naked capitalism

Anonymous says:

Two family members dependent on autos already laid off/out of work; neither live in Michigan…

One sold advertising to local radio stations; car dealerships were freezing up months ago.

The other sold at a dealership (Toyota) in California. Couldn’t make the “monthly minimum” and the owners were ready to throw in the towel.. back in July. (He moved on to an RV dealership… that filed for bankruptcy, two months after he started.)

The “lost decade” is upon us – Congress won’t let them fail, but there is no one buying.

Which begs the real question: what will advertising sales people, auto sales people and financial services do in the “coming infrastructure boom”? For that matter, if you idle 15,000 auto workers (X 3?), are those skills really equivalent to the roads/schools construction crews that are said to be “in assembly” now?

R in NY

Anonymous says:

34 Billion is just the tip of the iceberg, credit is going to be tight through 2010 and that means few consumers loans, especially car loans. They’ll be begging for billions more while firing more workers in 2009.

What bothers me is that while people talk about the difference between banks being saved and blue collar jobs in the auto industry, the reality is neither are actually different in this case. Tens of thousands of white collar workers have been laid off despite the bailouts and the ones at the top of these banks refuse to trim their ranks.

Companies can remain top heavy ONLY because of the government’s handouts. The SAME is happening with GM and Chrysler, they will fire thousands of factory workers, and none of the top bean counters or executives that got the companies into this mess. The idea of restructuring is a joke. If they really wanted to restructure they’d fire the guys at the top and hand over control of the company to the engineers who know they’ve been forced to cut corners and design crap products. Maybe letting them do their jobs for once without having to argue over using cheap substitute parts with bean counters will reverse the image these companies have gotten.

Instead we’ve chosen to build a massive pyramid with a small foundation, and are propping it up with paper.

yagij says:

More anecdotal logs to put on the discussion fire by using my father as an example.

My father has worked in car dealerships for almost 30 years. His kind are definitely a/the canary in the coal mine for the rest of myfamily. He is at the front lines of where we currently are and where we are going. He has seen his after-tax take-home go down 70% from Sept. 08 -> Oct. 08. On what was left, it has gone down another 30% from Oct. 08 -> Nov. 08. Putting some simple numbers to it: Sept. 08: $10k -to- Nov. 08 of $2k. Turning on a dime to the tune of 8k USD/month over the course of 60 days meant a personal budgetary cut of 33% as of Nov. 1, and I wouldn't be surprised if he turned that up to 50-65% by Jan. 1 if possible.

As for the professional side, it is absolute carnage at his dealership, and they were one of the top selling dealerships of their brand in the entire state. They have gone from moving 500 units total as of August 2008 to moving 150 units total as of November 2008. Out of those numbers, 2/3 are new units. Out of the new cars being sold, they are lucky to make $11/unit before financing & insurance. Between the car maker trying to adjust via manufacturing and the dealership trying to adjust via retail, it is a train wreck of epic proportions. They are sitting on 750 new units across 3 large car lots, and the manufacturer is moving another 250 units their way this month. There is no where to put the new inventory, no way to finance the sales of the existing inventory, and basically no way to avoid the wreck unless you want to jump off of a runaway train going over a deep canyon (e.g. No jobs to replace the current job).

From what I can tell, his management team is completely out of their league. There are so many forces against them in this unfolding script that I'm not sure if any dealership will make it in his market. There is little/no demand for the product and little/no financing for what demand that exists.

There is so much more to this story, but I may be the next generation's job to chronicle it for future readers.

Anonymous says:

Too bad those real jobs aren’t there right now. There are literally millions of jobs in America that can be made redundant with some creative thinking, firms that specialize in trimming companies will be doing as well as collection and repo agencies.

eh says:

You ain’t seen nothin’ yet. Governments who think they can stoke demand with all of these stimulus packages etc are just wasting money. And in the case of the US, it’s the money of future generations of taxpayers. Such is the lack of moral calculus in the US today.

Jojo says:

@spare some change? at 2:46 AM said “Depending on the industry, salespeople are either engineers, or blue collar workers, who don’t want to get their hands dirty.

I think a surprisingly high percentage of salespeople under the age of 40 can transition back to the real jobs they were doing before sales.”

Having worked in technology sales before being laid off in the beginning of the year, let me say that sales jobs ARE real jobs! Don’t disparage sales people. You can have the best engineers, build the best product with the best features but it is of little value if you don’t know how to sell it or don’t have someone to sell it to. Without sales, there is no revenue.

Yes, there are poor salespeople as well as good salespeople. There are also poorly managed revolving door companies where salespeople are recycled every 6 months or so. Sales is a hard business. But as the old saying goes, “nothing happens until the sale is made”.

Tying into the auto industry, one of the problems auto manufacturer’s have always had in the USA is that dealerships are independent of the factory. The manufacturer has little real control over how products are sold, how dealerships are managed, the advertising message or how sales are made. I recall that Porsche tried to change this model sometime back (10 -15 years?) by making dealerships run by the manufacturer but were stymied by various state laws that made it difficult or impossible for the manufacturer to own dealerships, so they gave up on the idea.

Perhaps the time is ripe to reconsider this independent dealership model? This would require law changes at the state level or an overriding law Federal law. I think that an integrated business model from design to manufacturing to sales would be more effective, more efficient and would save both the consumer and the manufacturer $$$.

charlie says:

Chrysler just fired 5000 salaried workers. Everyone is going to suffer.

The issue with the auto industry is demand. We’ve moved from 16 million to 10 million sales a year. High profit vehicles have disappeared. It could get worse — to as low as 6 million. You only need a new car if you wreck the old one – and there are a lot of spare cars in the US. New drivers can wait a bit for a car: you don’t NEED one until you start working.

A 6 million US vehicle sales a year, Honda and Toyota are going to be bloodied as well. They are too exposed to the US market. They may be better prepared, but Shelby and his republican buddies are kidding themselves if think the Japs won’t shut down their US plants. I think Toyota and Honda have three months of unsold inventory — and while that is better than detroit, those cars are not getting sold in this credit environment.

Anonymous says:

A general question. It is often stated that during the previous depression, the government work programs did not get us out the depression. Rather, it was WWII. It seems to me this was due to the USG adopting deficit spending and using inflation as a tool to stimulate ecomonic activity. Why does the President elect think that work projects will do the trick this time ? Or are the work projects just designed to prevent a civil breakdown while they look for the next way out?

Anonymous says:

What a nightmare.

Assume the bailout gets passed (today, tomorrow, Jan 21, whenever), what happens to the money?

Do they set loan it to buyers (that don’t exist)?

Do they pay factory workers to do nothing?

Do they give employees a bunch of the money force them to buy a new car they’ve made?

Do they prop up dealerships…for them to sit around / twiddle thumbs / tell dirty jokes?

Anonymous says:

“
Because the industry’s employees are among the best-paid in the U.S., the elimination of one auto worker amounts to erasing 1.7 jobs because of the loss of purchasing power, [economist Robert] Scott said”

What wonderful logic. Since UAW makes 1.7 times average worker laying them off is worse then laying off an average paid worker.
Then definitely we should keep high prices CEOs.

Unless the UAW pay is scaled down to Toyota/Honda scale big3 can’t compete.
Giving into UAW demands will come back to haunt Obama like Clinton and gays in the military. Big mistake

M.G. says:

I wish Professor Krugman did say “disappear”, maybe he really thought it. It makes sense to restructure the economy towards less car less oil. Let’s invest in something else. I really wish the car industry would disappear, around Europe as well. Think for a moment how it would be without private cars. If you cannot imagine a world without private cars just imagine one with small and fuel efficient ones, trains, public transport, car-sharing, car renting, etc.

bg says:

Now that we are going to nationalize the car companies, we have lots of “shovel ready” makework to boost employment… make unwanted cars and dump them into the market.

How do you think Japan will like that?