GM still out to lunch

[Michael]

At GM, Dreams of an Electric Cadillac

Despite opposition from the Treasury Dept. and others, some GM execs still want to put the Chevy Volt engine in a luxury vehicle

Source (http://www.businessweek.com/bwdaily/dnflash/content/aug2009/db20090821_978464.htm?chan=rss_topStories_ssi_5)

This would be funny if it wasn't true. Obviously, one major downside to the government rescue of GM was the fact that the entire executive staff wasn't fired immediately. This hair-brained scheme proves that the idiots are still in charge and that means in the short, medium and long term, there's no hope for GM.

[Americano]

That's one of the redeeming factors of a true chapter 11, the upper tier of management is normally immediately out the door. The new senior management then brings in proved planning and operations people at the director down levels. Clean sweep with a new broom.

Too bad government doesn't work that way.

[Americano]

Is their a poster who remembers how much public money England, sorry, the UK, spent on British Leyland and then the Rover Group before tossing in the towel?

[Michael]

Is their a poster who remembers how much public money England, sorry, the UK, spent on British Leyland and then the Rover Group before tossing in the towel?
I used to own a MG Spitfire! (TR-5) :D

At least the Brits eventually threw in the towel. I doubt the US government will ever do that. Its not in their DNA to do that.

Btw, the official British reason for supporting British Leyland was "national security". Does that reason sound familiar?

[Americano]

I used to own a MG Spitfire! (TR-5) :D

China now owns and produces the MG marque.

At least the Brits eventually threw in the towel. I doubt the US government will ever do that. Its not in their DNA to do that.

It's rather telling that the old slogan "As goes GM, so goes America" is still valid.

Btw, the official British reason for supporting British Leyland was "national security". Does that reason sound familiar?

[Americano]

I recently heard a radio ad that brings some clarity to the US vehicle market:

Kia (some model)
$169/mo for 62-months
10-year, 100,000 mile warranty
Credit requirements - 6-month job
Retail purchase price $11,995.
All rebates to dealer

This was a saturation ad that played about every 15-minutes on the FM rock station I sometimes listen to. They're obviously after basic transportation customers and have easy credit financing.

Question: What products do US manufacturers have that can compete with that offer? All I read and hear about is the GM's Volt sometime in 2010 and it ain't cheap.

[dilettante]

From what I hear, it's Toyota which is still cleaning up in the American market. The car most commonly purchased through the Cash-for-Clunkers program was the Toyota Corolla. In a sense it probably served to stimulate the Japanese economy as well...

[Michael]

From what I hear, it's Toyota which is still cleaning up in the American market. The car most commonly purchased through the Cash-for-Clunkers program was the Toyota Corolla. In a sense it probably served to stimulate the Japanese economy as well...

Toyota Corolla is built in two plants in North America - Freemont California and Cambridge Ontario - so buying this car is a boost to the North American economy.

[Americano]

Toyota Corolla is built in two plants in North America - Freemont California and Cambridge Ontario - so buying this car is a boost to the North American economy.

Has anyone bothered to see if tax revenue from the sale of those cars and the economic flow-through will cover the public subsidy? Or is it just another attempt to contain lagging GDP growth?

[dilettante]

Has anyone bothered to see if tax revenue from the sale of those cars and the economic flow-through will cover the public subsidy? Or is it just another attempt to contain lagging GDP growth?

I'm sure it won't in the short term, especially if you consider that about half of the people using the Cash-for-Clunkers program would have bought a new car in the near future anyway. Over the long-term its probably impossible to say whether these sorts of things will pay for themselves.

[Michael]

Has anyone bothered to see if tax revenue from the sale of those cars and the economic flow-through will cover the public subsidy? Or is it just another attempt to contain lagging GDP growth?

My quick 'back of the envelope' calculations based entirely on the 1350 jobs GM said they were restoring suggests that the payroll & income taxes on those jobs will cover the cost of the program (easily) within one year (if those 1350 jobs stay alive for 12 months).

This of course ignores the fact that auto-manufacturing jobs have one of the highest possible job multiples in the US economy - meaning that for every job in auto-manufacturing, there are three support jobs. Thus, the restoration of those 1350 GM jobs means some 4000 other supplier jobs as well (and they pay taxes too).

[dilettante]

My quick 'back of the envelope' calculations based entirely on the 1350 jobs GM said they were restoring suggests that the payroll & income taxes on those jobs will cover the cost of the program (easily) within one year (if those 1350 jobs stay alive for 12 months).

This of course ignores the fact that auto-manufacturing jobs have one of the highest possible job multiples in the US economy - meaning that for every job in auto-manufacturing, there are three support jobs. Thus, the restoration of those 1350 GM jobs means some 4000 other supplier jobs as well (and they pay taxes too).


:ummm:

It's a $3 billion program. Those 1350 jobs would have to contribute an average of $2,222,222.23 each in taxes to cover it in one year. Even with added 4000 supplier jobs, that's still half a million dollars per job.

[Americano]

:ummm:

It's a $3 billion program. Those 1350 jobs would have to contribute an average of $2,222,222.23 each in taxes to cover it in one year. Even with added 4000 supplier jobs, that's still half a million dollars per job.

All those jobs were call-backs to facilitate a spike in production from the subsidy, which means they go away. It's just another band aid on a chest wound.

[The Drunk Guy]

:ummm:

It's a $3 billion program. Those 1350 jobs would have to contribute an average of $2,222,222.23 each in taxes to cover it in one year. Even with added 4000 supplier jobs, that's still half a million dollars per job.
So, giving each employee $50k a year for ten years would have been easier? :rofl:

[Michael]

:ummm:

It's a $3 billion program. Those 1350 jobs would have to contribute an average of $2,222,222.23 each in taxes to cover it in one year. Even with added 4000 supplier jobs, that's still half a million dollars per job.
Obviously I slipped a couple of decimal places! :o

[Americano]

Obviously I slipped a couple of decimal places! :o

That doesn't include the interest to service the debt. This is true crisis management with an unending procession of smoke and mirrors to entertain the general public.