Wednesday, December 3, 2008

Surprise! GM Wants Even More Money!

The Detroit Three (formerly the Big Three) groveled in front of Congress last month, asking for $25 billion to keep the doors open. Congress rebuffed them and sent them home with instructions to return with "a plan." What do they come up with? A request that now clocks in at $34 billion. It has grown by a whopping 37% in just a matter of a couple of weeks! GM says that they need at least $4 billion immediately, before the end of 2008. It looks like they are burning through cash at a rate of around $4 billion a month now, obviously accelerating since their last quarterly report. Just last month alone, GM's auto sales were down 41%.

I'd like to relate a story that was told to GR Pundit today by someone who is a project manager for a large computer manufacturing company.

This person, we'll call him Ken, was doing a project at one of the big three automakers recently. We'll call this automaker DA (for Detroit Automaker). Ken explained how he was attempting to help DA with its PC deployment process. Here's how it worked: The computers would arrive. FedEx is not a unionized company, so the FedEx employees were not allowed to unload the computers. One unionized employee would move the PCs from the dock to the staging area. Another union employee would move them from the staging area to the storage area. Another union employee would move the computer from the storage area to the actual workstation of the person to use the PC. Each step would require a change order and a $50 charge from the union, plus the labor cost of each union employee. No one from Ken's company was allowed to move the computers themselves, only the unionized employees could do so. Ken said the entire project was such a nightmare that they basically gave up trying to improve DA's processes. Impossible due to UAW work rules.

This is why the UAW is desperate to prevent bankruptcy. It would ruin their "work rules" scam.

Perhaps this is one reason why 61% of Americans oppose the Detroit Three bailout.


  1. I don't understand why the liberal illuminati is not opposing this plan when it's obvious the companies need to go into bankruptcy and change the unions, so they don't exist on the silliness you just mentioned.

  2. I'd imagine about the same amount of people would approve of taking that $25 billion in regulation related cash they're already getting and repurposing it as a bridge loan.

    Actually MORE fiscally responsible that way, and eases onerous federal regs.

    Alas, Congressional Democrats won't even bring it up for a vote.


  3. It's not fair to heap the blame for the entire auto industry crisis on the backs of the unions; especially given how many concessions they've made throughout the years (including the most recent bout).

    It's further undone by the fact that non-union auto plants will likely soon be affected by their labor costs:

    What it seems to come down to is that corporations don't want to pay a living wage; they want the quality of life in the US to sink to the level of that in the developing nations whose wages they're pitting the wages of US citizens against.

    Assuming the anecdote is entirely accurate, my understanding is that work rules are negotiated on a local basis - so those may not be the same across the board at every "DA" location.

    Though the process seems overly-complicated, I can imagine how it would be important to do a good job to track the delivery and disbursement of expensive resources like PCs throughout a large organization like an auto manufacturer.

    Flipping things around, by that same standard FedEx has some pretty cumbersome rules it imposes on its contractors (with respect to reimbursement for all of the costs associated with working for FedEx and practices its workers must observe). There are a whole lot of allegation and lawsuits following FedEx around (for violating labor and transportation laws).

    The way I see it, the money for Detroit is peanuts compared to what is being allocated for Wall Street in addition to the $700 billion bailout (which is receiving far less oversight):

    Roughly the same percentage of the population opposed the Wall Street Bailout too:

    I find it hypocritical that we let nearly a trillion dollars fly out the door to Wall Street but we give the third degree to the domestic auto industry.

  4. I agree that it's not the sole fault of the unions, but this post simply exemplifies the insanity of how unions tend to "make work" rather than add any value. This ultimately comes to bite companies and unions in the rear end. Management at GM, Chrysler, and Ford are certainly to blame as well. Ford seems to have made the best decisions of the three, as they admitted they really don't *need* the bailout money, they would just like to have it as a backup.

    I think it's a bit of a red herring to say "hey, they got a bailout too!" as a justification for more bailouts. See the latest post on this blog about pigs at the government trough. Once you open the floodgates, you create the moral hazard of dropping money out of a helicopter, as our Federal Reserve chairman so famously advocated. This just leads to a bigger future mess.

    The "bailouts" have already reached over $8 trillion. This simply cannot be sustained.

  5. What if aniyhtng can be done to pull Michigan out of the gloom? It is a little similar here in Western NY, though not as bad. Are the any other industries that can possible make up for some of the auto industry losses?