Today’s Qs for O’s WH – 6/1/2009

Maybe they just shouldn’t be a car company.
(Does Gibbs ever answer a question?)

One little problem with the Volt. According to Chevrolet, it will only go 40 miles on a charge. That’s simply not far enough for the vast majority of us. To date I have not seen a hybrid that comes close to matching what Honda and Toyota produces.
The other problem is Obama’s press conference today in which he announced that a lot of people will lose their jobs and pensions (read lost taxes and spending), those who get to keep their jobs will accept cuts in pay and benefits (read lost taxes and spending), and retirees are going to lose their benefits as well (read lost taxes, spending, and greater dependence on government help). And then there’s the not so small fact that he wasn’t demanding that Wall Street and the banks take similar losses and punishments. Indeed, still he can’t shovel our tax money to them fast enough.
Obama’s a hypocrite, and I’m saying “no sale”.

Couldn’t have a better group to “re-invent the wheel”…

Shouldn’t some outfit be launching a reality show/documentary on the GM restructure? At least we could maximize the entertainment value on this.

How are they going to know who to fire and when?

tjp-
Mara Liasson asked a very similar question. She asked if the new GM wanted to build a car that would not be fuel efficient (a stated goal of the administration) but would be profitable, would the government get involved in that choice.
Gibbs, IIRC, basically said that was a preposterous scenario.
She then asked if there was an opportunity for the government to sell its share of GM, but the new owners would do things like shut plants down or make different cars, would they sell to recoup the taxpayers’ money. Again, Gibbs said this was a preposterous scenario because if GM was worth buying it would be really successful and no new owner would want to change it.
It was distressing.

Good questions Jake. It’s funny to see Gibbs basically say the government is making business decisions part of the restructuring.
“GIBBS: Well, I think part of — part of the restructuring, ultimately, is that the auto task force forced some decisions that I think, in many ways, some of these companies have been putting off for years. ”
My understanding is that part of the reason, other reasons like demand, that GM and Ford marketed a lot of SUVs and luxury cars was that they actually take a small loss on many “economy” vehicles due to high labor costs and low margins.
Another good follow up question I think would be something like the following. I could be misinformed however.
“Given the fact the UAW has made few concessions and the labor cost will still be high, how will GM and Chrysler be able to shift their manufacturing focus to smaller and fuel efficient vehicles while still making a profit?”
Granted you can make a smaller profit by increasing volume but since many people already are dedicated to their car brands market penetration can be difficult.
I see it as the Obama administration due to tightly coupled labor costs is refusing to fix the core of the problems and GM will just slowly build up debt again.
Not to mention people like me who will not buy a new or used GM or Chrysler. I won’t even rent a Chrysler or GM. I don’t believe in government ownership but what pushed me over the edge is the obvious political motivation and re-engineering of policy as a result.

tjp: Team Obama is comprised of policy-wonk ideologues who are consumed with attaining/maintaining power and are detached from reality
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Have you checked out Brian Deese? I have no idea what he is doing in the position he’s in. I’d love Jake to ask more about that.

MayBee – I blew right past Brian Deese. I figured he was an academic policy-wonk, but I had no idea he is an inexperienced one at that. Unbelievable. From the NYT (I held my nose as I read the article):
(NYT) “It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.. But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had NEVER SET FOOT in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.”
(tjp) Only in Obama’s America could something so improbable happen! What a country!
(NYT) “Mr. Deese’s role is unusual for someone who is neither a formally trained economist nor a business school graduate, and who never spent much time flipping through the endless studies about the future of the American and Japanese auto industries.”
(tjp) Yes, very unusual under most circumstances. But not in the Obama administration.
(NYT) “In fact, from before Inauguration Day, few in Mr. Obama’s circle saw any other choice. Every time Mr. Deese ran the numbers on G.M. and Chrysler, he came back with the now-obvious conclusion that neither was a viable business, and that their plans to revive themselves did not address the erosion of their revenues. But it took the support of Mr. Rattner and Ron Bloom, senior advisers to the task force charged with restructuring the automobile industry, to help turn Mr. Deese’s positions into policy.”
(tjp) “now obvious”? LOL! Anyone who has a fundamental grasp of economics and who halfway pays attention to the U.S. auto industry has known for years that neither Chrysler nor GM were long-term viable businesses.
(NYT) “Mr. Deese’s route to the auto table at the White House was anything but a straight line. He is the son of a political science professor at Boston College (his father) and an engineer who works in renewable energy (his mother). He grew up in the Boston suburb of Belmont and attended Middlebury College in Vermont. He went to Washington to work on aid issues and was quickly hired by Nancy Birdsall, a widely respected authority on the effectiveness of international aid and the founder of the Center for Global Development.”
(tjp) Great…
Do any of you Obama supporters really believe that Govt. Motors with CEO Obama at the helm can actually become successful without massive U.S. govt. subsidies, tariffs prohibiting foreign competition, policy which favors GM (and Chrysler), and/or a combination of all of the above?

MayBee:”And really, Brian Deese? What is that about?”
A staffer dedicated full time to research to collect information and policy facts for evaluation and action by the decision makers? He’s the guy without a vested interest who checks the lobbyist data for misrepresentations and holes, a fact checker and researcher for policy.
Lobbyists can offer valuable services to our government – free research and analysis – but they are obviously biased and need an inside check to get the full accurate picture. Hence Mr Deese’s particular Special Assistant position (a third level staffer role).

“the Hummer was an excellent piece of hardware. And while it belonged on the battlefield and a handful of ranches not soccer field parking lots”
Who are you (or are any of us) to decide who drive Hummers or any other vehicle? Should the government dictate to the masses what we should drive? There are other countries who have done this (unsucessfully): E. Germany (think Trabant), Romania (think Decia), and the U.S.S.R. (various models).
What makes the U.S. economy the most vibrant in the degree of innovation applied to meet consumers desires. When the government steps in and chooses for consumers, innovation fades.

tjp612:”But that, in short, is the job description for Brian Deese,”
No, actually, it is not. You are being suckered by the NYT taking artistic license. His job description is special assistant to the president, a third level staffer role.
The story is that he is exceptionally good at it – producing recommendations with such solid and accurate factual reasoning and supporting data, that they closely match the final decisions. Comparable to a brand new lawyer winning their first dozen tough cases against far more experienced teams.

“Thanks for this info. Team Obama is comprised of policy-wonk ideologues who are consumed with attaining/maintaining power and are detached from reality.”
Ahh, the glorious rise of the academic socialists.

tjp612:”Who are you (or are any of us) to decide who drive Hummers or any other vehicle? Should the government dictate to the masses what we should drive?”
The reliance on imported oil is a matter of national security that has enormous costs – we could let the Middle East tear itself apart just like the rest of Africa if we didn’t rely on their oil supply. Iran would be buying AK-47′s instead of uranium if they didn’t have the oil payroll.
Larger vehicles also cause disproportionate wear on roads, and result in more vehicular fatalities (both when they hit normal sized vehicles and due to their much higher incident of single vehicle fatality accidents).
Welcome to society. Government forces the costs of externalities on those who incur them – it’s kinda it’s crowning achievement.

“we could let the Middle East tear itself apart just like the rest of Africa if we didn’t rely on their oil supply. Iran would be buying AK-47′s instead of uranium if they didn’t have the oil payroll.”
(speechless)

Cyros:”Yep exactly. That’s the scariest thing with the bailout. To make the unions happy Obama’s team made very few salary and benefit concessions.”
Labor costs are now on par with foreign makers. The UAW ownership stake freed them of a great deal of the retiree burden forever. Your definition of “very few” is incredibly odd.
Posted by: jhw539
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No your refusal to face the facts is incredibly odd. Tip already beat me to the reality of it.
So according to your logic in a following post supporting tin cans on wheels I expect you’ll be buying a “smart” car.

tjp612:” find it disturbing that a law school student (with ZERO business and automotive experience) is involved in doing financial analysis and/or is is providing ANY input into the future of GM. ”
That’s your own problem. I suppose you want a 10 year veteran fetching coffee too. I have no problem who collects the facts, as long as they are accurate. Nor who does the first pass of the analysis, as long as it is checked and verified.
I’m an engineer; inexperienced staff regularly put together very extensive analysis that requires weeks of work and data collection. It’s the person who runs the final numbers and checks who matters. If I ever find no major errors or poor assumptions, that’s a big deal and a person to watch for quick promotion in the coming years.

“That’s your own problem. I suppose you want a 10 year veteran fetching coffee too. I have no problem who collects the facts, as long as they are accurate. Nor who does the first pass of the analysis, as long as it is checked and verified.”
So, back to my question:
Does this imply that you actually support that the Obama Auto Task Force is staffed by NO ONE who has any significant automotive experience?

That Obama’s Auto team may contain no auto execs may be a blessing – we’ve seen what the auto execs and their teams of experts have done with GM and Chrysler. Haven’t we?
It’s increasingly apparent that the Obama administration simply can do NOTHING right for some people posting here with their own personal political agenda. The object is to simply smear the President.

And not once in that excellent interchange did the fact of the UAW’s stranglehold and burden on GM come up. GM, without the burden of the UAW, can build cars and trucks that people want. But when you slap a $2500 union surcharge on each vehicle it gets hard to compete. There’s been far too much blame coming from the now defacto CEO of GM and directed at GM management, while his buddy Gettelfinger shares none of the culpability for GM’s failure.
In general, the thing that I would like to see is an exploration of the conflict of interest in these new government-private sector arrangements that Obama is forging. The UAW payback would be a good place to start.

If I ever find no major errors or poor assumptions
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But how do you come to the conclusion that Dees has made no poor assumptions? We are (deficit) spending $50 billion plus to become majority shareholders in an auto company that’s had trouble being profitable, while there are excellent competitors in the marketplace.

Danita: “Your agenda is showing again.”
Ok, Danita, you got me. I admit it. I do have a secret agenda to prevent the newest wave of european marxists from taking over every major industry in the United States.

tjp you are very confused if you really think President Obama or his team are going to run the day to day operations of the auto companies or their production facilities.
You’ve read the background information on this haven’t you?

tjp612: “Have you ever been in an automotive assembly plant? Within these plant are some of the most highly-coordinated processes & planning as found in any manufacturing facility.”
Oh, no tjp612, you have it all wrong! All the operations (along with all the other business fuctions with all their details) can be easily managed through “producing recommendations with such solid and accurate factual reasoning and supporting data (jhw539).”

Ok, Danita, how about if I call you an academic socialist, is that a soft enough term to let you in through the front door, or would you object to that?

“tjp – quit making stuff up”
I’m curious – What have I “made up”?

Oh gee, I must have had you pegged wrong, Danita. You must of course believe that ownership and profit motivate production, and that we are all better off for that, and not, like I thought you believed, that everyone would be better off if the government owned and ran everything?

MarkLevanworth:”All the operations (along with all the other business fuctions with all their details) can be easily managed through “producing recommendations with such solid and accurate factual reasoning and supporting data (jhw539).”"
That is classic rightwinger misquoting. You may as well cut words out of a newspaper to create your own Obama quote.
Did you seriously misunderstand the entire subject of that original post? Sad.

Posted by: danita | Jun 1, 2009 7:41:48 PM
Unintelligible.

MayBee:”But how do you come to the conclusion that Dees has made no poor assumptions?”
I did not. The two hire pay grades above him who analyzed and debated his work – which included many people with executive level experience in the business in question – did.
“Brian grasps both the economics and the politics about as quickly as I’ve seen anyone do this,” said Lawrence H. Summers, the head of the National Economic Council, who is not known for being patient whenever he believes an analysis is subpar.
tjp612:”Does this imply that you actually support that the Obama Auto Task Force is staffed by NO ONE who has any significant automotive experience? ”
Since the Auto Task Force is working to support the current executive team at GM and the experienced folks in Treasury, sure. The recovery plan was hardly created by him, as the kid-makes-good puff piece does mention, “far higher-profile members of the administration are making the big decisions about Detroit.”
But feel free to keep trying to set up a ski resort on that molehill.

Okay tjp and Mark – my apologies, I totally missed the fact you’re trolling. Sorry for taking up your time.
Both of you seem to have missed the fact we’ve just had a major collapse of banks and the auto corporations in this country.
Try reading up on this stuff.
Later.

MarkLeaveanworth:” It seemed to be your view that a person with no experience in an industry could make sound decisions for that industry. If I misunderstood, then either you believe that suffient experience can be gained on the spot, or that it doesn’t take experience to gain the knowledge of what’s behind the numbers.”
That was not my view. My view was it does not matter who produces the research if that research is then checked, expanded upon and debated by experts (which in this case included the automaker management).
AND BRIAN DEESE MADE NO DECISIONS. He is a third level staffer who produced excellent research briefs and impressed the experts – people with the experience you demand – by his clearly out performing his experience level.

“An unspoken subtext is also the value of that industrial base for emergency wartime production if required. The same reason Boeing may be allowed to suffer, but never die, or the crass rationale behind federal subsidized school lunches (started after a particularly bad rate of army recruit rejection due to defects easily avoided by proper childhood nutrition). ”
You’re on more solid grounds with this argument, but I would counter this:
“My view was it does not matter who produces the research if that research is then checked, expanded upon and debated by experts (which in this case included the automaker management). ”
With the fact that many corporations have outgrown the need for competition, becoming floundering enterprises in research, fact checking, debate and discussion, expansion of debate, more research, more experts, etc etc. The kind of experience we would need to make sound decisions, or even to provide sound training, wouldn’t be found in this industry, except overseas somewhere. From a different view, if the industrial base is being secured as a matter of national security, why all the foreign participants?

jhw539- I don’t read Dilbert. You seem to not know that many large corporations have become more collusive with academia and government over the decades, rather than competetive with eachother? Also, you promote the idea that the GM move was to preserve a national security interest in the industrial base? Finally, you say that more research, more experts, more ‘fact-based’ analysis, etc,etc will do what? Restore GM to profitability, or secure some national security interest?

MarkLeavanworth:”you say that more research, more experts, more ‘fact-based’ analysis, etc,etc will do what?”
Allow for an accurate valuation of income streams and cost obligations – business models are developed with inputs from experts (for example, the puff piece mentions Mr Deese’s meetings with Rick Wagoner as part of the research he collected).
The government can’t run GM, it can’t design cars. It can say if you sell a million units at a certain cost, as the most optimistic CEO insists is reasonable – but that doesn’t earn enough to cover the fixed costs and incurred liabilities, you’re screwed. Doesn’t matter your field.
(Boeing went through this a decade ago and found a couple of their lines of planes were being sold *below cost* – no one had every figured out all the costs and liabilities incurred on a per plane and per model basis during their hot war with Airbus over sales volume. How much it costs per unit to build something is a very hard accounting question.)

good questions

MarkLeavenworth:”You simply have no idea how many parameters there are when terms like ‘fixed costs’ and ‘incurred liabilities’ are taken out of a textbook and applied to the real world.”
Huh, I wonder if Summers – one of the guys how actually has a bit of control – has any clue?
“Brian grasps both the economics and the politics about as quickly as I’ve seen anyone do this,” said Lawrence H. Summers, the head of the National Economic Council
Or maybe some more senior advisors than wunderkid Mr Deese:
“But it took the support of Mr. Rattner and Ron Bloom, senior advisers to the task force charged with restructuring the automobile industry, to help turn Mr. Deese’s positions into policy.”
And I’m just an engineer, but I do have some clue of what I don’t know and what folks like the above – who check and are impressed by Mr Deese’s work – do know.

MarkLeavanworth:”Then let me ask you again what you know, if you expect this GM project to turn GM into a profitable company, or to secure some national security interest, or both?”
Probably both, although certainly not to your definition of profitable. It should give a better stimulus return on the money than unemployment benefits, but GM will never pay back the money put into it.
And actually I suspect only GM or Chrysler – not both – will eventually make it. But until they have a chance to run at the market unencumbered by well documented foolish legacy costs, it is tough to pick who’ll remain the domestic competitor to Ford.

Well, at any rate, I hope the academics don’t miss the opportunity to generate a library of original textbooks documenting all the unexpected discoveries and pitfalls of their learning experience in this government venture. That actually might have a chance of paying off in the long haul.

LMAO . . .
Fortunately the majority of Americans will not be moronic enough to consciously attempt to destroy their own auto industry in favor of foreign companies.
They may have picked other vehicles in the past because they were perceived to be better, but most Americans will not now consciously set out to destroy their own industry.
However, as with anything, expect a few whacked out types to pursue whatever logic they’re able to paste together with their extreme partisanship doctrinaire approach.

“However, as with anything, expect a few whacked out types to pursue whatever logic they’re able to paste together with their extreme partisanship doctrinaire approach.”
And then conclude they should nationalize a car company.

GM and Crisler sales will never come back. They will lose another 20-30% of market share due to bankruptcy and the politicalsation of this mess. I’ve owned both brands and have been happy with their cars, but I won’t buy one now. And most of BO’s supporters drive foreign cars, so these companies are cooked.

Buy a Ford.
Don’t drive and GMObama or FOC (Fiat-Obama-Chrysler)

The sad things is most of GM’s more profitable cars are not built specifically for fuel efficiency. Escalades, Tahoes, Hummer 3, GMC/Chevy trucks, Corvettes, and the new Camaro are the cars that actually make money. The government is attempting to make these cars go away with fuel efficiency standards that will cost these companies billions, estimated 50 Billion in the next 5 years. So not only are they bankrupt, they are being told that your cars that are selling at a profit won’t meet standards in 5 years.
So you can kiss those companies goodbye as they will be forced to stop producing the cars that turn a profit.
And all of this is a distraction. This isn’t about forcing GM to produce certain cars, its about forcing us to drive certain cars. GM is just a sacrifice to be made along the way.

The citizens of Michigan don’t believe that the rest of the American public cares about their industry and communities.. they are probably correct, in their assumption…
Funny thing about equality and fairness, it should be equal and fair to all.

“The citizens of Michigan don’t believe that the rest of the American public cares about their industry and communities..”
I’ll never forget a conversation I had with someone who was complaining about manufacturing jobs going overseas and blaming Bush.
So I asked him, what kind of car do you drive? He said a Honda. I asked him if he thought that Honda was a superior car to American cars and he said yes. I said, then why are you complaining about jobs going overseas? Its what you want to buy? You believe overseas products to be superior.
He then went on a ramble about how his Honda was built in the U.S. I replied, its assembled in the US, its manufactured in Japan. It uses recycled steel smelted in Japan. It doesn’t support the US Steel industry which is shrinking every year. The rubbers and many raw materials that go into making that Honda originate in Japan, not the U.S. While US auto’s do have foriegn parts in them, they do differ in many of the basic materials that are still manufactured in the U.S.
He didn’t want to talk about it anymore. I told him I didn’t want to hear his preaching about Bush anymore until he changed his buying habits.
I drive Fords and Chryslers.

Dontget18onme, my spouse just got back from two weeks in Michigan, working at sites in several small towns there. The folks he talked to were pretty bitter about the plight of Michigan and most of them, who are not auto workers, blamed the UAW. They talked about how well off the auto workers had been compared to others and a few said specifically that “greed” had helped drive the auto companies into the ground. The working class people my spouse was dealing with were no fans of Obama, either, by and large. Most were fed up with anyone from washington– Bush, Obama, their senators, you name it. But they clearly did not have any sense of solidarity with the auto workers in their state.
I feel for those people my spouse encountered in his work. They are working hard and doing okay but worry that the domino effect from the GM bankruptcy will so further disadvantage Michigan that their businesses will eventually suffer as well.