GM stock trade halted, close to bankruptcy

[c1ue]

Re: GM stock trade halted, close to bankruptcy

It is disingenuous to say that Japanese car companies dump poor quality cars at home and sell the 'good stuff' in the US.

The two markets are completely different.

For one thing, there isn't a South in Japan where every other car is a SUV or truck.

Secondly, the ways the Japanese government help the Japanese car makers profit are not necessarily what you'd want here in the US.

For example: Japan has a system called 'shaken'. Basically it is a full on inspection of the vehicle. Once a car gets over 3 years old, the shaken costs start becoming completely unmanageable. It is like a car show inspector going over your vehicle.

This is why there is such rapid turnover in Japan - not because of the car quality specifically.

But of course, rapid turnover is good for the car maker no?

[labasta]

Re: GM stock trade halted, close to bankruptcy

No person from a country with Gordon Brown as its leader is allowed to say my country is a miserable failure.


This is all I'm asking. Go to Japan, stick a gun to their head (metaphorically), and say "if your companies want free access to our markets, our companies better be allowed to have free access to your markets." It's that simple. Don't argue that Japanese-made (as in made in Japan) cars are superior. All the Japanese carmakers build poor quality cars in the Japan market because they pay off the government to allow them to have the market to themselves. Not to mention that they've pushed down the value of the currency for a long time just like the Chinese in order to prop up their manufacturing. The Japanese are the National Socialists here.

I've worked with the Japanese a ton and they can be cantankerous arguing and negotiating. But once they know they can't defend their position anymore, they'll back down, lower their heads, and quietly admit defeat.

It's time for the United States to have a policy of reciprocity. We'll treat you how you treat us.

I heard the same thing with Japan being very uncompetitve with imports.

I always thought that was daft. Of course I didn't know about the FIRE economy in 1990 and how debt was swapped for goods. I couldn't get my head around how on earth one country can have a surplus and another a deficit. It should be impossible if the playing field was level.

Either Japan were insular baboons with the brains of a tadpole or Europe and the US were subsidizing Asia's industrialization. If this was done as a cowardly way by the US and EU to keep international trade going, then their cowardice is now going home to roost. That subsidy is now being withdrawn (not voluntarily it seems). The once little industrial fledging Asia has hopefully grown up big enough to fly the nest by itself. And it must as its parents have given all their milk. They are now on life support.

Do we have a situation of stupid Asians and cowardly Westerners? Or was this subsidy intentional from the start? I wonder what the New World Order is going to look like in the coming decades.

[derelict54]

Re: GM stock trade halted, close to bankruptcy

I am buying GM and Ford on pink sheets. Obama would rather fire the top CEO's of GM and Ford himself and make the guys in Silicon Valley (Tesla and otherss) who are developing the next generation of cars move out there who could have all that equipment to retool our industry than watch millions upon millions riot in Michigan. GM got killed becuase of their banking business, somewhat cars, but mostly banking......where the FIRE industry runs rampant and all the tax incentives are giving to FIRE economy one will become a FIRE component.

All I got to say, is if I had a few million bucks I would buy a electric golf cart company and expand it. Why the hell can a golf cart go 96 holes in a day without a charge and the Checy Volt can't get 50 yards on its first publicity debut?

[grapejelly]

Re: GM stock trade halted, close to bankruptcy

GM got killed becuase of their banking business, somewhat cars, but mostly banking......where the FIRE industry runs rampant and all the tax incentives are giving to FIRE economy one will become a FIRE component.

GM got killed because it makes crappy cars for too much money. The FIRE economy subsidized their horrible unprofitable cars and now that's gone. The cars can't stand up on their own.

And the reason they make crappy cars? It's the same disease that struck, say, United Airlines. Big Labor and Big Management in league together. This happens to all capital-intensive and labor-intensive industries in the US. It has struck Big Government too, but that is another story.

Plainly: GM is run for its employees.

Same with Ford and Chrysler.

Customers are secondary. Shareholders are probably tertiary.

[Chris Coles]

Re: GM stock trade halted, close to bankruptcy

GM got killed because it makes crappy cars for too much money. The FIRE economy subsidized their horrible unprofitable cars and now that's gone. The cars can't stand up on their own.

And the reason they make crappy cars? It's the same disease that struck, say, United Airlines. Big Labor and Big Management in league together. This happens to all capital-intensive and labor-intensive industries in the US. It has struck Big Government too, but that is another story.

Plainly: GM is run for its employees.

Same with Ford and Chrysler.

Customers are secondary. Shareholders are probably tertiary.

Not quite that! The underlying problem is lack of local competition caused by a refusal to invest in competitors. We have to learn to recognise that, once investment is in place, Ford, GM, etc. being good examples, then every effort must be made to provide additional competition by investing in outsiders.

The real problem is that many have seen the initial investment of capital as the be all end all of capitalism. It is not. Capital must constantly flow towards anyone who can compete. But if you have institutions that feel they must constantly refuse to capitalise competition as the NEW competitor competes against THEIR original investment, then bad management becomes entrenched and even more importantly, knows for certain that, as long as they can bumble along, they are untouchable. From that moment forward, the long term is always going to eventually become a disaster for everyone.

The origins of "Arms Length" investment was to remove the idea that the institution that invested the savings of the nation had anything to do with the long term management of the business. But today, the concept of Mergers & Acquisition brings everyone under the same roof so to speak and responsibility for good old fashioned competition flies out of the window.

Derelect54's idea of pumping millions into a golf cart company is right on the button. But in the climate we have had over the last several decades, anyone who has tried to compete can tell you, they would be laughed at and shown the door, and very quickly too. No one in M&A would have for one single moment considered the idea of what? Investing in an uncontrolled COMPETITOR to their existing fiefdom? No way!

THAT has been the underlying problem. Trying to foist the blame on the unions is a complete blind alley. As I have previously stated, no one starting up a new business has any need for nor interest in a union. Why? Because it is in their best interests to treat with their employees in such a manner as to keep them as their own employees.

If you work in a community where the new investment has moved to a new company and yes, the existing employees in the larger unit are better paid with better fringe benefits, but you can also see that the new investment has stopped in the uncompetitive and turned towards your new adventure. Anyone working in a declining large business can see for themselves the difference. What we have allowed to happen is to forget that simple thing called competitive investment and the true benefits it can and does bring.

The failure has been to refuse to permit competitive investment against the existing incumbent industry and that has stemmed from the lack of leadership in, and from, our Institutional Investors.

The solution is to create conditions that promote the necessary investment and only a clear lead from new, vibrant leadership at the highest level can do that. That is Barack Obama's (and the individuals surrounding him) responsibility. Only they hold the power to make the necessary changes, both in perception and direction.

[grapejelly]

Re: GM stock trade halted, close to bankruptcy

THAT has been the underlying problem. Trying to foist the blame on the unions is a complete blind alley. As I have previously stated, no one starting up a new business has any need for nor interest in a union. Why? Because it is in their best interests to treat with their employees in such a manner as to keep them as their own employees.

I am not blaming the unions.

I am saying that there is structural incentive for management and unions to cooperate together at the expense of the shareholders and customers.

This structural incentive true of ALL capital- and labor-intensive businesses in the US.

(Not all such enterprises end up in this dead end situation.)

It takes awhile for this state of management-union coziness to become the status quo. Decades even. And here is my stab at how it happens.

Labor finds it can do great damage to shareholders fairly easily by striking.

So management makes concessions to labor to prevent the strikes.

Shareholders may lose out in the long run, but labor contentment is more important to management. And shareholders exercise no real control over management anyway.

Ultimately, the enterprise is run strictly for the benefit of its unions and managers.

Just take a trip on United Airlines to see how this works. And compare it to say, Southwest or JetBlue. Each has their problems, but there is a stark contrast that you can observe.

The solution is to this ossification is to remove the antitrust exemptions from unions. And also a bit of creative destruction, that is, just let the market do its thing.

These are enteprises gone so bad that they should just go out of business. That will introduce the fear of god into unions and labor and restore the balance, where employees really know that their jobs depend upon their productivity and profitability to their employers.

And there is another long term solution that is more important.

And that is to provide structural incentives to start up new companies of capital- and labor-intensive businesses.

That means taxes must be lowered or eliminated on business and on dividend income. We must do everything in our power to encourage savings and investment, and discourage consumption.

The US gubmint has the opposite policies: encourage consumption, discourage investment and discourage savings.

Corporations don't pay taxes, their customers pay everything. Eliminate business taxes and the tax on dividends completely. Eliminate capital gains taxes, most of which are the results of currency depreciation anyway.

We simply must encourage large pools of savings to form in this country again.

And we must stop this insanity of "stimulus" and "bailouts" that fritters away our savings even further like a stealthy thief in the night.

[Chris Coles]

Re: GM stock trade halted, close to bankruptcy

I am not blaming the unions.

I am saying that there is structural incentive for management and unions to cooperate together at the expense of the shareholders and customers.

This structural incentive true of ALL capital- and labor-intensive businesses in the US.

(Not all such enterprises end up in this dead end situation.)

It takes awhile for this state of management-union coziness to become the status quo. Decades even. And here is my stab at how it happens.

Labor finds it can do great damage to shareholders fairly easily by striking.

So management makes concessions to labor to prevent the strikes.

Shareholders may lose out in the long run, but labor contentment is more important to management. And shareholders exercise no real control over management anyway.

Ultimately, the enterprise is run strictly for the benefit of its unions and managers.

Just take a trip on United Airlines to see how this works. And compare it to say, Southwest or JetBlue. Each has their problems, but there is a stark contrast that you can observe.

The solution is to this ossification is to remove the antitrust exemptions from unions. And also a bit of creative destruction, that is, just let the market do its thing.

These are enteprises gone so bad that they should just go out of business. That will introduce the fear of god into unions and labor and restore the balance, where employees really know that their jobs depend upon their productivity and profitability to their employers.

And there is another long term solution that is more important.

And that is to provide structural incentives to start up new companies of capital- and labor-intensive businesses.

That means taxes must be lowered or eliminated on business and on dividend income. We must do everything in our power to encourage savings and investment, and discourage consumption.

The US gubmint has the opposite policies: encourage consumption, discourage investment and discourage savings.

Corporations don't pay taxes, their customers pay everything. Eliminate business taxes and the tax on dividends completely. Eliminate capital gains taxes, most of which are the results of currency depreciation anyway.

We simply must encourage large pools of savings to form in this country again.

And we must stop this insanity of "stimulus" and "bailouts" that fritters away our savings even further like a stealthy thief in the night.

While I still disagree on the matter of unions, I have to say that you bring the core of this debate right into focus with your statement:

"provide structural incentives to start up new companies of capital- and labor-intensive businesses."

[grapejelly]

Re: GM stock trade halted, close to bankruptcy

While I still disagree on the matter of unions, I have to say that you bring the core of this debate right into focus with your statement:

"provide structural incentives to start up new companies of capital- and labor-intensive businesses."

Really, I am not picking on unions. Labor- and capital-intensive businesses are sitting ducks for the modern "democratic" nation-state. There is so much at stake, that management must cave in to labor's demands. Labor has too much power. You end up with this cozy arrangement between labor and management at the expense of shareholders and customers.

And as I said, just as important but less visible, is the structural issues that reward consumption and penalize savings and investment.

[Chris Coles]

Re: GM stock trade halted, close to bankruptcy

Relax Grapejelly, we are both on the same road, but we have come to it from different directions and thus have our own viewpoint. I respect your views as I am sure you respect mine. The important thing is that we must both hope that someone is listening and drawing up plans to take some action. If they leave the status quo in place, everything will be for nought.

The faster the change in direction happens, the quicker the turn will come into sight and the earlier we will start to bring everything into focus again. Now, how's that for a bit of hubris?

[grapejelly]

Re: GM stock trade halted, close to bankruptcy

Relax Grapejelly, we are both on the same road, but we have come to it from different directions and thus have our own viewpoint. I respect your views as I am sure you respect mine. The important thing is that we must both hope that someone is listening and drawing up plans to take some action. If they leave the status quo in place, everything will be for nought.

The faster the change in direction happens, the quicker the turn will come into sight and the earlier we will start to bring everything into focus again. Now, how's that for a bit of hubris?

sorry if I came across a bit heated, don't feel that way, Chris and I am very happy to have this discussion. My apologies as that isn't my state and not what I meant to convey.

Anyhoo, I don't expect most people to "get it". Right now I am most shocked that EJ doesn't get it. And if he believes in more "stimulus", more fiscal profligacy, more consumption, then how can we expect lesser mortals to get it?

A situation like GM/Ford/Chrysler shows that we don't have a case of simple mismanagement on our hands. We have a structural problem. And that problem is not that complicated.

Look at how many auto companies started up in China. 200? And I'm not comparing Brilliant Motors with GM, but the point is, that in the US you do not have the ability to start up and build capital- and labor-intensive businesses anymore, and I think the reasons why not are the precise "other side of the FIRE economy" coin -- starkly visible in GM and Ford's collapse (and who knows, maybe GE's) as their finance revenue died, so they died.

Capital formation is penalized here in the US. You can have small startups that involve small investments and potentially big returns. But large startups are very difficult because of the taxation policy, and the penalties to saving and investing that are imposed on people. The labor issue is there but can be dealt with, as witness Southwest airlines...although in the long run, over decades, it will stifle such companies until the laws bring labor into better balance.

[BiscayneSunrise]

Re: GM stock trade halted, close to bankruptcy

Your implication that the CAFE standards are somehow responsible for our excessive consumption of gasoline is incorrect. The initial standards did raise the fleet MPG. The failure was in congress to not raise those standards to higher levels and plug the loopholes for the monster SUV. Appropriate government action at the right time would have lessened the problems we now have.

W_A_T

You just re-iterated my point. I never said or even implied that CAFE standards caused excessive consumption. I said the American consumer is responsible and Congress left gaping holes in their policy big enough for a Hummer to drive through, literally. Remember, too, those excessive tax credits in 2003 for SUV's which utterly defeated the intent of fuel economy.

Sorry for the confusion. Perhaps you could point out where in my text the miscommunication happened.

[Chris Coles]

Re: GM stock trade halted, close to bankruptcy

No Problem Grapejelly, and I never once thought of your points as being "overheated" just simply that I have a different viewpoint.

Right now I have friends that are worried that their deposits in a bank have no income. When I say, but in the old fashioned world you never could make any money from a deposit and always could make a steady 8% on an industrial shareholding, they look at me with total lack of any understanding. They are still trapped in a FIRE world where the last thing you do is place your savings into industry. In a sense, right now, yes, they are correct as many of the large "GM's" are in dire straights.

But the whole idea of a savings institution, which held the savings and made the long term investments, in turn breaking the saver from the fear of failure, inevitable in investment, by a pooling of everyones savings in one pot; has been lost somewhere decades ago when the banks persuaded the governments to believe that they were the new savings institutions - but did not invest in anything.

Today the entrepreneur gets a smidgen of capital and a barn load of loans. That is not capitalism. The original idea that the capital was the bulwark against any chance of financial failure for the length of time it takes, sometimes as much as a decade or more, for the new business to establish itself, has vanished.

The savings completely disappeared and the reign of the banks began.

This is going to be a very long road to get back to the basics of a savings and capital based institutional system invested into the free enterprise efforts of the nations citizens and a lot of "Bankers" will have every reason to try and stop the whole change in direction in its tracks.

That is why, right now, I consider that the unions are a side issue. The BIG problem is changing the direction of the ship of state and overcoming all the arguments for maintaining things just as they are - in banking.

[grapejelly]

Re: GM stock trade halted, close to bankruptcy

No Problem Grapejelly, and I never once thought of your points as being "overheated" just simply that I have a different viewpoint.

Right now I have friends that are worried that their deposits in a bank have no income. When I say, but in the old fashioned world you never could make any money from a deposit and always could make a steady 8% on an industrial shareholding, they look at me with total lack of any understanding. They are still trapped in a FIRE world where the last thing you do is place your savings into industry. In a sense, right now, yes, they are correct as many of the large "GM's" are in dire straights.

But the whole idea of a savings institution, which held the savings and made the long term investments, in turn breaking the saver from the fear of failure, inevitable in investment, by a pooling of everyones savings in one pot; has been lost somewhere decades ago when the banks persuaded the governments to believe that they were the new savings institutions - but did not invest in anything.

Today the entrepreneur gets a smidgen of capital and a barn load of loans. That is not capitalism. The original idea that the capital was the bulwark against any chance of financial failure for the length of time it takes, sometimes as much as a decade or more, for the new business to establish itself, has vanished.

The savings completely disappeared and the reign of the banks began.

This is going to be a very long road to get back to the basics of a savings and capital based institutional system invested into the free enterprise efforts of the nations citizens and a lot of "Bankers" will have every reason to try and stop the whole change in direction in its tracks.

That is why, right now, I consider that the unions are a side issue. The BIG problem is changing the direction of the ship of state and overcoming all the arguments for maintaining things just as they are - in banking.

Wow, really good points. I agree. People have been snowed by what Rothbard called "the mystery of banking"...and mistake debt for capital. I'm not optimistic that anything will change except upon a fiat currency collapse (which I expect).

[BiscayneSunrise]

Re: GM stock trade halted, close to bankruptcy

Gentlemen,

This is a very interesting discussion. A few comments:

I think GJ is spot on when he discusses the structural problems as core to the problem or differently said it is a problem that speaks to the culture of the various entities.

At the end of a recent, very long international trip, our last leg home was cancelled on our major legacy airline. After a few hour delay, my colleague and I ran over to Southwest to get ourselves home more quickly. As we settled in our seats, exhausted, I remarked to my friend that the great thing about Southwest is that when you see that airplane pull up, you know that you will be leaving on time. No shenanigans from a disgruntled employee trying to make a political statement. The company is also properly resourced to handle contingencies.

Southwest is unionized but their culture is one of hustle and "can do" Or as a friend who is a long time HR guru says: "a company always gets the union they deserve"

You can say the same thing about GM or even various countries. A lot of people criticize Detroit for poor quality but they have come a long way and are making some excellent cars now that capture the publics imagination. The Cadillac CTS, Chrysler 300 and Chevy Malibu come to mind. As GJ points out, though, the structural problems are so significant, the higher quality cars can not overcome those structural problems.

Chris points out the need for more competition. I don't know. hasn't there been plenty of competition against Detroit? Granted, Detroit has lobbied hard for various protectionist laws but the competitive pressure from overseas has remained inexorable.

Now extrapolating that idea of corporate culture and structural capabilities globally, we can see similar trends among national cultures. When I go to China I am deeply impressed by the sense that everyone wants to do a deal and hustle to serve the customer and make some money. Like at Southwest Airlines, I don't see people dragging their feet.

At dynamic entities like China, Toyota, Southwest, it seems to be about serving the customer and basically saying yes to whatever comes up rather than inefficiency, bureaucratic laziness and featherbedding.

[Chris Coles]

Re: GM stock trade halted, close to bankruptcy

Greg, again, you hit it on the nose. When a Toyota created a subsidiary called Lexus, we forgot that to compete, we needed to match the competition. But let me guess, anyone who suggested that, would not have had access to the capital to do it.

We can all see where the GM's have gone astray, they should have been left to go their own way and new investment should have laid down new competitors.