Ferrari Mailing List: Re: Motor City Christmas Card

[jashburne (jashburne]

The perfect storm for Detroit has been brewing for more than 40 years and can 
be summarized as follows:

1.  Years and years of union negotiations during which the carmakers 
consisently sold their futures and agreed to much more expensive post 
retirement medical and pension liabilities at the expense of saving hourly wage 
increases.  These liabilities can not easily be reduced outside of a bankruptcy 
court and more importantly became a big albatross as the number of retirees 
surpassed the number of active workers by a wide margin.  This is where a large 
part of the cost penalty against the other car makers lies.

2.  Agreeing to restrictive work rules that all but eliminates flexibility in 
shifting workers around to respond to changing market conditions.  I am told 
that the current book of union work rules is nearly a foot thick.

3.  Bad product decisions run more by the beancounters than by the product and 
market people, the "car guys".  Even aside from some horrendous car models ( 
e.g. Aztek) the good models were hampered by lousy ergonomics, cheap materials 
to save a few pennies and indifferent build quality that increased warranty and 
recall costs while driving customers away.

4.  Too many siimilar product lines that duplicated costs and increased the 
bureaucratic overhead.

The Detroit 3 all have many good assets but they need. a drastic restructuring 
in order to become viable competitive businesses.  Throwing more money at them 
with a car czar or with Congress making product decisions will not help the 
inevitable decline into a later bankruptcy at an even greater cost.

The bridge loan goes nowhere. It is a pier and not a bridge to a solution.  The 
current crisis did not cause this situation, it only hastened what would have 
happened sooner or later anyway.

The bailout only rewards bad behavior and will only lead to more bad behavior 
and even bigger problems down the road. 

The airline and warranty analogies are similar.  People put their lives in the 
hands of bankrupt airlines so I don't see why they wouldn't buy cars with 
warranties, especially if a judge in bankruptcy makes sure that warranty 
liabilities rank ahead of bond and stockholder claims.

It's like the old ads for Fram oil filters:  you can pay me now or pay a lot 
more later.  Letting them file now will cost something (not as much as the 
fearmongers predict) but nowhere near as much as in the future.

John



Sent from my Verizon Wireless BlackBerry

-----Original Message-----
From: "Lee S. Lingo" <LeesCars [at] comcast.net>

Date: Sun, 14 Dec 2008 14:21:35 
To: <jashburne [at] aol.com>
Cc: 'The FerrariList'<ferrari [at] ferrarilist.com>
Subject: Re: [Ferrari] Motor City Christmas Card


I'd like to know as well.  I would hope that lessons were learned from the
loan that was extended to the financial industry via TARP to the tune of
700b, that checks and balances will be put in place, benchmarks established,
and progress made.

That being said, I'm a fan of doing whatever will enable one of the oldest
and largest American industries to not only survive, but to return to
prosperity and preferably, world prominence.  

I'm not against Chapter 11, but I don't think taking that route for the Auto
industry can be directly compared to the Airline industry.  The auto
industry produces an end-consumer product that is a big-ticket item,
requires consumer confidence and a support system that is fathoms deep.  The
airline industry provides a service that consumers rent in small amounts of
time.  The Rental fee covers the support system and consumer confidence is
much less rooted to its overall success.

I agree that he airline industry did come out of bankruptcy stronger, as do
many companies.  I would point out that many companies that go through
bankruptcy don't produce the second highest price consumable that the
average individual purchases in a lifetime.  The first is obviously a home,
but that can't easily be compared apples to apples to the car because that
industry is not as consolidated into a core as the auto industry.  There are
thousands of homebuilders in the US, there are only really three automakers.

I also agree that the need for unions has long passed and although it still
serves a purpose, in terms of a product lifecycle, the union is well into
its waning years.  The recent (last 4 years) renegotiations with the unions
did yield significant improvements in equalization and parity with other
non-union auto makers.  The average wage at the Georgetown, KY Toyota plant
is actually higher than the average wage of the UAW worker.  The UAW is
willing to work further to reach parity, as stated in the committee meetings
lately, they just want to see the actual source of the information for the
benchmark.  So much of the information being bandied about by the media and
our elected officials and thus internalized by the American public is at
most the result of a quick Google search and reading the snippit that is
included under the first returned link.  It's no different than how we deal
with politics though, with the exception that in politics, the news crews
report absolutely everything, where in this case, I feel as though they are
reporting almost nothing.

I couldn't agree more that staying in business is a privilege.  Generally
speaking, when a business goes under, it might take several thousand jobs.
If the financial industry were to go under, it would be catastrophic to the
American people in terms of lost money as it brings down the stock market
and so many pensions and 401k's through loss of confidence.  I think the Big
3 would have an equally bad effect through loss of millions of jobs which
would also bring down the stock market.  

Unfortunately, this "perfect storm" hit when the Big three were making
significant strides toward a resurgence.  GM and Ford particularly are
producing their best products in decades with even better to be released in
the next year to three.  They had both renegotiated with the UAW, and
creditors to secure more competitive cost structures and credit.  They have
both been selling assets to reduce their debt load and become more
streamlined and mobile.  They have reduced their work force by hundreds of
thousands to reduce their overhead.  Facilities are being sold or closed.
Brands eliminated.  What more can be done that is of this equal impact?
Their efforts were working until the credit crunch for everyone destroyed it
all.  Market sales downturns of 40% will kill any product, service or
business if sustained.  The foreign automakers are also experiencing
significant decreases in sales not far behind.  Where I have a problem is
how we Americans, me included, have allowed industry and advantage after
industry in advantage leave for cheaper countries.  Steel, manufacturing,
and most recently IT, have been outsourced to other countries to save a
buck, or rather, to make a buck for the shareholders.  I'm all for making a
dollar, or as many as possible, and I love all cars, import and domestic.

Two industries we're great at are space and war.  While they are important,
they don't have the same impact as these other industries on a global scale.
I would love to see Americans rally around the home team and help it return
to global prominence.  I feel strongly that the old way was not working for
too long and that change, significant change, is needed in the US auto
industry.  I think change is coming and just needs a little more time to get
here.

I do not work for the big three or any of its support network.  My wife
does, but I've been a car person three times longer than I've even known
here and have always found it interesting reading about the industry.

I'm sorry for ranting and drowning out any Ferrari related topics today, I'm
just sick to death of hearing people in the news and elected officials who
know nothing beyond the surface of the situation talk as if they have the
answers.

Now for Ferrari related topic: I didn't notice it here, but there's been
lots of talk about Ferrari's sales being really down as well and they have a
significant plant closing planned for the holiday.  For years, Ferrari
followed the mantra that they would make one less car than they could sell.
Over the past decade, their sales and thus, manufacturing output have risen
to meet the increased demand.  Now, they seem to be moving the prices up
with the introduction of the California as the new entry car with the F430
replacement slated to be introduced above it in price.  Have we finally seen
the end of Ferrari production growth in the short term?

Lee Lingo

-----Original Message-----
From: Steve Jenkins [mailto:steve [at] stevejenkins.com] 
Sent: Sunday, December 14, 2008 12:33 PM
To: 'Lee S. Lingo'
Cc: 'The FerrariList'
Subject: RE: [Ferrari] Motor City Christmas Card

As part-maker of the loan, I'm curious as to what is the collateral on the
loan?

I'm a fan of chapter 11 for the "big" three. It's doesn't mean they have to
go out of business - it means they have to re-organize, they have greater
ability to strong-arm the unions (don't get me started on unions - they were
necessary "back in the day" but have far outlived their necessity) and they
can restructure some of their debt. Airlines who've done it (United, Delta,
NWA) are all still alive and kicking. Of course, it didn't work for Aloha
Airlines - but staying in business is not the right of any organization,
it's a privilege afforded it by its customers.

SJ

-----Original Message-----
From: Lee S. Lingo [mailto:LeesCars [at] comcast.net] 
Sent: Sunday, December 14, 2008 9:25 AM
To: Steve Jenkins
Cc: 'The FerrariList'
Subject: Re: [Ferrari] Motor City Christmas Card

Yeah, this has been floating around for a month or so.  It's unfortunate
that it plays to the stereotype that the "Southern Senators" are claiming.
Sen.'s Bob Corker (TN), Mitch McConnell (KY), Jim Bunning (KY) and Richard
Shelby (AL) are some of the more outspoken leaders of the anti-American
sentiment where it pertains to the automotive industry.

I know that it's a lot of political posturing, but I find it unbelievable
that they are pushing out the US Auto makers and feel that they are in no
need of assistance just because they have some foreign auto manufacturer's
in their state.  Those manufacturers, Toyota, Honda, Hyundai, Nissan and
Mercedes-Benz chose those locations because of intense lobbying by those
states and the subsidies in taxes and such.  Those five manufacturers all
use parts vendors that also provide parts to the US auto makers.  If one or
more of the US auto makers go down, their inability to pay their vendors
will cause significant hardship, and most likely, closing of the vendors at
least temporarily should sufficient credit be available which will in turn
affect the foreign makers.  They're all tied together.

And I'm sick to death of the term bailout being bandied back and forth.
It's a bridge loan...

Sorry Charles, but this issue REALLY gets my goat.

Lee

-----Original Message-----
From: Charles Perry [mailto:charles [at] carolina-sound.com] 
Sent: Sunday, December 14, 2008 11:20 AM
To: Lee Lingo
Cc: The FerrariList
Subject: [Ferrari] Motor City Christmas Card


Amusing, in a sad way...

-- charles

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