Baby, You Can't Sell a Car

Car sales are now at a 27-year low, reports the AP and Bloomberg News via the Cincy Enquirer:

Cars and light trucks sold at a 9.1 million annual pace last month, a drop from 15.4 million a year earlier, according to Autodata Corp. Total deliveries tumbled 41 percent to 688,909, the Woodcliff Lake, N.J.-based company said.

General Motors' sales tumbled 53 percent from a year earlier, while Ford's U.S. sales fell 48 percent and Chrysler's 44 percent.

The major Japanese automakers fared only slightly better. Sales at Toyota, which has its North American manufacturing headquarters in Erlanger, fell 40 percent.

More here.

While tumbling sales have been used as a justification by GM and Chrysler for the big auto bailout(s), Michael C. Moynihan showed that in fact those companies (and Ford, too) had trouble making money long before the current recession. Watch below to see why.

Comments

[SugarFree]

If the government just bought all those unsold cars and then sunk them in the ocean for use as artificial reefs we could solve two problems with only one stupidity. That's a 50% savings in stupidity!

[Warren]

Organized labor = organized crime. Bailing out Detroit is nothing less than the US Government acting as a collection agency for the mob.

[just sayin\']

Well, the feds pay farmers not to plant corn, so maybe they should pay car-makers not to make cars . . . .

[Lost_in_Translation]

I hear the bailout a comin?
it?s rolling round the bend
and I ain?t seen a profit since I don?t know when,
I?m stuck in stock collapse, and time keeps draggin? on
but that bailout keeps a rollin? on down to GM/Chrysler/AIG/BOA..
When I was just a baby my mama told me. Son,
always be a good boy, don?t ever play with (hedge) funds.
But I bought them from a man in Reno just to watch him lie
When I hear those stocks a fallin, I hang my head and cry..

I bet there?s rich folks lobbying on the fancy congress floor
they?re pleading and begging for a few bailouts more.
Well I know I had it coming, I know I can?t get any
but the congress keeps a bailin?
and that?s what tortures me...

Well if they?d free me from this tragedy,
if that money was still mine
I bet I?d moved it all a little further down the line
far from corporate welfare, that's where I want to stay
and I?d let that sweet white powder blow my blues away.....
I bet I?d move just a little further down the line
far from coporate welfare, that's where I want to stay
and I?d let that sweet white powder blow my blues away.....

[BDB]

Well, Toyota just got bailed out by the Japanese the other day.

Seems to be a global phenomenon.

[BDB]

Just for accuracy's sake, Ford was forced to appear beside Terri Schiavo (Chrysler) and the Roulette Wheel (General Motors)*. They didn't want to go since they don't need government checks, but they were subpoenaed.

Ford is the only American car company that's making good cars right now.

(*H/T to J sub D)

[kilroy]

Has anyone asked BO and his lackeys what the cap on this auto bailout is? When is enough enough? If GM, Chrysler and Ford never sold another vehicle would the government just continue to fund them forever? What's the limiting case here?

I completely fail to understand how this shit can be justified.

[jsh]

I completely fail to understand how this shit can be justified.

Labor union contributions to Dems, of course. What more justification do we need?

[BDB]

Again, Ford *is not taking bail out money*!

[kilroy]

BDB, understood. Sorry for the guilt by industry association.

[mike]

FYI, Subaru sales were up...now if anything were to happen to VT,NH, ME.......

[BDB]

Subaru is weird like that. They're like the Apple of the car world, uber-loyal hipsters as customers.

[kinnath]

Subaru is weird like that. They're like the Apple of the car world, uber-loyal hipsters as customers.

I had five in row. From the mid-80s to mid-90s. I was happy with all of them.

[P Brooks]

Old joke:

Q: "How do you say Saab in Japanese?"

A: "Subaru."

[P Brooks]

ps-

Die, General Motors.

Die, die, die!!!!

[creech]

Germany is apparently paying 2500 euros to anyone getting rid of a car nine or more years old. Lots of takers, apparently. Watch for something similar here - after all, the poorer folks tend to be the ones driving the older cars (but have little money to afford a new car.) And, of course, this giveaway can be rationalized as helping turn the highways "green," and it sure will keep a lot of unionized workers at their jobs. Ten million cars, at least, are qualified, so the tab would be about $32 billion if all were turned in.

[R C Dean]

Has anyone asked BO and his lackeys what the cap on this auto bailout is?

How much do you have?

[P Brooks]

Cash for Clunkers; it'll never fly, though. The marginal cost of removing additional units of carbon and pollutants is too low.

The Demos would rather do their social engineering with the tax code: impose huge costs on new-car buyers to achieve miniscule gains, and then subsidize them with tax credits.

If you just buy cars from people outright, you can't control what they spend the proceeds on.

[BDB]

Cash for clunkers was in the stimulus but was removed as pork.

[Ryo]

As mentioned above, Toyota is asking the Japanese government for loans now too. Speculation is Honda and Mazda will join them. The report I read said banks were only willing to loan to Toyota at an interest rate roughly 50% higher than the year before.

[anarch]

Would someone please channel joe? I'm feeling nuance-deficient.

[Jeff P]

Just curious: has anyone in the industry pushed for a law forbidding private citizens from selling their cars for money to another person? The music and movie industry pushed to abolish the robust aftermarket, I can easily see automakers branding cars as Intellectual Property and crying that only licensed dealers should provide them.

[J sub D]

The auto industry is always the first to show the effects of a recession. It also leads the economy out of one. I've known this since before adulthood.

Every auto manufacturer is getting clobbered right now. I'm am so not surprised that Toyota, Nissan, et al sales are in the crapper.

[R C Dean]

Jeff, I don't recall any entertainment industry crackdowns on used record stores, or sales of used CDs/DVDs, etc. Did I miss something?

[Jeff P]

RC: Garth Brooks condemned used record stores in 2001 (IIRC). After that several big labels floated the idea of penalizing mom & pop stores for selling used stuff, but Media Play (remember Media Play? Sigh. I miss them) started a brisk used disc business and the idea fizzled. Several Walmarts down south sold used DVDs for a time, and when the labels told them to stop they just laughed. The idea still gets mentioned occasionally, but nobody pays attention.

[ChicagoTom]

Moynihan is being his typical dishonest self.

Labor costs aren't excessively high. In fact the costs of the current labor force at US auto companies is withing a dollar or two per hour of the japanese automakers.

The problem is legacy expenses and paying for promises the company has made in the past (like pension and health care for RETIREES). Anyone who presents "labor costs" as a combination of current labor costs and legacy pension and health benefits for retirees and then compares them to the current wages that the japanese auto-makers is engaging in hackery.

The bottom line is that the american auto-makers made promises to their workers. And those workers accepted those benefits in lieu of a higher salary.

It's not the unions' or the workers' fault that those expenses have gotten out of hand. (It isn't the auto-makers fault either -- but the automaker did enter into a contract and they have to honor it -- they gambled that it would be smarter financially to push those benefit costs into the future and they lost)

[BDB]

"anarch | March 4, 2009, 12:11pm | #
Would someone please channel joe? I'm feeling nuance-deficient."

The only decent defense of GM and Chrysler I've heard is here:

http://www.youtube.com/watch?v=U7YBjjLKLd0

And even that is "well, the people on Wall St. are even bigger bastards and you have them more".

[John Thacker]

Anyone who presents "labor costs" as a combination of current labor costs and legacy pension and health benefits for retirees and then compares them to the current wages that the japanese auto-makers is engaging in hackery.

The bottom line is that the american auto-makers made promises to their workers. And those workers accepted those benefits in lieu of a higher salary.

I'm sorry, ChicagoTom, but I'm having difficulty grasping the nuance of your argument. On the one hand, you argue that it's unfair to count these higher costs as "labor costs," but then you argue that they are benefits that the workers accepted in lieu of higher payments.

It *is* higher labor costs. Just deferred payments. If you want to look at it that way, you can say that GM mortgaged their future a long time and had absolutely insane labor costs in the past.

What you're saying is that it's now the unions or retirees' fault that they're willing to screw over current workers in order to protect their current benefits, they're just looking out for themselves. And since the retirees have more votes in the UAW, the UAW has no problem putting the burden on the poor saps who decided to come along later.

but the automaker did enter into a contract and they have to honor it

Sure. Except now they're bankrupt, so if anyone is going to honor it, it's going to be the US taxpayer. Are you really sure you want to reward companies (and labor, and unions) for, in your words, "gambl[ing] that it would be smarter financially to push those benefit costs into the future?"

[ChicagoTom]

I'm sorry, ChicagoTom, but I'm having difficulty grasping the nuance of your argument.

It's actually very simple.

People currently working in the auto industry do not make the equivalent of $71/hour. The only way to come up with that number is by including benefits to retirees. These benefits include health care and defined benefit pensions to RETIRED workers.

The proper equation should look something like this:

total cost (including pension and health for retirees) / (current workers + retired workers)

instead that $71 dollar number comes from an equation like this:

total cost (including pension and health for retirees) / current workers.

That is a bullshit number.

Current workers don't get pensions any more. They instead get 401(k) which don't cost the company neraly as much. The number bandied about are an apples to oranges comparison designed to make the unions and workers look greedy rather than addressing the fact that the problem with the car companies is that they made promises they can not keep and didn't fund their pension obligations properly. Now chickens are coming home to roost because of economic factors.

The comparison to the foreign companies "labor costs" (and the implication that somehow it's the unions to blame) is bullshit. The real average cost of current labor force of US auto-companies when compared to the current labor costs of japanese car companies are actually quite close.

As for the legacy costs, the japanese companies don't have as many retired workers here in the US. And back home they have socialized medicine so they wouldn't need to provide health care to their retirees in Japan.

Pension benefits and healthcare for retirees aren't shouldn't be added into labor costs when you are trying to calculate how much the american auto-worker makes -- unless you are trying to calculate some kind of historical numbers. Most current auto-workers don't have a defined benefit retirement plan and their health benefits when they retire won't be anywhere near as generous.

If you are going to honestly compare the cost of the current labor force and see how much they are making then you don't get to include retiree benefits that will current workers don't get merely to inflate what the "american employee" is getting when compared to the japanese employee.

[andrew]

Is anyone as annoyed at Moynihan's haircut as much as I am?

[ChicagoTom]

What you're saying is that it's now the unions or retirees' fault that they're willing to screw over current workers in order to protect their current benefits, they're just looking out for themselves. And since the retirees have more votes in the UAW, the UAW has no problem putting the burden on the poor saps who decided to come along later.

What bullshit.

No one is screwing anyone over. The retirees and the auto-companies all negotiated in good faith what was a fair rate of compensation. In lieu of higher salaries up front the retirees accepted lower take home pay to have security during retirement. The company thought that was a good deal and accepted it. That's how contracts work.

Since that time, the unions and the companies, working with the common goal of preserving the companies (and their jobs) have re-negotiated the terms of those contracts for new hires.

I don't see how anyone is getting screwed over. New hires aren't losing any benefits they had. They just don't get benefits as good as the retirees. So be it. Times have changed and so has the market place. That is not a screw job.

What is a screw job is not getting the benefits promised during retirement when you took lower pay over the course of your career in order to have security during retirement.

Except now they're bankrupt, so if anyone is going to honor it, it's going to be the US taxpayer. Are you really sure you want to reward companies (and labor, and unions) for, in your words, "gambl[ing] that it would be smarter financially to push those benefit costs into the future?"

Just because you are anti-union and think the unions screwed the company over doesn't make it so. Two parties agreed to terms and signed a contract. If one party felt they were getting screwed then they shouldn't have agreed to the terms. So obviously both sides thought the deal was a good deal for them. In hindsight maybe it wasn't such a good deal, but hindsight is always 20/20.

Now, since the companies don't want to file for bankruptcy and the government doesn't want that either (something I strongly disagree with ), nny government monies the auto-companies get should first go to pay their retirees pension obligations. The company had a contract and the retirees lived up to their end. Why should the company get to walk away from their end? Why should the workers get punished?

If the auto-companies want to file for BK then do that, but until that happens they are on the hook.

I don't want to reward bad behavior, but the only bad behavior here is by the companies who want to basically get away with not delivering what they promised. If government monies do go to the auto-companies than those monies should be used to make whole the people who are getting screwed : retirees who lived up to their end of the contract and have pensions coming to them.

[J sub D]

Moynihan is being his typical dishonest self.

Labor costs aren't excessively high. In fact the costs of the current labor force at US auto companies is withing a dollar or two per hour of the japanese automakers.

Labor costs for new hires are in line with Japanese transplants.
Are you disingenuous or just ignorant of the latest UAW contracts?

[ChicagoTom]

Labor costs for new hires are in line with Japanese transplants.
Are you disingenuous or just ignorant of the latest UAW contracts?

Your side is being disingenuous.
That $71/hour number includes RETIREES benefits.

You are comparing current and legacy costs of american workers to only current costs of foreign companies and then saying "look these guys are getting so much more compensation" -- uhmm maybe over the lifetime of the company they have gotten more in the past, but CURRENTLY their labor costs/compensation is the pretty close.

[BDB]

BTW, Nissan is now asking for a loan from not only the Japanese government, but our own as well.

The transplants are being bailed out now too, folks.

[BDB]

So it's obviously not just labor costs. It's beginning to snowball to the point where just about every major car company is asking for government money, whether from our own, Japan's, or Germany's.

[matt]

I have to make the most immature irrelevant comment

Did anyone notice how everyone in the frozen first frame of this video has mean grimaces on their face except for the guy on the right with the sh!t eating grin?

[P Brooks]

Bottom line: GM can't make and sell cars for a profit.

Die, GM.

[P Brooks]

So it's obviously not just labor costs.

The market has most definitely contracted.
However, by propping up a zombie GM, our government just makes it more difficult, if not impossible, for *anybody* (Honda, Toyota, Hyundai, Volkswagen....) to earn their way out of trouble.

[LarryA]

You can argue all you want about the economics. As long as everyone is saying the automakers are a heartbeat from going out of business and voiding any warranty, why in hell would you expect me to buy a new car?

[BDB]

"However, by propping up a zombie GM, our government just makes it more difficult, if not impossible, for *anybody* (Honda, Toyota, Hyundai, Volkswagen....) to earn their way out of trouble."

Let it be known that Toyota and Nissan have taken bailout money before Ford has seen a dime. Just sayin'.

It should be interesting if Bob Corker sticks to his guns on this or bends over since Nissan has factories and its' North American headquarters in his home state (TN).

[BDB]

Dick Shelby should be placed on Hack Watch along with Corker if either of them doesn't speak out against the Nissan and Toyota bailouts.

[cuernimus]

Did anyone notice how everyone in the frozen first frame of this video has mean grimaces on their face except for the guy on the right with the sh!t eating grin?

The first frame makes me think the dude on the left gave the dude in the middle an improper touch. The guy on the right is oblivious.

[John Thacker]

Let it be known that Toyota and Nissan have taken bailout money before Ford has seen a dime. Just sayin'....
Dick Shelby should be placed on Hack Watch along with Corker if either of them doesn't speak out against the Nissan and Toyota bailouts.

Umm, why, BDB? Why exactly should we complain about the Japanese giving them money? A good portion of that money ends up as direct subsidy to Americans, gift of the Japanese government and Japanese people, both as workers and consumers.

OTOH, the other bailouts end up being gifts from the American people and the American government that go to subsidize not only Americans but foreigners.

I take it you don't understand trade at all, BDB? Exports are the price we pay for imports. If another country wants to give us something for free we take it.

Arguing against our government giving away money is different from arguing against taking free money from another government.

[BDB]

"Umm, why, BDB? Why exactly should we complain about the Japanese giving them money? "

Nissan asked our government for a loan just today.

[BDB]

IOW they're also double-dipping. Nissan is going to get a few billion from the Japanese, and at the same time is asking us for a few billion since they have factories in North America.

[John Thacker]

As for the legacy costs, the japanese companies don't have as many retired workers here in the US. And back home they have socialized medicine so they wouldn't need to provide health care to their retirees in Japan.

Well, here we have socialized medicine for retirees, yet the UAW still has that benefit for retirees. The UAW doesn't *need* that benefit, but they want it because it's particularly nice. So it's still part of labor costs.

Plus, I'm pretty sure that either business or individual taxes pay for that socialized medicine. And as a result, either the Japanese car companies have to pay their workers more to cover those taxes, or those workers are actually getting less money and the labor costs are, in fact, lower for current workers and retirees.

Socialized medicine isn't free. It's paid for somehow.

[BDB]

So Nissan is asking for a bailout, from the US treasury. It will be fun to see Sen. Corker's reaction when his state is on the line. Then we'll know if he did this out of principle or if he is just a hack.

[Lost_In_Translation]

I hate the bailouts as much as anyone here, but I've arrived at the conclusion that inertia of the past 80 years of creeping socialism has put us over the edge anyway, but like the wily coyote, we just haven't looked down yet. Might as well bail everybody out, because soon we'll be paying for it in spades regardless of what the government does. Sit back, light up a smoke, take a swig of alcoholic drink of choice, snort some coke, inject some heroin and bang the most expensive whore you can find, because its gonna be one ugly mess when we hit pavement after this freefall.

[Hazel Meade]

Here's what they should do. Instead of bailing out GM, you break GM up into component brands. (Chevy vs. Pontiac vs. Plymoth vs. Cadillac, etc.)

Then they have to compete against eachother to see which bits can survive. At the end of five years we have a national referendum and award $15 billion to the winner.

Meanwhile, we sell the rights to document the competition to FOX and they make a reality TV program out of it.