Friday :: Jun 10, 2005

Bayh GM!

by pessimist

It takes either a very brave man or a fool to grab for the reins when one's world is hurtling out of control toward the abyss.

Indiana Senator Evan Bayh seems to be making moves toward seeking the Democratic presidential nomination in 2008. Considering what is about to happen to his home state, though, one does have to ask the question: "Bravery or foolishness?" While his voting no on confirming Pricilla Owen, William Pryor, and Janice Rogers Brown, Bayh voted for cloture to end the fillibuster on their confirmation votes. Voting no on these radical religionist judicial activists is like voting to ban overnight parking near the city gates after the Trojan Horse was taken in.

Hence, one would have to lean toward fool. But we should give him the opportunity to express himself as a way of introducing himself:

Still not running, Bayh bashes Bush

While not declaring his candidacy for the Democratic nomination in 2008, Bayh certainly sounded like a man seeking the hearts of the party faithful as he took the stage Saturday evening. In a speech that lasted more than 30 minutes, he rebuked President Bush's administration on a range of issues, from the federal deficit to the need for energy independence. "When the history of our time is written," Bayh said, "I believe this president will be judged very harshly." Pointing to the Republican Party's symbol, Bayh joked,
"The elephant always leads to some unpleasant stuff that you have to clean up."
Bayh said Republicans have divided the country, and Bush failed to summon Americans to "something more" following the Sept. 11, 2001 terrorist attacks. The president, he said, should have urged people to accept potentially costly moves to lessen the country's dependence on foreign oil. Bayh said he would have made such a request "if I'd been president of the United States at that time." Massive budget deficits threaten future generations, Bayh said, before accusing Bush of not doing enough to respond to the unfair trade actions of other nations.
"We need a government that will stand by our workers," he said, offering a message for unions, a key base of any national Democrat's candidacy. ". . . We need a government that will do something other than roll over and let them down."

Thanks to GM and Ford, the spotlight is on your home state, Senator. Will you stand by the workers of Indiana? Will you do something other than roll over and let them down? It's time to show what you can do for them before we give you a shot at doing for the rest of us:

GM to slash 25,000 jobs across U.S.
Hundreds at Indiana plants, suppliers could be affected

General Motors announced Tuesday it plans to cut 25,000 jobs from its hourly U.S. work force by 2008, a move that could lead to hundreds of layoffs in Indiana. GM employs about 12,000 Indiana workers, about half of them in Indianapolis. The cuts, forced by rising health care costs and lagging sales, would be the company's largest restructuring since the 1990s spinoff of its statewide auto parts empire.

GM Plans to Cut 25,000 Jobs

GM Chairman Rick Wagoner said the announced cuts and other moves this year will reduce the company's capacity to 5 million vehicles by the end of this year, down from 6 million in 2002. The strategy carries some risk, because GM needs a high volume of sales to generate cash for its health and pension plan costs. But GM has made it clear that it wants to get smaller to become more efficient.

GM, once a towering icon of U.S. industry, has stumbled badly in recent years. Sales -- particularly of its once-hot sport-utility vehicles -- have plummeted, and the company is weighed down by rising health care and pension costs. Its foreign rivals, meanwhile, continue to expand their share of the North American market, with more efficient factories, lower health care and pension costs and fewer unionized employees.

"This probably represents some acceleration in their reduction in their workforce, but I think pretty much it's the logical outcome of all the other announcements that GM has been making," said Dana Johnson, chief economist for Detroit's Comerica Bank. "It's clear they've lost market share; it's clear the finance markets are putting pressure on them to improve performance."

"It's going to save some money, but it's not nearly enough," said Peter G. Morici, a professor at the University of Maryland's Robert H. Smith School of Business. "In some industries there are golden parachutes for the guy at the top. Here, the golden parachutes are at the bottom. The best thing that could happen to you at 55 at GM is to be bought out. Then it's off to the golf course forever."

That's a popular Topper misconception about union workers. For most of us, that fallacy - 'uppity union workers wanting to act like their Topper corporate betters' - is a long way from reality.

Late For Tee Time - Had To Work

GM making major job cuts

Struggling with billion dollar losses and earnings this year 80 percent lower than forecast, General Motors took what has become an almost routine automotive move. Wagoner expects "to close additional assembly and component plants over the next few years and reduce our manufacturing employment by 25,000 or more people." Employee Julie Dilley says, "I live day by day. I don't listen to the rumors. When the axe comes the axe comes. But I think it's a shame we're losing those jobs."

The company operates Allison Transmission in Indianapolis with 3,800 workers, the Fort Wayne Assembly plant with 2,900, a Bedford foundry with 880 workers, the Indianapolis Metal Center with more than 1,600 and the Marion Metal Center with more than 1,600; nearly 11,000 Indiana workers.

GM's restructuring has broad implications in Indiana. That plan includes working with the United Auto Workers Union on ways to cut its $5 billion a year healthcare costs for one million active workers, retirees and their families. Issues of losing market share for years and struggling with rising healthcare costs have been worrisome to retirees and current employees concerned that they will bear the burden of bringing the world's biggest automaker back to profitability. At the company's Indianapolis Metal Plant, workers like Yogi Henderson are concerned.

"It's just another tactic to basically rip the guts out of the working class family."

Hoosier state in firing line as GM announces major cuts

Hit by soaring health costs and falling auto sales, General Motors Corp. came out Tuesday with a prescription for its ills, a job-cutting plan likely to roil Indiana's industrial economy. GM would cut 25,000 U.S. jobs by 2008 -- 22.5 percent of its blue-collar work force -- and close an unspecified number of component and vehicle assembly plants. Analysts say GM's goal of bringing production capacity in line with shrunken market share could cost Indiana hundreds of GM jobs, and trigger layoffs among dozens of independent auto parts suppliers throughout the state.

GM Indianapolis workers say 25,000 jobs are small compared to the bloodletting in the auto industry over the past decade. GM has steadily cut back from 600,000 employees worldwide in 1979, to 321,000 currently, including 150,000 in the United States. Of those, 111,000 are hourly workers.

Industry analysts had little insight into how GM might cut back production capacity. Kim Korth, head of auto analyst IRN Inc. of Grand Rapids, Mich., suggested the 800-employee GM foundry in Bedford, Ind., could be shut down. That could happen if GM decided to retreat from certain component businesses. Bedford makes powertrain parts.

GM metal stamping plants in Marion and Indianapolis also could lose jobs as the company scales back vehicle output. The plants shape metal into hoods, doors and other auto parts for nearly every GM assembly line in North America. As GM makes fewer autos, orders for parts could decline, triggering job cuts in stamping plants.

GM's Allison transmission complex in Indianapolis and the full-size pickup truck assembly plant at Fort Wayne are not considered vulnerable by analysts. [More on Fort Wayne of significance below - ed]

GM already intends to close assembly plants at Baltimore; Lansing, Mich.; and Linden, N.J. Analysts say future shutdowns could include assembly plants at Doraville, Ga.; Oklahoma City, and possibly one full-size pickup plant. These six plants can make about 1.5 million vehicles a year, or about 28 percent of GM's assembly capacity in North America.

Money For Nothin'

GM has been propping up car and truck sales with heavy incentives that now surpass $5,000 per vehicle on average. GM had 25.5 percent of the nation's car and truck sales this year through May, down from 27 percent last year. Its factories are scaled for more than 30 percent market share. "There's no question they still need to close two to four assembly plants," Korth said, but she stopped short of calling the restructuring dramatic.

And Your [Health Care] Checks For Fee

Although it has plenty of cash to stave off bankruptcy, GM's falling market share has left it with too much production capacity even as it shells out $1,500 per vehicle to cover the health care costs of employees, retirees and dependents. GM's medical plan covers about 1.1 million employees and retirees, including an estimated 50,000 in Indiana.

Supply And Demand Uber Alles!

Let's take a look at this for a moment. Millions for purchase rebate subsidies and pennies for health care? Seems off-balance to me!

GM can't sell vehicles without massive subsidies, which indicates to me that they are producing vehicles that don't attract customers. Those who tout the market as the savior of all things economic should be making the case that such a company should go out of business if it can't offer a product of service that is attractive to customers. It isn't like all these blue collar jobs cuts under King George have prevented Hummer [a GM subsidiary] sales from shooting through the roof!

Those who tout the market as the savior of all things economic should be praising their dollar-basis diety everytime this situation arises, and shouting out that this is how the market is supposed to work. Thus, if GM isn't making it, then the executives who are running GM need to be replaced. They clearly aren't up to the job.

We all remember the premium prices some people were willing to pay to get their hands on the Hummers when they first came out, and currently Toyota Prius hybrids are in high demand, some going for more used than the new models cost. I know for a fact that this is happening, as one of my good Orange County (CA) Republican coworkers paid such a higher price for a used Prius.

So supply and demand is alive and well, despite most of us facing piles of due bills stacked higher than the piles of dollar bills due to pay for them. If GM were producing the vehicles that American consumers really want - instead of forcing us to take what they offer and like it - they would be so profitable that they would quickly be providing all of their executives with huge bonuses to get rid of excess cash - just like they do when they plan massive layoffs. The decision on which vehicles to produce is not made by those about to pay with their jobs and benefits.

Slicing The Turnkeys

Because UAW labor contracts discourage layoffs and plant closings, the Detroit automakers can't simply shut down their factories. Changes require UAW approval. Just what happens will be revealed in future talks with the United Auto Workers union, which recently accepted Ford Motor Co.'s restructuring with supplier Visteon Corp. [More on this follows - ed], but hasn't so far given GM an easy pass. Because the majority of GM workers were hired in the 1970s, retirements naturally reduce its work force about 5 percent to 7 percent a year. By that account, GM could shed 20,000 workers in three years through attrition.

"It's certainly not high enough in the long term," Korth said about the 25,000 number, "but it sends a message to the industry and Wall Street: 'We get it. We know we have to do something.' "

Earlier this year, GM executives pressed the UAW to renegotiate health care coverage, but union chief Ron Gettelfinger declined. The union said the nation ought to reform its health coverage rather than force workers to pick up higher costs. Now GM is angling to come back to Gettelfinger with demands to first close plants and cut jobs, then bring back the health care issue, possibly before the 2007 labor contract talks open.

Caught Between A Rock And A Hard Face

What's opened the way for Wagoner to push for both job cuts and health concessions at the same time is Las Vegas casino mogul Kirk Kerkorian. He's been amassing GM shares, leading to speculation he could lead a takeover of the automaker and oust Wagoner and his executive staff. While GM's stock is worth less than $20 billion, its various elements such as Allison Transmission in Indianapolis, OnStar safety network and its pickup truck plants could be sold off in pieces by Kerkorian, bringing in more than $70 billion. "What GM in effect is telling the union is, with Kerkorian in the picture, who would you rather deal with, Kerkorian or us?" said David Cole of the Center for Automotive Research, a think tank in Ann Arbor, Mich.

As a real-world employee, I've been in these concrete Kerkorian shoes. Years ago, he was buying up our stock with an eye toward recouping his investment by downsizing certain of the company assets, and spinning others off once he had gained control. He was run off by a dingy white knight, but that at the time was the leser of two evils.

There is nothing worse than being a pawn in a dominance game between two corporate bastards. You watch all of your plans evaporate and your dreams crumble into dust with every move they make. Your future is nothing to men who can reduce vast sums of cash into a single item on a balance sheet. It doesn't help when your valiant kiss-up media tells you that you have to suffer so that the Topper$ investor$ don't:

Let's learn from GM's woes, strategy

Our position is: Job cuts are harsh but necessary step to save General Motors. General Motors must become more competitive to survive. So must a state that has long relied on the auto industry to drive its economy. GM's announcement should serve as another reminder that it's critical for Indiana to build a more diverse economy. The state has been battered in recent years because of its over-reliance on traditional manufacturing.

Solutions for what ails Detroit vary. They involve management and labor, as well as government officials who need to address how health benefit costs affect the competitiveness of U.S. manufacturing. One encouraging sign, however, is the recent agreement on an efficiency plan involving the UAW and auto part supplier Visteon Corp. Visteon employs 2,200 workers at its Indianapolis plant. [More below - ed]

General Motors' announcement that it will eliminate 25,000 jobs by 2008 likely will have harsh repercussions in Indiana, the state with the second-largest number of major auto parts plants, after Michigan. But the move, part of a four-part strategy to save the world's largest automaker, is necessary given GM's severe financial problems.

In the first quarter, GM posted a $1.1 billion loss. Its debt has reached junk bond status. More than half of its stock value has been wiped out since 2000. GM's market share has plunged. It's saddled with health care costs that add $1,500 to the price of every vehicle rolling off its assembly lines. Recent statistics show GM's productivity is improving faster than productivity at Ford or Chrysler. But industry leader Toyota showed an even higher rate of improvement, adding another $500 price advantage in labor costs. If there's good news, it's that GM and other domestic automakers have substantially improved the quality and reliability of their products.

One Reporter Gets It

Wall Street Journal reporter Joseph B. White recently observed, domestic automakers are becoming "increasingly efficient at building vehicles many consumers don't want." Automakers need to do a better job of meeting consumers' demands.

Blaming The Worker For The Shortcomings Of Management Decisionmaking

I'm going to include the following propaganda paragraph to establish a baseline for the subsequent segment:

Relationships need to improve between domestic automakers and their suppliers. Union officials need to make concessions not only on wages, benefits and pensions, but also on work rules. Refusal by United Auto Worker negotiators for more flexible job classifications has put Detroit at a huge disadvantage to foreign carmakers, which keep ratcheting up productivity through teamwork.

Now we can expose this lie for what it is. Management likes to blame high labor costs for all of their problems, but labor is struggling mightily to meet the increasingly insane demands that management places upon them - and generally succeeds in meeting them:

GM's Oshawa #1 is Most Productive Assembly Plant in North America

The General Motors Corp. Oshawa #1 plant in Ontario, Canada is the most productive vehicle assembly plant in North America according to "The Harbour Report North America 2005." Oshawa #1 took the No. 1 spot with 15.85 hours per vehicle. In total, GM has three of the top five assembly plants. GM also leads in seven of the study's 13 vehicle segments, three of them in cars and four in trucks. GM is the most improved manufacturer for the last five years at a total rate of 22 percent.

In addition, GM's stamping operations improved productivity by 2.7 percent. The company's Marion, Indiana plant led in major progressive pieces per hour (PPH) equipment productivity and the Lansing, Mich. plant led in transfer press PPH equipment productivity. In powertrains, Flint Engine North was the most productive 6-cylinder OHV engine plant in the industry at 3.52 hours per unit.

"Our manufacturing productivity is a critical piece of our ability to compete in today's fierce market place," said Guy Briggs, GM group vice president for Manufacturing and Labor Relations. "We are pleased with the results of our Oshawa #1 assembly plant and continue to implement strategies that will improve manufacturing productivity in all our facilities."

"The fact that overall productivity at GM has improved 22 percent over the past five years affirms that our joint approach significantly enhances GM's manufacturing productivity," said UAW Vice President Richard Shoemaker. "Yet, even with GM's notable improvements in 2004 as seen in the Harbour report," Shoemaker added, "additional progress is definitely possible and necessary."

"Despite recent challenges, it is obvious that GM's manufacturing organization has maintained its focus," said Ron Harbour, president of Harbour Consulting. "More than two-thirds of GM's assembly plants show year-over-year improvements, and that is very impressive, particularly given the environment the company is operating in."

Some of GM's productivity highlights according to Harbour include:

* GM vehicle assembly plants led in seven of 13 North American assembly plant segments:

-- Lansing M, Mich., was the industry's most productive compact car plant at 17.53 hours per vehicle.

-- Oshawa #1, Ontario, was the most productive midsize car plant at 15.85 hours per vehicle.

-- Lansing Grand River, Mich., was the most productive luxury car plant at 24.11 hours per vehicle.

-- Moraine, Ohio, was the most productive midsize SUV plant at 20.73 hours per vehicle.

-- Arlington, Texas, was the most productive fullsize SUV plant at 22.39 hours per vehicle.

-- Fort Wayne, Ind. was the most productive fullsize pickup plant at 19.86 hours per vehicle.

-- Wentzville, Mo., was the most productive large van plant at 24.41 hours per vehicle.

That was the significant fact that I referred to above. Tell me again about how GM's woes are the worker's fault! It isn't - it's the fault of the piss-poor management that has attracted the attention of corporate sharks like Kerkorian through their incompetence. Savvy GM investors aren't fooled by these lame pronouncements of GM executives:

General Motors Corp. announced yesterday that it will eliminate 25,000 jobs by 2008 and close an unspecified number of plants to trim costs and reinvigorate its North American auto business. GM has closed or stopped production at several plants this year, including one in Baltimore in May. It also closed a Linden, N.J., plant in April and two plants in Lansing, Mich. [the two cited above?], last month.

GM's announcement amounts to the largest single job cut since January 2003, when Kmart announced plans to eliminate 37,000 jobs, according to John A. Challenger, chief executive of Challenger, Gray and Christmas, an outplacement firm. GM now employs 110,000 hourly workers in the United States.

Let's now get to the real problem with GM:

GM chairman and chief executive G. Richard Wagoner Jr. said at the company's shareholder's meeting yesterday in Wilmington, Del. that
the company lost revenue because of its weaker retail sales, and that it did not achieve its "market share expectation." The company has been selling fewer high-profit SUVs and more lower-profit cars.

And having to 'pay' customers an average of $5000 to take one of those off their hands to boot!

Wagoner said that the closings and job cuts should save about $2.5 billion a year. "The most challenging and important operating issue we face is getting GM North America, our biggest business unit, turned around and back into a profitable position," Wagoner said.

Iceberg! Right Ahead!

Some shareholders at the meeting strongly criticized GM's leadership. Shareholder John Lauve compared GM officials to the officers of the Titanic, according to the Associated Press.
"The Titanic sank because the directors ignored the warnings," he said.
Some industry observers said GM's plan may not be enough to turn the company around. "Only new product can save GM," said Maryann N. Keller, an automotive consultant.

In a written statement, United Auto Workers Vice President Richard Shoemaker said he was skeptical of the plan. "The UAW is not convinced that GM can simply shrink its way out of its current problems," he said. "What is needed is an intense focus on rebuilding GM's U.S. market share, and the way to get there is by offering the right product mix of vehicles with world-class design and quality."

Instead, this is what we get from General Motors - a high-priced and impractical 'image enhancement' Rambo Range-Wrecker toy that doesn't address any of the major daily transportation issues confronting American consumers:

Will small engine hold back new Hummer?

To the new Hummer H3 steep hills are mere speed bumps, boulder fields are like piles of pebbles and dirt roads may as well be blacktop.

Has Arnold been working on the pavement lately?

Add in rugged military looks and a surprising 20 miles per gallon and it looks like General Motors Corp. has a well-timed hit arriving in showrooms.

Maybe they should just rename it the NO VA!

There's just one problem: A growing chorus of critics say the midsized H3 is handicapped by an underpowered engine and is painfully slow when merging onto a freeway or passing.

To those of you who have never experienced a California freeway during rush hour, this can be fatal!

"To pass anyone you have to floor it," said John McElroy, host of the TV program Autoline Detroit, after a recent test drive. "Moving it is a lot to ask of a 3.5-liter twin-cam motor that makes just 220 horsepower and 225 lb.-ft. of torque," wrote AutoWeek critic Andrew Luu. And Fortune magazine wrote: "If the original Hummer is a truck for the Terminator [and is illegally registered in - INDIANA!], and the downsized H2 a perfect fit for Indiana Jones, then who is the new, even smaller H3 designed for? Agent Cody Banks? Ace Ventura?"

Clueless in Seattle? Make it Dense in Detroit!

Making us want something that makes no sense to have requires enticing us to lie to ourselves about our needs, which is why image is such an important part of all advertising:

Hummer marketing director Mark Hernandez said acceleration is not crucial for most SUV buyers. "It's not a Corvette," Hernandez said.

The image of the kid with the Corvette is something that is very foreign to most people today. People aren't into a care-free, zoom-zoom existance - they are into attaining power and the outward display that they have some. Our Hummer marketing director is certainly aware of this, as he lets slip:

Hernandez says GM is prepared to pack more power in the H3, if consumers demand it. "We found very quickly we could have put an F-14 jet engine in it and somebody would still say you're a little slow on power," Hernandez said.

He must really be a fan of movies like Top Gun, but I digress.

Industry pundits are already sure that GM made a bad decision, and have hopes that the toy aspect of this slug can be enhanced:

Mark Williams, the editor of Motor Trend's Truck Trend magazine, said the H3 is sluggish on the highway but performed quite well on California's treacherous Rubicon Trail. "I'm willing to give it a little more latitude, under the assumption the engine is going to be addressed either with a twin turbo or something pretty dramatic down the road," Williams said.

Silk Pursing The Sow's Ear

GM assembles the H3 at a plant in Shreveport, La., alongside the Chevrolet Colorado and GMC Canyon midsize pickup trucks. All three models are powered by the same inline five-cylinder engine. The I-5 engine provides the H3 with an attribute never attached to any Hummer -- decent fuel economy. Even as fuel prices have begun to moderate, that selling point is a big deal to a brand that has been a target of environmentalists who regularly lambaste the less fuel efficient H1 and H2.

But the H3, at 4,700 pounds, is about 700 pounds heavier than the pickups, mainly because of the reinforced frame and other equipment that give it its off-road prowess.

Let's take a reality check here. Hummers are very popular here in California, but few of these 'rugged military lookers' ever gets off the shoulder of the freeways much less off the pavement and out amid the boulders. We aren't invading Iraq while we cruise about Irvine, and if we wanted to wear fatigues and get blown up and shot at while we drove Hummers, we'd volunteer for Uncle Sam's Foreign Incursion Club. But most of us aren't about to make that kind of misjudgement. We instead leave making misjudgements to the business executives who insist that they know far more than we mere mortals can ever imagine:

Any Color We Want - As Long As It's Black

GM engineers would have preferred to give the H3 a more powerful engine, but in order to make the business case to build the vehicle alongside the Canyon and Colorado, it was more cost-effective for the same engine to be installed in all three vehicles. That sort of trade-off, however, may put the H3 at a competitive disadvantage against off-road midsize SUVs with more powerful engines, says Karl Brauer, editor-in-chief at the vehicle shopping Web site "They may say 'this thing goes off road too and isn't nearly as gutless,'" Brauer said.

The engineers told NASA executives not to launch Challenger, but they were ignored also.

But somehow these bad marketing decisions are all the fault of the greedy retirees and the dependents of the currently-employed! If they weren't insisting on company-paid medical coverage, we'd have the money to put into bonuses for the executives who decided to install bigger engines into these H3s and sell thousands of them!

The Status And Distinction Of Exclusivity - For Everyone!

GM is not looking to sell huge numbers of the H3 and wants to maintain the brand's mystique and exclusivity. The automaker is hoping to sell 30,000 H3s this year and double sales by 2006. Still, GM is counting on the H3 to revive a brand that's seen its sales drop 12 percent this year. With a base price of $29,500, the H3 is designed to put the brand within reach of thousands of less-affluent consumers who aspire to own a Hummer. The H2 starts at $53,000 and the H1 carries a starting price of $100,000-plus.

So buy three - they're small - even a housewife can handle one!

More Dollars Than Sense

Detroiter Robin Fowlkes gave the H3 a once-over Tuesday at Detroit Hummer in Southfield, and is seriously considering the vehicle based on its price, size, interior and off-road ability. "It's better for a woman," said Fowlkes, who works in the billing department at DTE Energy. "The H2 was really big, a man's size." She was not sold by the H3's fuel economy or turned off by the small engine. "I have a truck and trucks use a lot of gas, so it doesn't make a difference," Fowlkes said. "As long as it has four-by-four and gets me through the winter, that's fine."

Promise Her Anything

A study by Kelley Blue Book found that 35 percent of those who said they would consider buying the H3 are women. A major marketing push kicked off in May with the intent of winning over buyers in their thirties, especially women. GM has bought advertising on television shows with large female audiences such as Desperate Housewives and Grey's Anatomy to get the message out there's a new, smaller, Hummer available. On Tuesday, a carrier truck delivered four H3s to Detroit Hummer. All but one was already spoken for and sales manager Ken Reszczyk says he sold 38 even before he had any on the lot. "I'll take as many as I can get," Reszczyk said. "Eight out of 10 people are asking about the H3." No one, he said, seems concerned about the less-than-ferocious engine under the hood.

The Thrill Is Gone

But many others said they would not consider buying the H3. "It's a vehicle that really has gained a pretty high awareness in the marketplace, but not a vehicle that really has gained an above-average reaction," said Jack Nerad, editorial director of Kelley Blue Book. He believes Hummer may be suffering from the "flavor-of-the-month" syndrome, where off-beat or distinctive products such as the Chrysler PT Cruiser or Mini Cooper are red hot at first then cool.

The massive economic consequences of the bad decisions of the leaders of our largest corporations are dire - and threaten wreaking widespread havoc:

Detroit's Woe, America's Worry

The biggest problem about the missteps plaguing GM and Ford: They're likely to cause an economic pileup clear across the country. The effects of auto industry woes will likely rumble through the economy far beyond Motown's city line. Because of the domestic auto industry's size, its misfortunes have an amplified impact on the overall economy and on family budgets, say economists and industry experts.

For example, financial turmoil sparked by a credit downgrade for the car companies could have a direct effect on many Americans' savings and retirement accounts. When debt falls in value, mutual funds and pension funds holding bonds issued by these carmakers fall, too.

Damn good thing that King George is out there stumping for us to demand that he force Social Security privatisation down our throats!

But I digress.

General Motors (GM) shocked the financial world in mid-March when it warned of staggering losses in the first quarter of this year -- $1.1 billion in red ink when the number was announced on Apr. 19. Ford (F) reported on Apr. 20 that it managed to post a profit of $1.2 billion in the period, but that was a punishing 38% drop from a year ago. Both companies' stocks have fallen about 40% in the past year, and credit markets are reeling at the potential for credit-rating downgrades.

Chrysler, a division of Germany's DaimlerChrysler (DCX) that's holding up far better than the other two members of Detroit's Big Three, is worried about what troubles at GM and Ford portend for the U.S. auto industry.

Most shocking of all: Given the nature of this downturn, increases in car prices are likely to accelerate. "I don't think you'll see any diminution in the quality of cars or the choice, but I do expect to see higher prices," says David Cole, chairman of the nonprofit automotive think tank, Center for Automotive Research (CAR). Auto makers are already reporting that incentives, like zero-percent financing programs, aren't stimulating buying the way they used to and are cutting them back, says Tom Webb, chief economist with Manheim Auctions in Atlanta. Used-car prices are also rising, which often presages higher stickers for new vehicles, he says. Rising gas prices only add to consumers' pocketbook misery.

Tapped Out

The downturn in Detroit can't be chalked up merely to U.S. auto makers losing a popularity contest between gas-guzzling sport-utility vehicles and fuel-efficient new hybrid models. The industry's root problem is that it can't really squeeze any more savings out of suppliers or the manufacturing process, says Cole.

But that doesn't stop automaker execs - and governmental 'friends' of theirs - from trying, now does it?

Even though auto industry employment is far lower than it used to be, CAR estimates that every job lost in an carmaking plant has the economic impact of losing 9.4 jobs elsewhere. GM alone still makes up 1% of the economy.

Runnin' On Empty

What most worries economists, however, is the potential for U.S. auto makers' debt ratings being downgraded. "Any threat of default or downgrade affects assets across the country," says Milton Ezrati, senior economist at Lord Abbett & Co, who notes that GM and Ford paper is held in virtually every pension fund and money-market account in the country. "A lot of wealth has been destroyed already, but that's not to say it couldn't be worse," he says.

Given the rising costs of producing cars, auto makers have little choice but to raise prices to return to profitability. "A car just got to be too good a deal, and that era is over with," he says. As the financials of GM and Ford show all too starkly, the U.S. auto industry can't solve it's problems by sales incentives alone, and more expensive sticker prices may just be one of several ways American families share their pain.

Meyers worries that these trends aren't going away, no matter what the economy or gas prices do. "More and more people are going to be finding themselves idle when they would rather be at work," he predicts. Most of the auto downturn's economic damage will hit states like Illinois, Ohio, and Indiana where carmaking is concentrated.

Driving The Class War

"If you live in Flint, Mr. Moore is going [to have to] to make another movie," says Ezrati, referring to the location of Michael Moore's 1989 documentary Roger & Me. "He will get rich, but they will remain poor."

I'll bet that Michael Moore is employing more people per capita with his movie income than any single GM executive is with his automotive income! But isn't it like the Topper$ to try to smear their harshest critics with the same brush used on them? It must make them think that we'll not notice that they don't live in the same world the rest of us do:

You Could Be Next: Cavuto Says Poor People are "the Worse Half"

In keeping with the "business news" theme of his show, Neil Cavuto opened Your World w/Neil Cavuto today (June 6, 2005) with three segments about the Alabama student, Natalee Holloway, missing in Aruba. Later he found time for two segments on the "Jacko" trial and an interview with Miss Universe, but apparently he didn't want to stray too far from "business news" ;).

He didn't have time for the Downing Street memo or the ruling in the Washington state governor's race.

Snow Me The Money!

Justin McNaull, a spokesperson for AAA was a guest for one of the Aruba segments. The stated topic of the segment was whether or not Aruba's tourism industry will "take a hit" as a result of Holloway's disappearance, while the actual tone of the discussion had more to do with the scary, scary world that lies beyond the safe, orderly and civilized confines of the U.S. border.

During their discussion Cavuto indicated that not only is there a lot to worry about out there, but apparently poor people are especially dangerous.

Is that why we in the United States put so many of them in prison?

Here's what he said:

"Should you be leery of countries where there might be extreme poverty, where you have one side of the island, for example, that might be very industrious and commercial and there might be a great deal of interest in tourism, and the other side that shows, certainly, how the worse half lives and that somehow this is very close to where, you know, vacationers congregate"?

Comment: "The worse half"? Because you're poor you're "the worse half"?

Try "The worse 99%" ?

I got that same feeling from listening to some of the clearly wealthy while staying in San Diego recently. You'd think they would at least show a hint of respect those who wear the uniform of Uncle Sam's Yacht Club, and who protect their cruise ships from attack by Osama's Navy! But I digress.

[Read Confessions of an Economic Hit Man - the US has been in the business of creating such poverty for decades. (extremely important!!!)]

Boy, if that isn't a neo-con way of thinking, I don't know what is.

Neo-con Thinking? Isn't that an oxymoron?

Yes? Yes, Senator, I will yield the floor for a comment.

"I want to know why we should reward lousy management,"
- Sen. Jim Bunning, R-Ky.

Because GM then won't mess with your constituents?

Bowling Green site isn't likely to suffer

General Motors' plant in Bowling Green -- the auto giant's only manufacturing site in Kentucky -- seems safe from the cutbacks announced yesterday. The 1,130-employee plant makes the Corvette and the Cadillac XLR. Eldon Renauld, president of United Autoworkers Local 2164 in Bowling Green, said he is not worried about GM's decision to cut 25,000 jobs nationwide. "Our products are doing quite well," Renauld said. "We're at full capacity."

Hmmm, Caddies and 'Vettes - just WHY would people want those specific cars? Could it be the WEALTHY IMAGE we hold of those who own them?

GM's closest plant to Louisville is in Bedford, Ind., about an hour north. Union leaders and analysts said that plant has suffered more than the one in Kentucky. "We're experiencing layoffs like all other GM plants," said Darrell Thimling, president of UAW Local 440 there.

Kim Korth, president of Michigan-based automotive research firm IRN Inc., told the Indianapolis Star that if GM closes assembly plants, parts facilities such as Bedford's will have to reduce production or close. Korth also said GM may choose to sell its foundry operations, which includes the Bedford plant.

Thimling said GM makes engine parts at other plants in Mexico and transmission parts at nonunion shops in Indiana. The Bedford plant makes transmission parts and engine components, such as pistons and engine blocks. The Bedford plant might be shut down, but he doesn't expect that. "Our quality here is top-of-the-line," Thimling said. "We're trying to get some new parts in here, so I see a good future for us."

"Ford - Where Quality is Job One" was a Ford ad slogan! They didn't take it kindly when a blogger adapted that slogan to read Ford, where finding a job is job one!

That website just might need some dusting off:

With GM Cutting Jobs, Is Visteon Next?

(Connersville) -- The world's largest automaker plan to cut 25,000 U.S. jobs by 2008. This means hundreds of jobs at Indiana's five GM facilities could be in jeopardy. GM employs 5,400 workers in Indianapolis between the Indianapolis Metal Center and Allison Transmission. A Fort Wayne assembly plant [the very productive one I cited above - ed] employs 2,900 workers and 1,600 people work at the Marion Metal Center. A foundry in Bedford employs 880.

In Connersville, a little more than an hour east of Indianapolis, there's major concern about the future of the Visteon plant. Ford announced last week it would buy back some Visteon plants. The one in Connersville was not among them.

Anyone who thinks layoffs at this plant are only a distant possibility should check in with Lester Schaefer. His job at Visteon disappeared two years ago "They took business elsewhere. They took marginally profitable products and took 'em to Mexico," the former Visteon employee explained.

If the plant were to close, it's not just the workers there who would lose out. So would the town of Connersville and its smaller businesses. The plant employs nearly 1500 people. In an area with a population of just 24,000 it's not surprising people here call the plant their "economic engine." One local businessman told News 8 he's "scared to death" the plant could close. The Connersville economic development group says 70 percent of the local economy depends on Visteon. The Fayette tool company does more than 40 percent of its business with the Connersville Visteon plant.

City leaders are worried. They held a news conference Tuesday imploring Visteon and the union representing its workers to come to terms on a new contract. "We must prevent what we've already seen happen in Marion and Anderson and Fort Wayne from happening to our community of 24,000 people," Bill Konyha of the Connersville Economic Development Group told News 8.

Calling In The Big Gun

When times are desperate, the desperate reach for anything that just might help:

The Connersville Economic Progress Coalition isn't stopping with Tuesday's news conference in its efforts to save Visteon.
It's holding a prayer vigil on the town square Friday at noon.

The Power Of Prayer?

Maybe that prayer vigil worked?

Eastside Ford steering plant to go on block

Visteon said the Ford deal does not affect its two other Indiana plants at Bedford and Connersville. Workers there are represented by the International Union of Electrical workers and generally have received lesser wages than UAW members.

Lower Wages - All The Time

Ford Motor Co. stunned its rivals Wednesday with a far-reaching proposal to slash wages in more than two dozen unionized U.S auto parts plants, including in Indianapolis. Ford wants to take back 24 Visteon Corp. plants in the United States and Mexico and sell 22 of those factories by 2008, including the 2,200-employee Indianapolis steering systems plant, said Ford spokesman Oscar Suris.

Ford's restructuring of its massive auto parts network appears bittersweet for Indianapolis, a city hungry for high-wage industrial work. Hundreds of jobs could open up in the huge Eastside plant as veteran UAW members move to Ford plants in other states. If they stay in Indianapolis, Ford might pay them an undefined lump sum but require they give up rights to Ford-paid benefits. A new owner most likely would scale back those benefits.

The new owners could hire a fresh factory work force at nearly half the current wage scale as Visteon veterans stream back to Ford, retire or take early buyouts.
Of the 17,400 workers at Visteon, McAlinden estimated 5,000 would take buyouts, 2,000 would transfer immediately and 10,000 would retire or transfer by 2008.

While new workers hired by the steering systems plant also would be UAW members, labor economist Sean McAlinden notes their wages and benefits would amount to roughly half the $60-an-hour rate for pay and benefits paid by the Detroit automakers and suppliers Delphi and Visteon. Last year, Visteon and the UAW negotiated a $14-an-hour wage for new employees, compared with the standard scale, which pays wages of $26 an hour plus $34 an hour for pensions, health care and other benefits covered by the employer.

The $12/hr difference in wages has consequences of its own. That is the sort of money that makes it possible for your typical Red State Republican-voting Hoosier to purchase that Hummer H1 he's had his eye on for years without causing his distaff partner to dial D-I-V-O-R-C-E. If Mama say no, the buy's a no-go! And the consumer-spending-driven economic recovery takes yet another hit!

But fear not! Ford will continue to provide for the white-collar Visteon decision makers:

Visteon will continue to employ the salaried workers in the plants going back to Ford and lease them to the automaker.

Joe Hill's Body Lies A'Moulderin' In His Grave

While a deal is certain to cut the $100-million-plus annual payroll in the huge Eastside steering systems plant, the proposal is in line with recent United Auto Workers union efforts to help hard-pressed Detroit automakers redo the industry. The union's new attitude was reflected three years ago in a forerunner of the deal under way at Ford. Three years ago, Ford moved the steering column business from Indianapolis Visteon to ThyssenKrupp Presta. The German auto parts maker opened a plant at Terre Haute [INDIANA!] for production of the unit.

Throughout the 1990s, the UAW waged a bitter fight to keep the automakers from reducing the work force in the plants. Drained by a long 1998 strike, the Detroit union stood by in May 1999 as General Motors Corp. spun off its massive Delphi auto parts empire, a mainstay of Indiana's automotive economy. The union didn't object in 2002 when DaimlerChrysler AG sold its huge machine shop in New Castle to Michigan auto parts maker Metaldyne Corp.

Wages in the New Castle plant subsequently fell to about $16 an hour, from $24 an hour.

And the consumer-spending-driven economic recovery takes yet another hit!

Desperate to catch up with GM in cost savings, Ford set out to spin off its Visteon auto parts six years ago. The deal was supposed to open Visteon to competition and drive down the cost of parts for Ford. But the union by then had gathered new strength. It demanded Visteon workers remain Ford employees. Ford conceded, separating itself from Visteon legally in June 2000. Ford in turn leased workers to Visteon under a complicated transaction that analysts say never let Ford achieve significant cost savings.

With Visteon losing money, Ford in 2003 went back to bargaining with the union and in a long series of discussions emerged with the proposal announced Wednesday. Voting on the measure is expected to begin Tuesday by 17,400 UAW members in 15 Visteon plants and technical centers in the United States. The deal bears the mark of UAW President Ronald Gettelfinger. He helped negotiate the proposal, handing the Dearborn automaker the opportunity for large savings.

One Good Turn Of The Screw Deserves Another

Ford could pare its annual auto parts bill by $1 billion and in turn pressure rivals GM, Delphi and DaimlerChrysler to find more savings or lose ground to Ford, said Sean McAlinden of the Center for Automotive Research, a think tank in Ann Arbor, Mich. "It took a year to negotiate, but it's Gettelfinger recognizing economic reality and trying to keep these plants UAW and protect his membership," McAlinden said.

Isn't he just like the corporate executives he 'negotiates' with - a firm believer in the First Commandment: Protect Thy Own Job First! This sort of attitude is where the Democrats got their strategy for dealing with the GOP.

I simply MUST to do something about all this digressing!

But I digress.

Ford plans to form a separate company to take control of the 24 Visteon plants. Ford will keep two Michigan operations and sell off the remainder. Ford has no buyers lined up and is just beginning the process of finding new owners, Ford spokesman Suris said. "Some plants have companies lined up making bids," McAlinden said.

And the following Red State mostly-Christian Republican-voting small-town Hoosier union workers await their fate as the corporate demigods wrestle with the next change of decor for the main office:

Visteon in Indiana

• 2005: 1,095
• 1995: 900
What it does: Manufactures components, such as fenders, fuel pumps, emission harnesses, fuel pressure regulators and windshield washer systems.

• 2005: 1,635
• 1995: 4,000
What it does: Manufactures automotive air conditioner condensers and compressors, fuel injection components, aluminum radiators, evaporators and accumulators, tubes and hoses.

• 2005: 2,285
• 1995: 3,050
What it does: Manufactures steering gears and power steering pumps.

Source: 2005 Harris Indiana Industrial Directory, Visteon Bedford

Assuming you're still with me, this is the big major issue presidential wannabe Evan Bayh will be facing in his home state. He's going to need all the support and understanding he can get if he's going to deal with this issue at all successfully. How do his consituents like him? Would they support him?

They might:

Bayh does well in poll of Hoosiers
Two-thirds like his personal qualities; 49% likely would vote for him for president.

Bayh has said it's too early to talk about whether he will run for president, but he has hired aides, made fundraising changes and taken other steps viewed as laying the groundwork for a possible bid. Bayh also has gotten favorable attention from political pundits as a possible contender, largely because of his ability to do well in a Republican state like Indiana.
A former two-term governor, Bayh was recently elected to a second Senate term with 62 percent of the vote. Seventy percent of those surveyed said they approve of the job he's doing. In addition, 67 percent said they think Bayh has the personal qualities needed to be a good president, regardless of whether they would vote for him.
That's nearly as high as the 72 percent approval rating for Sen. Richard Lugar, R-Ind. And it is much higher than the 55 percent job approval Hoosiers gave Gov. Mitch Daniels and President Bush, both Republicans.

But while only 49 percent said they are likely to vote for Bayh for president, political analysts said that's a good number. A third said they would vote for another candidate, and 18 percent weren't sure. "Even if Evan Bayh runs for president, and even if he wins Indiana, he's not going to carry it with 70 percent of the vote. That's just the nature of partisan politics, particularly in Indiana, where partisanship is pretty important," said Stuart Rothenberg, editor and publisher of the nonpartisan Rothenberg Political Report.

Sell Son Blue

Many Democrats have said the party needs to be able to compete in the Republican "red" states that dominate the South and many parts of the West and Midwest to recapture the White House. "I think he can make the case that as a Democrat running for president, he can carry his own state." In the 2004 election, the presence of former Sen. John Edwards, of North Carolina, on the Democratic ticket did not help carry that state. In 2000, Democratic nominee Al Gore lost his home state of Tennessee. At this early stage, political analyst Rothenberg said, the poll numbers for Bayh are most useful as a benchmark to measure how he's doing later.

Ann J. Selzer, president of Selzer & Co., which conducted the poll, said the fact that 30 percent of the Hoosier Republicans polled said they would likely vote for a presidential ticket headed by Bayh is a promising sign for him. "That's a meaningful proportion of that group," Selzer said. "If I were handicapping this to say could Bayh carry the state of Indiana, I would say, yes, without too many qualifications."

Barbara McClain, a Lafayette retiree, is among the Republicans polled who support a Bayh presidential bid. "I like what he stands for and I think he's an honest man," McClain said.

But Republican Lee Perkinson, a retired businessman who lives on the Northeastside, said he's not likely to stray from his party's presidential ticket, even though he doesn't question Bayh's ability or integrity. "I would not be inclined to vote for him," Perkinson said. "But I thought he was qualified."

This last man is going against the grain of the Righty Whir-LIE-tzer, which is trumpeting loudly against Bayh:

Small businesses, jobs and Sen. Bayh

The National Federation of Independent Businesses (NFIB) is an organization that tracks congressional voting on small business-related legislative issues in Washington. They represent an average of over 1,000 members in each congressional district, including farmers, electrical repair shops, tool and die shops and the many other small businesses that form the backbone of our economy. NFIB recently released its voting summary.

Sen. Richard Lugar, Rep. Mike Pence and all the rest of Indiana’s Republican congressional representatives voted 100 percent of the time in support of small business. Sen. Bayh rates an A+ for appearance and speaking ability. However, he rates a resounding F for his votes against assisting small businesses to be successful and create jobs for Hoosiers and the rest of the country.

Sen. Evan Bayh voted zero percent of the time in support of small businesses (the same as Hillary Clinton, Ted Kennedy, John Kerry and other extreme liberal Democrats).

Bayh’s senatorial voting record on small business issues is consistent with what happened during his two terms as governor. In 1988, Indiana was ranked sixth in the nation in job creation. Twelve years later, it ranked last. Bayh was governor for eight of those years, Frank O’Bannon for the last four.

Someone needs to explain to Bayh that in order to maintain current jobs and create new jobs, we must have successful small businesses. He may be under the impression that his anti-business agenda, combined with the tooth fairy, will generate new jobs.

Based on everything I've presented here, I'd say that the problem isn't in the small-business community - it's in the big business community that hides behind their little brothers each time the spotlight gets shined upon them.

The real test for Senator Bayh will come in other states whoes attitudes and issues aren't all that different from Indiana's. Let's take Iowa, for example:

Senator weighs presidential run

Indiana Sen. Evan Bayh told Iowans here Wednesday that he is doing the "practical things" to keep open the option of seeking the Democratic presidential nomination in 2008. Business and civic leaders from the Des Moines area are in Washington, D.C., for their annual lobbying trip, which also often attracts politicians interested in speaking to voters from the state with the nation's first presidential caucus.

Bayh stressed to the Iowans his background as a Midwestern centrist who can bridge party divisions. He said that "constant acrimony" and "constant ideological extremism" in Washington are harmful and that Congress should follow the example of state legislators in Iowa and Indiana working together in closely split bodies.

Bayh said he is "kind of old-fashioned" and that he achieved a balanced budget as governor, with the largest budget surplus in the history of the state. Americans should unite "not as red states or blue states but 50 red, white and blue states," he said. Bayh, 49, was elected in 2004 to his second term in the Senate with 62 percent of the vote - at the same time President Bush won Indiana with 60 percent - and is a former two-term governor of Indiana.

Dory Briles, senior vice president for development at Des Moines Area Community College, said she was impressed with Bayh and agreed with his concern about the national debt and the need for a better energy policy. "He was just very articulate, and answered the questions," she said.

Michelle Durand-Adams, vice president of mortgage lending at Regions Bank, said, "That was certainly a running-for-president speech I heard today." She said she is a moderate and fiscal conservative who has voted for both Republicans and Democrats for president, and "I liked a lot of what he said - I liked his centrist position on things."

Asked after [his] speech to more than 150 members of the Greater Des Moines Partnership if he will seek the presidency, Bayh appeared to go somewhat further than he has in past public remarks. "Am I doing the practical things that would allow me at some point to make that decision?" he replied. "Yes, I'm doing the practical things to keep that open as an option." Bayh told reporters afterward that he will be in Iowa in August. He acknowledged that although he has visited the state in the past, this trip will be viewed in a different context as the race for the presidency slowly unfolds. "It's only natural there's some significance attached to it, and I think that's appropriate," he said.

OK, Senator, you seem to be making a good first impression. But be aware that reviews of your performance in the upcoming troubles facing your home state are going to be weapons used against you in the primary by fellow Democrats - and during the regular campaign by Bu$hCo should you win the nomination. You seem to be a realist, despite the nasty ratings you got from the Republican-leaning National Federation of Independent Businesses. I would think that comes from being a state executive. You know that there are no quick fixes, and there certainly isn't much one man can do by himself.

You will need to demonstrate to your own kiss-GOP-ass party that you can be the sort of leader that will convince them that they have to change their Gannon/Guckert 'choice' of lifestyle and return to their true roots. You will need to demonstrate to Indiana's Red Staters who otherwise would support King George's heir apparent that you are their man. They like you, which is a good start, and they seem to respect you even if they don't.

But you are up against Old Man Famine in his guise as U. N. M. Ployed. Losing the 'Mer'kin Way Of Life' that the lost $24/hour income from Visteon once bought will make them bitter and hateful, and thus more susceptible to Rush's bleatings about 'lib'ruls'. The Klan could rise again in Indiana, which has had far too many of its share of racial incidents that initially sprang up from the other side of the War Between The States. And you're a Democrat.

This is only one issue facing this nation that I took a lot of time to condense [REALLY!] to a more readable form. Thanks to the BlunderBu$t of King George The Greedy Incompetent, there is a whole lot more of them that require attention - some even more complex.

Senator, if you can keep all of these Red State people on your side, and convince others to abandon King George's legacy and follow you instead, then you just might be the sort of leader this nation so desperately needs.

If not, sit down and STFU! That way, maybe some other worthy can step forward.

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