From yesterday’s New York Times, about a Senate hearing on a proposed government bailout of auto makers:
The chief executives of G.M. and Chrysler said their companies were using up their cash at a rate that could leave them close to insolvency without federal aid.
“Without immediate bridge financing support, Chrysler’s liquidity could fall below the level necessary to sustain operations,” said Robert L. Nardelli, the chairman of Chrysler.
His comments were echoed by G.M.’s chairman, Rick Wagoner, who warned that the rippling impact of the auto industry’s cash woes could put three million American jobs at risk.
Heyyyy — I have an idea for a little bit of “liquidity” these companies can use! How about selling the ultra-luxury private jets the CEOs flew on to get to Washington to beg for money?
All three CEOs – Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler – exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone …
While Wagoner testified, his G4 private jet was parked at Dulles airport. It is one of eight luxury jets in the GM fleet that continues to ferry executives around the world despite the company’s dire financial straits …
Wagoner’s private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.
After the hearing, Wagoner declined to answer questions about his travel.
Ford CEO Mulally’s corporate jet is a perk included for both he and his wife as part of his employment contract along with a $28 million salary last year. Mulally actually lives in Seattle, not Detroit. The company jet takes him home and back on weekends.
Mulally made his case Tuesday before the committee saying he’s cut expenses, laid-off workers and closed 17 plants.
“We have also reduced our work force by 51,000 employees in the past three years,” Mulally said.
Yet Ford continues to operate a fleet of eight private jets for its executives. Just Tuesday, one jet was taking Ford brass to Los Angeles, another on a trip to Nebraska, and of course Mulally needed to fly to Washington to testify.
Let’s see… GM has 8 jets at $36 million apiece, plus $20,000 per round trip. That’s easily a $50 million savings per plane over the long term, or $400 million per company.
$1.2 billion total. KA-CHING!
They should hire me. I’ll just ask for a measly 2 percent of the bottom line “savings.” And I’ll fly coach.
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Oh and don’t forget that unions impede a country’s ability to compete in the global market.
(That said I’d take a union job anyday, 100 sick days a year, $75 / per hour to site on you a** all day, and working at a 60% capacity is already too ambitious)
**sit
Here’s an idea, lower the price of the product you sell and make it reliable. I looked at an ‘09 Suburban and to make it the way I need it, it was going to cost over $50k.
As far as the union issue. I’m in the Teamsters and they suck. They take dues money and don’t give much in return. I understand that any company that gets unionized, deserves it, but the unions have a stranglehold and once in-place never leave. Their like cockroaches is a NY apartment complex, you can never get rid of them. DEATH to the Teamsters. BTW, Hoffa is in Section 18, Seat 18-20 in the Meadowlands.
Basically the Auto Giants need to tell the Unions, either they cut costs and pay or they will not have a job in 2 years. If the unions refuse you fire the entire plant and rehire any of the old union workers that want to have a paying job and ALSO slash corporate spending by 50%.Then you fill in the empty slots with people who will work for $20 an hour unlike the $40 an hour they were getting. It beats my salary.
Mitt Romney has the answer. I agree 100%.
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=3
What do you think Mitt is short for? Mittbert? Mitty? Mittwardo? Keith?
Don’t tell my friend who’s hanging on by his fingernails at GM these days. Ah heck, he probably knows already.
Is state regulation part of the union issue as well? I mean, Toyota and Mercedes didn’t build their US plants in right-to-work states because of the gorgeous Kentucky and Alabama scenery.
Thanks for the tip about Hoffa, Swede0319. It did seem like my seat was slanted at that Jets game a few weeks ago.
It isn’t quite as clear cut as the articles sound.
I’m a Chrysler family, so I’ll start there:
Chrysler Executives travel on Pentastar Aviation flights. Pentastar was sold off as part of the Daimler divorce from Chrysler, back in 2001/2002. Chrysler no longer owns a fleet.
Who’d they sell it to? Edsel Ford II. The Ford family, not Ford Motor Corp. Pentastar is now independant of the automotives.
I’m not sure if Ford Executives fly Pentastar, although that’s the inclination I get from the article. If they do, it’s chartered, just like Chrysler. I’d be suprised if Fordies fly Pentastar given their close proximity to Detroit Metro Airport (Pentastar doesn’t land there). Detroit Metro Airport is located in Romulus, not Detroit, maybe 15 minutes from Dearborn where Ford Headquarters is located.
Chrysler isn’t located in Detroit, they’re 1.5ish hours away from Metro Airport; therefore Chrysler execs still charter Pentastar out of Waterford, MI (20 min from headquarters).
I have no idea about GM, not sure if they own a fleet/airline. They’re the only auto corp. headquartered in Detroit proper which makes me suspect they fly out of C.A.Young Airport, 10 minutes from headquarters.
Now back to Pentastar… My husband flew it several times during the Daimler years. Main service was Michigan to Germany with a refuel in Iceland. He’s only an engineer so he wasn’t taking a CEO luxury flight. They plane had desks w/ jacks set up and employees worked during the flight. Inflight food was VERY, VERY nice but they listened to briefs during the meal.
I’m going out on a line and guessing that corporate planes aren’t necessarily a money loosing perk for corporate hot shots. Figure in the time spent going through airport lines, customs, delayed or late flights, plus the inability to perform full work function while onboard may make it a money saver in the long run. And remember, executives don’t fly by themselves. My husband says that he’s never seen Bob Nardelli without 5 assistants fluttering around him; so you’ve got to include staff tickets and their inability to work into the total flight cost as well.
My husband has worked projects for Chrysler VPs, both German and American. The one constant he notes is that they seem to have 24 hour jobs, juggling a couple hundred things at once. I think it’s safe to assume that CEO flights aren’t all champagne, caviar and hot tub bikini girls.
As for living in Seattle and working in Detroit? That IS inexcuseable.
Oversneer – you obviously do not understand that these company execs NEED private planes and high salaries because it helps them build better cars.
My wife is in a union, their contract is up this year and one of the items they are asking for is a “no pressure work environment”
MC Mom wrote: “Is state regulation part of the union issue as well? I mean, Toyota and Mercedes didn’t build their US plants in right-to-work states because of the gorgeous Kentucky and Alabama scenery.”
I’m not sure what you mean by regulation but I can say that taxation is a big part of the draw to southern states. In Michigan, we have the world’s most fugged-up business tax law and it’s constantly up for this improvement or that re-wording. As a result the best we can do when we pitch to companies like Toyota, Maytag or Electolux is say:
Heck, everyone pays taxes and we’re not really sure what your liability will be from year to year. But don’t worry, we’ll cut you a big tax break, we promise .
Not exactly enticing, eh?
According to an article on Boortz.com today (http://boortz.com/nealz_nuze/2008/11/is-gm-buying-ads.html), GM is putting up ads on AOL asking people to support the bailout.
They’ve also put up a three-minute video on YouTube (put up by GM Blogs, their home for corporate blogs).
If they’re that broke, how can they afford to buy the ad space and film the video?
What the hell is a “no pressure work environment”?
A no work environment? A mani-pedi-shiatsu environment? Or do they just play the sounds of alpine spring rain over the PA all day?
Wow.
Unions definitely contribute to plants closing down. My dad worked for a steel mill in cleveland, and I worked there while in college. I made 10 grand one summer, 12 grand another summer! And what did I do most days? I would get a job to sweep out a storage room. I was cautioned by my co-workers not to work too fast and “kill the job” because then the bosses would just give me more to do. One summer, the mill brought in some outside contractors for some job, so we all got to work 10 hour days to make they money that was being paid to the contractors. Co-workers regularly napped while on duty, and a common day was comprised of: hang out for 30 to 45 minutes to get an assignment, get transported to assignment, work for a bit, coffee break, work for a bit, lunch, work for a bit, then get transported back to shower and clock out. Yeah…. the mill went bankrupt. It has reopened, bought by a new company without a union. I think unions had their place before labor laws and back when workers were treated like crap, but those days are gone. Now, unions just ensure that lazy workers can’t get fired, and dudes (and dudettes!) who have seniority get paid a ton of money to do basically nothing and they have no incentive to ever leave. I saw a documentary once on the glory days in motown when autoworkers made bank, and even they admit it’s their own fault that that way of life is now gone.
@Minnow – I know, I about fell over when I read it. If there was away I could post it up I would
I totally agree that the unions once served a vital purpose. But the days when a boss could make 6 year olds lick the plant floor are gone. Nowadays they’re fighting for mink robes.
My absolute favorite UAW story:
At Chrysler headquarters, there are no clocks.
As a cost cutting measure, management went around a few Saturdays ago, before the end of daylight savings changeover and removed every single clock.
Otherwise they’d have been responsible for paying union workers DOUBLE TIME to reset clocks on a Sunday.
Somewhere in the world’s largest building, there’s a top secret room. It’s chock full up to the ceiling with clocks, all one hour off.
What, they couldn’t change them Monday morning? Or would that make too much sense.
@ manda — So right! I live not far from Springfield, OH, a town all but destroyed by unions that methodically and short-sightedly went around shutting down all the factories in the town. It used to be a prosperous, nice place, so I’ve been told, but now it’s a scary, decaying place with lousy employment. Unions *had* a place, but now they’re as drunk with power as the bosses they were created to fight, and they’re driving all the jobs away.
My thought too Minnow – just what is a ‘no pressure’ work environment? I googled it and got no pressure singles dinners, no place to hide,no pressure to look for work.
I have seen two full page ads in the newspaper for the automakers as well. How can they spend big money on advertising to plead their case when they could spend the time,effort and money on bailing themselves out?
Habana~ Same here. If you’re ever up in Michigan (and feeling brave) a drive through Detroit, Pontiac, or Flint is well worth the trip if you’re into beautiful architecture. Tons of splendid examples of Art Deco buildings and several cathedral style churches with rose windows, all built during years of automotive prosperity. Sadly, many of these gems are falling down or surrounded by dumps. The good years have passed these towns by.
The automotive companies are largely responsible for the creation of the middle class. They did it with the help of the unions, fighting for job security, fare wages, safe enviroments, decent benefits, and fostering pride in their productive value.
Sadly, something went terribly wrong.
Well, I’m only a corporate wife who reads and listens… but my take on the recent advert expenditures by the Big 3 is thus:
The “running out of cash” claim deals with covering employee paychecks, benefit coverage, and pension obligations which they pay out monthly. They also have a large chunk of money owed to the UAW who has promised to take over and manage pension obligations for their workers after the year 2010.
In a normal credit market, any obligatory shortfalls would be covered by a bank loan. Large corporations routinely take out short term loans to cover these situations in lean months and repay them in flush ones. Except the credit market is currently frozen and automotive stock values are plunging which lowers their credit worthiness.
Toyota and Honda have already borrowed from the Japanese government in the past 2 weeks. The Japanese government frequently offers low interest (or 0% interest) loans to their businesses. I think Nissan has a source of loan cash; yesterday they bought up a chunk of their own stock from Ford. Renault has a sum from the French government, Deutche Bank and the German gov have extended credit to Daimler (MercedesBenz).
So far, the US has the only government playing coy with their automotives.
The rise in gas prices this summer dealt a blow to American auto companies who rely on large vehicle sales for their profits. This is because under US law they are required to produce a certain percentage of small vehicles in ratio to larger, less efficient ones. Problem is, at the rate they pay UAW assembly, they can’t charge enough on small vehicles to make any profit. Most small cars loose about $400 per vehicle, due to the cost of employee benefits. Trucks and SUVs net several thousand to the positive.
So when you hear that “the Big 3 only make profits on trucks and SUV’s” it’s not because they’re stupid, it’s because they’re governmentally locked into producing small cars at a loss. This is why you see fleet sales (auto rental companies, municipal vehicles, and corporate cars) are almost always cheap-o small cars; because the Big 3 has to dump these government mandated small cars somewhere. It’s also why you see them producing the super crappy tiny vehicles in Mexico, no assembly cost loss there.
Foreign corps are not required to produce to the small/large ratio. They’re exempt because the law only covers American owned companies. In essence, we handcuff American car producers and fit them with cement shoes, then laugh at them for not being able to swim with Toyota. It isn’t that Toyota is Michael Phelpps (note they’ve borrowed money recently) but because Toyota isn’t dragging an anchor across the pool.
Anyway, people stopped purchasing the profitable large vehicles, then with the economic freeze, people stopped buying any cars at all. No sales equals no income equals no money to meet monthly obligations. Frozen credit equals no coverage bank loans.
This is what they want the bridge-loan to cover.
The ads you see are most likely running in ad space, purchased in bulk, earlier in the year. That’s my guess. That and the fact that it comes out of the advertizing budget rather than the montly obligation budget. My husband’s lab is on a travel freeze but the supply budget and outside lab work funds aren’t frozen. Again, same idea, different budgetary systems.
Minnow – you know when you throw logic into a conversation you take the fun out of it.
I bought a foreign model car for three reasons: it is affordable, it is reliable and it gets good gas mileage. If the big three went back to that, I would buy American in a heartbeat.
Sorry D, I thought my logic was sexy.
I’ll go back to the skimpy panties and red toenails before I post again.
How much time is lost by the GM representatives when they have to check in for a flight two hours early, or when the GM representatives are not to talk about business during the flight due to insider trading concerns?
The question is what is lost? When 12 people fly on a private jet it costs about $20,000. When 12 fly commercially to DC it costs about $12,000. Is a $8,000 savings worth the time lost?
Isn’t it really worth it in the long run?
http://nomedals.blogspot.com
BTW bigmama, before you purchase your next car, give the Big 3 a look-see.
Yes, they cranked out some real trash in the 80’s and frankly, some lines are still rubbish.
But there is good stuff out there.
As the B3 decrease overhead problems they’ll firm up more solid supplier relationships. They’ve learned the hard way that the cheapest parts manufacturer isn’t always the best way to cut costs. Most reliability problems stem from improperly machined or treated parts, not design or assembly problems. Unfortunately, the cheapest supplier from India who employs 3 guys in loin cloths isn’t terribly motivated to crank out quality parts and he also isn’t held responsible when there’s a product recall. The car company takes the blame.
The B3 are in the process of getting union costs under control; then they’ll have the funds to invest in better design and quality suppliers. In the next decade you’ll see American cars topping the JDPowers list more and more.
Oh-oh. Slipping into logic again. Darn. Okay, pretend I gave that mini rant wearing a dress of grass clippings, using the accent I picked up watching BBC. Much better, no?
Minnow, thanks for answering my question. I appreciate the logic and depth of your posts, as unsexy as they are. Now feel free to carry on with the grass-dress and the faux-Brit accent.
Well, as part of a GM family and a former employee, I know to look past the resplendent lives that CEOs lead, which I feel most CEOs across the board live, because they just don’t represent the millions of middle class people who depend on the Big Three in some way or another.
And GM isn’t all Hummers and Suburbans, they also make things like the Chevy Aveo and Coblat, the Saturn line, the plug-in Chevy Volt, and a ton of products that are FlexFuel and/or hybrids. I feel like they sincerely are trying to change, but to take a lesson from physics 101, for any huge object trying to switch directions, there’s a lot of inertia to overcome.
So, I’m not trying to convert anyone or even think that the bailout is the best option, I just think that we need to check our prejudices of the evil Big Three at the door and try to do what’s best.
I am still waiting for the next Minnow post…
This one?