' of the car. Reliability and owner costs were comparable across the board. With everything being equal would I buy American? Absolutely. For example, I'd be first in line if Jeep came out the with 40+ MPG Wrangler (I own a 1999 Wrangler myself). Sadly, all things are not equal. I will continue to purchase the best car I can afford. Maybe one day it will be American.

Re: GM and Chrysler
 

FIRST in Michigan is an organizational model, not a government sponsorship. Two or three years ago the Governor proposed funding of FIRST teams. It was cut in committee in favor of funding K-12 education - which no one can argue with. That year the rookies got some funding; even that has since been cut.

So would I, even though I like the styling of other products better. Do you know any manufacturer of a 40 mpg SUV?

We can't lose sight of the fact that the domestic makers were building things that would sell and make money doing it. Long, long ago Lee Iacocca was quoted, saying that Chrysler lost $600 per engine by buying a 1.6 liter for the old Omni/Horizon line, as compared to the 2.2 liter in-house engine. He added, "You can't make that up on volume." Maybe that 1.6 was better and got better fuel economy. But the company couldn't afford to continue to buy it instead of the 2.2. 20 years after the Omni/Horizon, Chrysler brought out the Dodge Intepid, a full size sedan with a V-8 engine. Guess what? It got better fuel economy than that old Omni! Other makers, both domestic and imports, brought out similar products. The better efficiency of the engines was used to upgrade the products - make them bigger, safer, faster. As long as gas was $1.50-$2.50, no one really cared what the fuel economy of their vehicle was. When gas spiked at $4.50, everyone was caught flat-footed. Because of some of the business relationships the importers have with their own governments, they are better able to withstand the temporary credit/finance/cashflow crunch Ike has so aptly described. Now that gas is back in the $1.50-$2.00 range, people are interested in trucks and SUV's again - except they can't get financing for them. And the dealerships can't get loans to stock the vehicles on their lots.

Points have been brought up that a century ago the buggy whip makers, harness makers, carriage makers, etc were going out of business and no one suggested they should get a government bailout, or even a loan, to keep them in business against the new auto companies. That is not a fair comparison. There is no current viable alternative to the internal combustion gasoline/diesel automobile engine. None. It just doesn't yet exist. It's not a case of the car companies and oil companies being in cahoots to crush any potential rivals. The science just isn't to the level that all those on the outside looking in think it should be. Companies are researching the next generation of transportation. Perhaps it will be electric/battery/hybrid/fuel cell. But the technology just doesn't yet exist to change over the entire fleet. Automakers themselves are in the forefront of change - at least they were until they could no longer afford it. For example, GM recently announced it is cutting back on the Chevy Volt project. If the car companies go under, who is going to fund the research into the future?