High gas prices strike again, says the "CBS Evening News."
The June 3 "Evening News" blamed surging gas prices and General Motors reluctance to produce "more fuel-efficient vehicles" for closure of several plants, including one in Janesville, Wisc.
"It's not just here and it's not just GM. Since 2005, the big three - GM, Ford and Chrysler - have had 70 plants and supplier shutdowns with a total loss of 149,000 American jobs," CBS correspondent Cynthia Bowers said. "At the same time, foreign automakers selling more fuel-efficient vehicles are building five new U.S. plants that will employ 24,000 workers over the next three years."
But Bowers omitted one detail: GM (NYSE:GM), Ford (NYSE:F) and Chrysler all have ties to the United Auto Workers (UAW) union, which forces those manufacturers into collective bargaining agreements with very expensive labor costs.
And, the foreign automakers that sell "more fuel-efficient vehicles" - which include Toyota (NYSE:TM) (opening a plant in Tupelo, Miss.), Honda (NYSE:HMC) (Greensburg, Ind.), Volkswagen (FRA:VOW) (to be determined - but Alabama, North Carolina and Tennessee are in the running) and KIA (SEO:000270) (West Point, Ga.) - are building their new plants in places where the UAW doesn't have a presence and won't make them less competitive by raising overhead costs.
As an August 2007 Investor's Business Daily editorial pointed out, unions are a principal reason many Americans have lost jobs. "[I]t's hard to fathom how a middle class could be created by an institution that has ... forced many Americans out of the labor force because of the high wages it has compelled businesses, through the power of its government protection, to pay," the editorial said.
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That's what I thought
June 4, 2008 - 10:34 ET by MeanderingWhile gas prices don't help the issue, I knew there was something else to it and this is it. Of course the union which is supposed to help those that are its members have actually caused them to lose their jobs. Its sad and NO ONE will report on it. Maybe John Stossell will.
I know the retail union is
June 4, 2008 - 10:37 ET by sshuffield70I know the retail union is worthless. But you're right, Jeff, the automotive union controls is even worse. Are there any useful unions left in America?
US Rep Allen(Me/D) Response
June 4, 2008 - 10:50 ET by NortoAfter spending a page explaining how we have to be concerned about the caribou in ANWAR, here is what his solution is:
" We must become more reliant on our own energy sources.
However, I believe these efforts should focus on opening capped
and marginal wells, building a natural gas pipeline from existing
drilling sites in Alaska, increasing our use of renewable fuels, and
filling our energy reserves as President Bush ordered last year,
rather than drilling in public lands."
I assume he failed to read the democrat screed b4 he sent it to me. You know, while the campaign has dominated the news for the past two years, the NE is about to fall into chaos with energy prices and really, none of the Maine delegation could care less.
Senator Collins sent me a 10 point plan and Carl Levin(D) was mentioned in the first paragraph! Wow
DRILL AND REFINE!
yep
June 4, 2008 - 12:26 ET by mbuelThat's obvious to anyone out here in the real world... they live in fantasy land where the Earth is still getting warmer and CO2 is the cause.
Toluca
June 4, 2008 - 10:50 ET by CaringwhiteguyJeff-GM is also closing an SUV plant in Toluca, Mexico. What's the union labor situation there?
Why close just SUV plants?
June 4, 2008 - 13:30 ET by blogonatorIf it is mainly a union issue, why close just SUV plants? Further, what has made the union issue come to a head right now? It seems increased gas prices would have more to do with the closing of factories that produce vehicles that require more gas, while plants that build more fuel-efficient cars remain open. I'm not saying the unions aren't a major cause, but to be fair, it appears to be the increase in gas prices and the fact that dealers are selling fewer SUVs.
One of the many factors
June 4, 2008 - 13:58 ET by fitzfongOne of the many factors (besides sales volume) that stimulated production of SUVs, was the relatively high profit margin realized per unit sold. In other words, domestic auto makers were flooding the market with SUVs because they were profitable...the higher the sales revenue, the easier it is to honor wage and pension obligations. While the auto makers were selling SUVs like hotcakes, they were operating as if the revenues would continue to pour in at the same rate...thus inflated wages and benefits. Now that gas prices have stifled the demand for SUVs, such vehicles are no longer as profitable as they once were. The wages and benefits packages negotiated in the good times can no longer be supported by the sales revenues currently generated and projected in the future. Thus, SUVs, whose sales revenues once papered over the real cracks in the business operations of the auto makers, have exposed those cracks now. That's why it's mainly a union issue.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
I agree with the post before
June 4, 2008 - 15:04 ET by air conservativeI agree with the post before yours, that the timing of all this seems to favor gas prices as the culprit. Everything you mention sounds like bad business decisions by GM, to put all their eggs in one basket. Labor is a cause, not THE cause. Gas prices are leading airlines to close down service to certain airports. Also labor related, but, the travel industry is also being impacted - and they have no union issues. What ties them all is oil.
Of course these are the
June 4, 2008 - 15:41 ET by fitzfongOf course these are the result of bad business decisions by GM...not to mention the airlines. When gas prices were lower, the businesses were lulled into a false sense of security that demand for their product/service would stay high. So they continued manufacturing high demand SUVs with large profit margins. It's at that point that they negotiated wage and benefits contracts based on overly-optimistic revenue projections...failing to account for the possibilty of a spike in a variable cost for an absolute necessity. They were under the misapprehension that demand for (at the time) highly profitable SUVs would always be high...and they used overly-optimistic revenue projections as a basis for which they negotiated terms with the Union. Meanwhile, they failed to invest in R&D so that they could address the future market demand for more fuel-efficient cars. They failed to prepare for just this circumstance. Now because they've locked themselves into wage and benefit obligations that they can't afford, they've been forced to play all kinds of parlour tricks to move excess inventory and address consumer price sensitivity. With airlines, they're starting to charge for checked baggage to create the myth that they're not raising prices on seats. The automotives are trying to flog excess SUV inventory on consumers by offering a program to put a ceiling on gas prices. And they're negotiating with the Union Members to buy out their contracts (assuming that they can't shift the burden for their obligations on the taxpayers). Essentially, fuel prices were never properly accounted for by car manufacturers and airlines...and they negotiated their contracts on that basis. In other words, labor is the cause.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
With all due respect,
June 4, 2008 - 16:26 ET by air conservativeWith all due respect, everything you wrote had its root in bad business decisions and gas prices. The large margins and lack of R & D.
But you use this to as basis to conclude "labor is the cause."
As I said I disagree that it is the primary cause, given the timing. The unions eventually might have crippled GM, but it wasn't something they couldn't have overcome with innovation.
Ultimately unions are legal in this country - they aren't going away no matter how badly they cripple us. Hopefully these closings will lead unions to look long and hard about what they demand in future industries
When labor costs are not
June 4, 2008 - 17:05 ET by fitzfongWhen labor costs are not supported by sales revenue, labor is the problem. A primary reason that SUVs were manufactured in such great numbers was to have the sales revenues offset the high labor costs. SUVs were a cash cow...a luxury that temporarily permitted auto makers to pay inflated wages and benefits to its employees. Money that could be invested in R&D to keep the businesses relevant in the future would instead be used for operations...an expense. That they didn't invest in R&D while they did continue to churn out excess product for inventory is management's fault. That they negotiated an awful deal with the Union is management's fault. Had they not negotiated such an awful deal with the Union, they may not have been tempted to take a shortcut to offsetting the pay increases by manufacturing more and more SUVs. The failure of the business is down to management...especially when management agrees to pay its employees more than the market will support.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
"When labor costs are not
June 4, 2008 - 17:40 ET by air conservativeActually, no, sales revenues are the problem. Failure to recognize and adjust to market trends and failure to create their own sustainable trends (SUVs). Ford's Hybrid SUV Escape was introduced over 4 years ago. Where are the rest of the american hybrid SUVs? Detroit has had years to license these technologies while they developed their own, but didn't. And as for foresight, oil prices have been an issue EVERY summer for the past 4 years, but no one seems to remember the outrage when prices hit $2 because, in retrospect, $2 doesn't sound so bad now.
Unions and corporate mismanagement were bound to drag them down eventually, but right now gas is what has done it. And hopefully, rather than being a fatal blow, will allow them to adjust how they negotiate with labor and read the market so that in the future, external events like fuel costs won't impact them so badly.
No, labor costs are the
June 4, 2008 - 18:43 ET by fitzfongNo, labor costs are the problem. The auto makers have allowed the cart to lead the horse for a long time now. When your labor costs are not out of control, you can be profitable without generating as much sales revenue. However, inflated wages and benefits increase the pressure on the sales side to generate extra revenue to cover the costs. At that point, it becomes crucial to sell inventory with higher profit margins versus inventory with lower profit margins. Management takes a shortcut to maximize profit in the short term to meet obligations. The inventory that sells the most with the biggest profit margin is going to be pushed...all to cover inflated operational costs. How big is the market demand for hybrid SUVs...or any hybrid, for that matter? Outside of a niche who can afford and will pay the premium markup? Especially when Union wages, medical and pension benefits are built into the price of each vehicle?
You operate a business by giving the consumer what the consumer wants...to the extent you succeed in providing that, you create more jobs. The more profitable you are, the more you can offer your employees (especially if you don't want to lose them to competitors). In other words, businesses are not in business to create high-paying jobs...high-paying jobs are byproducts of businesses being successful. The auto makers have been operating as if their primary purpose is to create high-paying jobs with good medical and pension benefits...that's not their primary purpose. Their primary purpose is to manufacture and sell automobiles to the most customers for as much as the market will allow them to be sold. If you're successful in that endeavor, the rest will follow...not before. Inflated labor costs are the problem.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
You make good points, and I
June 4, 2008 - 20:00 ET by air conservativeYou make good points, and I agree with most, but as I said, I just disagree with the motivating factors of the plant closings at this time, with respect to oil prices, rather than last year or five years from now. I enjoyed the discussion.
You may have a point with
June 4, 2008 - 20:39 ET by fitzfongYou may have a point with regard to what stimulated plant closings at this time...but I believe that the gas prices are more the "straw that broke the camel's back" rather than the root cause.
By the way, I see you've been a member for just a few days. I look forward to our paths crossing again many times in the future, and I hope you have fun participating. I enjoyed our discussion, as well. Cheers.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
The GM plant.......
June 4, 2008 - 10:53 ET by zoro7957........near where I lived closed it's doors in the 80's, when unskilled workers were earning inflationary wages. While living in newly built tri-level houses in the 'burbs, their driveways full of new boats, cars, trucks, and other "toys", they were outraged at GM when suddenly they found themselves in the unemployment line. I guess some folks just don't get it.....~sigh~.............
Zoro, and just what is
June 4, 2008 - 16:23 ET by bassndudeZoro, and just what is wrong with a new bass boat?
Save a SeAL, club a liberal!!
Ford Ad: We Are Now At The Same Quality As Toyota
June 4, 2008 - 10:54 ET by PamFord is advertising that they now meet the same quality standards as Toyota?!?! My Dad, husband and I all heard that and each of us was totally blown away that they would advertise in such a way. Anyone that has had any dealings with the big three from a supplier perspective will get this..Parts rejected, line costs charged, companies forced to have parts sorters in the assembly plants just so that supplier can pay a person to sit and read but never sort a part..that's efficincy isn't it? The writing has been on the wall for years..
And what are the Dems doing to reduce fuel costs?
June 4, 2008 - 10:58 ET by buzzbeeNothing of course. If gas prices are to blame, why not mention how Lieberman - Warner global warming bill will drive gas prices even higher.
Drill here, Drill Now!
Tom Blumer wrote a short
June 4, 2008 - 11:17 ET by dscottTom Blumer wrote a short piece on this last year, Myth Busted: ‘Deindustrialization’ The GDP of the manufacturing sector has gone up not down over the years.
In fact, unions in a perverse way helped propel the automation of the car manufacturing plants to the extent that the US has been cranking out a steady pace of cars for years while the employment has dropped to make the cars. The real issue is increasing productivity which many people don't realize actually means less people to produce the same product. At a 3% productivity gain a year, it shouldn't take a genius to realize that in 24 years, half of the people are no longer necessary to produce the product at the same output volume, so either you outlaw productivity gains or you must increase product volume to justify keeping the same numbers of people. http://www.automotivesupplier.org/Industry%20Economic%20Paper.pdf
Labor productivity has soared, while the number of vehicles assembled in the United States
has remained relatively constant at 12 to 13 million units since 1994. Total labor headcount in
the industry has fallen by 17 percent since 2000.
Nancy Pelosi and Harry Reid, starving the poor one gallon of ethanol at a time. Fill your tank with E85 and cull a village.
I hope they go bankrupt
June 4, 2008 - 12:04 ET by LastlibertarianNormal
0
As a kid fresh out of high school (early 80's) I
applied for a position in skilled services. After passing the aptitude test and
receiving 100%, I was told that all minorities and women would be receiving a
bonus 35%. Anyone scoring over 65% would trump me. Any company that supports
such sexist and racist policies, not to mention tolerating extortionist union
pay is no asset to America.
Normal
0
yep
June 4, 2008 - 12:23 ET by mbuelThat's another asset of liberal policies that have damaged the American Business model.
Did they read GM's website or watch their commercials....
June 4, 2008 - 12:30 ET by TexasDrifterWe are talking about the same GM that is planning on 8 hybrid models by the close of 2008 aren't we? They are also introducing a smaller, more fuel efficient version of the diesel for their half ton trucks for the 2009/10 model year. As well as having more flex fuel, e85 capable, vehicles than anyone else.
We are talking about the same GM, right?
I think the new Tahoe hybrid is supposed to get the same city mileage as a Honda civic. Their recent ads are promoting that they have more models with over 30 mpg highway than anyone else. The Chevy Volt is still being worked on as well as the new Equinox Fuel Cell vehicle. I've seen more along these lines from GM than any other manufacturer.
Wow, they totally botched the research on this one, unless it is a different General Motors we are talking about here.
http://www.gm.com/ex...
Ford was experimenting with a hydraulic system in its heavy trucks (was in the Tonka concept), I think UPS was testing them in Chicago.
http://www.autoblogg...
Ford is also introducing a smaller, more fuel efficient diesel for the half tons. The Chief concept truck, also Ford, featured a flex fuel engine. The press never picked up on that either, just that Ford had another huge concept truck.
unions
June 4, 2008 - 12:22 ET by mbuelIMO,
Unions were _never_ needed and were merely the beginnings of marxist idealogy in the USA. If you want to find one of the key reasons jobs started shifting overseas, this would be one of them.
1) Government regulating what a business must pay an employee. The minimum wage law has been absolutely destructive. Instead of helping, I think it has encouraged employers to seek cheaper employment either overseas or through illegal immigrants.
2) Union controls. Unions make for less efficient business, they force companies to keep on useless workers and follow the marxist idealogy that all workers are worth the same no matter what their output. Unions have been EXTREMELY damaging to the American Business model. This has also lead to cheaper employment overseas (where the workers typically have more pride for the job than union workers.) and illegals!
The simple fact of supply and demand is ignored with these two basic facets. If you can only sell a widget for 5 dollars, yet it takes an hour to make one and you have to pay your employee 8 dollars an hour (minimum wage in Washington state) are you going to pay them and lose 3 dollars per widget? Are you going to raise the price of your widget to 10 dollars, and risk losing a large amount of your customer base?
And yet we still have liberals trying to ignore the laws of supply and demand, telling us they're going to save us with "windfall taxes" to punish those rich oil barons. They're going to save us from ourselves so we can put a stop to the global climate crisis by raising the price of energy so high that it will make more Americans homeless.
Why do we keep electing these people? Because by and large the American people don't understand simple economic theories like supply and demand. They think that government largess is benevolent and any pain at the pump, even it's trickle down from taxes is justified to punish the rich for being successful.
Labor Unions create an
June 4, 2008 - 13:19 ET by fitzfongLabor Unions create an adversarial relationship between employer and employee akin to litigation. The Union "leadership" cultivates this myth that businesses have an infinite supply of money to give to their workers...and that if the businesses don't, it's only because the top guys skim for themselves. This creates an atmosphere where Union Members, believing that their leadership has their best interests at heart, simply follow along without giving any serious critical thought to the impact the Union actions have on the businesses...and, by extension, on themselves. Businesses operate on narrow margins, and their future viabilities are reliant on keeping costs in line with revenues. Irresponsible labor contracts, like those negotiated with the UAW, stretch the cost obligations to the point that revenues have to significantly increase to meet such obligations. Price increases may temporarily bridge the gap, but eventually, such measures will negatively affect sales volume. When that happens, businesses are forced to reduce cost to get in line with revenue. Inflated wages and benefits are often the catalyst for these problems, so they're addressed first...through lay-offs, buyouts, renegotiations or the shipping of jobs to more cost-friendly climates. At that point, it's hard to empathise with people who so willingly place their fates in the hands of Union "leadership".
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
I'm sure high gas prices
June 4, 2008 - 12:29 ET by fitzfongI'm sure high gas prices instead of inflated wages and benefits will be the excuse when CBS finally ships Katie Couric, too.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan
I have a couple friends who just retired from gm
June 4, 2008 - 13:26 ET by audio357First of all they was whining that they would only get 4500.00 a month in retirement.. that was gm ripping them off.. im like you got to be kidding thats more than i make working..
second they then told em how they backed thier trucks up (5 of them) and stole everything that wasnt nailed down cuz ya know.. gm is ripping them off. as he leans on his 50k boat next to 30k truck... . they are delusional.
I said well if you all are doing that i bet others are too what do you expect if they are losing money hand over fist they laughed and proceeded to tell me all the things they had stole from them and how the economy is so so bad and its george bushs fault.. I couldnt believe my ears. I said its your friggin unioun that helped ruin the big 3. Another group of always voting democrats who dont care if the company goes down as long as they get what they think is coming to them. They also told me stories of smoking weed and drinking on the job everyday and hour naps each day.. anytime a foreman would say hey where you been they would say F@@# you go talk to the unioun steward.. its crzy..
honesty is the best policy... unless your running for office.