The ongoing financial turmoil and financial discussion thread

[dustygoon]

I say this from the perspective of an analyst.

People are so upset when guys in wall street made huge bonuses only to leave carnage in their wake.

I really do not see any difference from wall street excess and the largess that you see at the big 3 autos. The unions are so powerful, they have absolutely handcuffed GM et al from repositioning their companies to better compete. Moving from half tonnes to small cars and hybrids would result in reconfiguring of operations and job losses.

The healthcare and pension plans for union employees are otherworldly. Converting union employees from their current healthcare plan to the same plan that GM office and non-union employees get would save GM $2b per year by some estimates (their operating profit to Dec/07 was -$4b). Union refused.

There should be no bailout and the obvious recommendation for GM is to own bonds and short the shares against this, but this would be foolish given a rescue is likely on the way. One that will disproportionately wipe out recovery prospects for bond holders and equity holders compared to union numbers.

The obsession with the "US car makers" by politicians is baffingly when you consider how much of the components are actually made in China only to be assembled in the US much the same as Toyota does with its plants in the US employeeing US workers.

What a joke. I wouldn't be too quick to short those shares as the slightest hint of a bailout will cause a spike. The short interest (number of shares sold short) has continued to decline over the past few weeks because of this.

[Azure]

Originally Posted by Phanuthier

Thats really harsh, though I for one hope GM doesn't get a bail out. At some time, GM is going to die and they already got their 2nd chance in 2003. Just let it go already.

Whoa, we agree. Where are we going to write that?

You make a good point. Why should the government bail them out when they're going to die anyways?

[Azure]

Originally Posted by Table 5

GM has 1.4 million employees. 3 million jobs will be lost if it takes Chrysler with it...

You seriously don't think that's "important to society" ?

Will it save GM and keep the company going, giving those people an extension on their jobs? Or will they simply go bankrupt 5 years down the road once again?

EDIT: And like others have said, the government shouldn't be bailing out these companies where the unions have completely screwed over everything.

[Claeren]

Originally Posted by Dan02

no kidding, the unions have negotiated themselves such fat contracts the're going to take down the companies and be left with no jobs at all.

Looking at a article from last year



Compensation of basically over 70$ a hour for what most of the jobs, is flat out ridiculous and thats why none of the American auto makers are competitive and profitable and why I feel all 3 will eventually fail no matter how many bailouts the government tosses their way. Until they get their labour costs under control(read halfish) the outlook is very bleak for them.

Alot of employees are making 3 or 4 times what they would for the same job outside the big auto maters. Simply not sustainable.

They need to let these companies fail and hope that new ones emerge without the oppressive burden of the contracts that the UAW has negotiated.

I agree to a point but:

1) Many of the jobs they do on the autolines are not necessarily easy either, certainly not easier (nor necessarily harder) than a lot of the rig/drilling/pipeline work around Alberta that pays just as much (if not more).

2) No one is sweeping floors for $35/hr ($70/hr in your example) - that is anti-union propaganda and you sound silly just repeating it. Unions might be a bad thing, fair enough, but keep to facts. If you are going to state their wage as costs-all-in then do it for ALL employees not just union big3 guys and if you are going to assume that floor sweepers get the average big3 wage then you also need to assume that the guy cleaning up a new well site is also getting the average wage (which ironically they are more likely to be doing IMO).

4) Much of that $70 is the impact of a collapsing American healthcare system, and the automakers themselves have said as much. If the health system had been reformed 10 years ago like it should have been (and almost was) the big3 would have saved billions and billions and been able to put it right back into their companies without such a bailout.

5) Another big chunk of money was lost by the manufacturers themselves when they went and spent all of the workers own pensions. If they hadn't blown all that money building crappy cars they wouldn't now be struggling to repay it. Don't go blaming the employees for wanting to retire one day, I am sure they are not begruding you that right yourself.

6) Unions have already given back tons over the years. A HUGE reason they refuse more cuts is that they (rightfully IMO) believe that managements only idea for saving the big3 companies is to cut line workers pay. Autoworkers believe (rightfully IMO) that if management could build good cars that people wanted wages would not have to be cut -- but that would be too simple I guess?


****7) At the end of the day though it is easy to blame the people at the bottom for failure at the top isn't it?

If the people running the big3 had not been such horrible business people the last 25 year, taking their market dominance and customer loyalty for granted, no one would be in this situation.

The problem is not with wages, the problem is with the product and the management that dictates what that product should be.


Toyota, Nissan and Honda employees in North America make about the same money as big3 employees, albeit it with profit sharing instead of union mandated wages, but how have those Asian manufacturers managed to grow and grow and not shut down plants if they are not seeing huge savings on wages?

Oh yeah, because they are managed by world class leaders who are driven to meet their customers needs.


I am not a fan of unions at all but I hate crappy management getting blamed on employees even more....


Claeren.

[Table 5]

Originally Posted by Azure

Will it save GM and keep the company going, giving those people an extension on their jobs? Or will they simply go bankrupt 5 years down the road once again?

EDIT: And like others have said, the government shouldn't be bailing out these companies where the unions have completely screwed over everything.

Hey, I'm no fan of unions either, but that's not really my point. Letting GM (and Chrysler) go under will have big effect on everyone, not just union workers....it will effect everyones stocks, 401ks, housing values, and decrate the already horrible mood of the world even more so.

Unions need to be dealt with, but I'm not sure letting the entire auto industry collapse is worth it right now.

[Dan02]

Originally Posted by Claeren

2) No one is sweeping floors for $35/hr ($70/hr in your example) - that is anti-union propaganda and you sound silly just repeating it. Unions might be a bad thing, fair enough, but keep to facts. If you are going to state their wage as costs-all-in then do it for ALL employees not just union big3 guys and if you are going to assume that floor sweepers get the average big3 wage then you also need to assume that the guy cleaning up a new well site is also getting the average wage (which ironically they are more likely to be doing IMO).

Thats interesting because no where in my example did i say anything about floor sweepers. I'm confused as how you putting words in my mouth makes me look silly.

Oil workers get paid as much as they do because of 4 reasons, that kind of work doesn't appeal to alot of people regardless of wage. It is extremely physically demanding, you're working in the middle of bum**** no where, exposed to the elements and finally the hours are worse then shift work, not at all comparable to working on the assembly line.

These numbers come from Forbes, in terms of total compensation, feel free to dispute them. I cannot vouch for their accuracy other then the source they came from.

Ford: $70.51 ($141,020 per year)

GM: $73.26 ($146,520 per year)

Chrysler: $75.86 ($151,720 per year)

Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

Bottem line, union workers at the American autoworkers are overpaid and an example of how unions can be detrimental in todays society. If the American auto companies want to be viable long term they need to bring their labour costs inline with their competitors.

[Table 5]

crap, i totally went into the wrong industry.

[Azure]

Are those the wage figures for the union workers for each company?

[Dan02]

Originally Posted by Azure

Are those the wage figures for the union workers for each company?

Those numbers are for UAW employees and include hourly wages and benefits.

[bluejays]

What did I start, just by mentioning the sweepers?

[Azure]

Originally Posted by Dan02

Those numbers are for UAW employees and include hourly wages and benefits.

Wow.

[Red]

Originally Posted by MoneyGuy

I have done this research on past bear markets and the recoveries for some clients of mine. I thought this info might be useful.

1. The market usually leads the economy into recovery by six to eight months because investors make their decisions in anticipation of what they expect to happen, and those decisions are what drives the market. Therefore, if we expect an economic recovery mid way through 2009, it stands to reason that you should begin considering moving into the market gradually maybe starting early in 2009.
2. History shows that investors tend to make up 80% of bear market losses within the first year of the recovery, according to Standard & Poor’s Equity Research. This is American but it’s much the same in Canada.
3. Also from S&P: equities typically recoup a third of what they lost in a bear market in the first 40 days of the recovery.
4. Stock prices are low. This is not to say they’ve bottomed, but prices are lower than they were at the start of 2000.
5. For investors whose faith in equities are wavering, consider the last time they performed so poorly: the 1930s. Investors who may have concluded that stocks were not the place to be would have lost out on decades of bull markets.
6. So far this year, investors have pulled more money out of stock funds than they’ve put in. This is the third time in recent memory that this has been the case. The other two were in 2002, just before a five-year bull market, and in 1988, the start of a 12-year bull. Investors who refuse to get into the market usually don’t make it back in time to enjoy the recovery.
7. Whenever the bottom is reached (whenever that is), you’ll never see those prices again. Yes there will be market crashes, but the next one will not bring prices to these levels. Remember that the best time to invest is when things are their bleakest. I don’t know if this is as bleak as it gets. J

Bottom line: The recoveries happen when you least expect. They're quick and dramatic. They're spring loaded. Don't miss the recovery.

The other way of looking at that is that the stocks were overvalued and the year 2000 prices are more representive of what they should cost in a healthy enviroment. Afterall the housing, car, retail markets etc all grew on fake sense of wealth. Would this not apply to stocks?
How many people borrowed against their house to buy stocks? Those people are now screwed and that money is not returning to the markets any time soon, if ever. Supply and demand at it's finest.

What do you all think?

[Claeren]

Originally Posted by Dan02

Thats interesting because no where in my example did i say anything about floor sweepers. I'm confused as how you putting words in my mouth makes me look silly.

Oil workers get paid as much as they do because of 4 reasons, that kind of work doesn't appeal to alot of people regardless of wage. It is extremely physically demanding, you're working in the middle of bum**** no where, exposed to the elements and finally the hours are worse then shift work, not at all comparable to working on the assembly line.

These numbers come from Forbes, in terms of total compensation, feel free to dispute them. I cannot vouch for their accuracy other then the source they came from.



Bottem line, union workers at the American autoworkers are overpaid and an example of how unions can be detrimental in todays society. If the American auto companies want to be viable long term they need to bring their labour costs inline with their competitors.

Someone said something about floor sweepers, must not have been you - the point was directed at them though.



As for rig work v. line work -- you have not worked on a line before eh? It is pretty obvious because if you had you would be saying the opposite.

Those workers get to stay outside instead of stuck in oppressive feeling plants for years on end without seeing daylight, they get to waste hours driving too and from places and waiting for contractors and rigs and such to show-up, they are generally paid all sorts of per diems in excess of their real costs to party in hotels all week, they get to go out and see the countryside, and they don't have to nearly as repetitive tasks that really do wear your body down more than sheer physical work does.

A lot of that is silly, both jobs are hard, but people here in Alberta spout off about how easy those jobs are all the time and really have no clue.

As somone who had the misfortune of working on a line once long ago it is EASILY the hardest work I have ever done. I DO think they are often somewhat overpaid just because people at the bottom are almost always underpaid but I don't buy any of this sentiment that if only wages were $12/hr less the Big3 would be fine -- that is total bull.


Management is the problem at the Big3, not line-employee wages.




As for those wage numbers I would be most concerned that they are again the all-in costs for those employees. What is the employee actually making? Is one making $34/hr and the other $29 ($5 difference is pretty small, especially when most import plants are in the lower cost south while most domestic plants are in the higher living cost north) and the rest of the all-in has much to do with poor long term management by the domestics. Also, I would also be curious how profit sharing is being incorporated into those numbers, import plants pay it and domestics do not.



One thing people out West (and in general) do not give auto-unions nearly enough credit for is raising wages and working conditions for EVERYONE in North America. It was the on-the-ground work done by auto unions years ago that got the ball moving on policy's that protect rig workers in Alberta, that forced wealthy industrialists to start paying living wages and that allow you some rights as an employee versus your boss that once held power over your entire life. People make out the 1950's and 1960's as all romantic now days but there were a LOT of problems and much of the optimisim that people feel when looking back at that time was from the progress of unions in fighting for the 'everyman' that really needed the help.

Unions HAVE outlived their usefulness I agree, and the 'Westjet Model' is much more productive IMO, but they are not to blame for the Big3 mess.

(I would say that cost pressure from unions make the poor managment at the Big3 harder to hide -- but that is kind of a circular argument. If oil drops to $20/barrel and companies look at their balance sheets they could say 'oh look, we aren't making money because of all these employees, it is their fault!' when really it is because there is no demand for their product. When oil prices went up the wages would nto be a problem. Thus: If the Big3 made good cars the employee wages are just fine.)







Claeren.

[Dan02]

Originally Posted by Claeren

As somone who had the misfortune of working on a line once long ago it is EASILY the hardest work I have ever done. I DO think they are often somewhat overpaid just because people at the bottom are almost always underpaid but I don't buy any of this sentiment that if only wages were $12/hr less the Big3 would be fine -- that is total bull.

The wages aren't the problems, they might be marginally to high depending on your POV, the problem lies in the massive benefits which the autoworkers have negotiated themselves which often exceed the actual wage compensation.

[Shawnski]

YOU, Claeren, have obviously never set foot on a rig, nor worked on one either.

Wow, what an assinine couple of posts.

They "get" to stay outside? No, they HAVE to stay outside, in bitterly cold weather. And after a ridiculously long shift each day, they "get" to go back to a makeshift camp and shower in hauled in water that I wouldn't bathe my DOG in.

I DID it before, it is brutal.






NOT Claeren

[Dan02]

Originally Posted by Claeren

Also, I would also be curious how profit sharing is being incorporated into those numbers, import plants pay it and domestics do not.

Interesting as to why you think that, every source i've been able to find on the internet including the UAW website suggests that the American automakers do indeed have profit sharing plans with the union, however, I cannot find specifics as to what they are.

This comes off the UAW website in regards to their 2007 contract with Ford.

The UAW Ford profit-sharing formula will continue unchanged, and continue to make graduated payments based on Ford' s U.S. profits.
In addition, our bargaining team negotiated an expanded definition of the profits to be included in the formula. The definition was clarified to ensure that it will include any potential income resulting from the establishment of an independent VEBA trust for retiree health care.
Ford Motor Credit Co., however, will no longer be included in the profit-sharing calculation.

Not much to go around though when you're loosing billions a year though i suppose.

[Claeren]

Originally Posted by Shawnski

YOU, Claeren, have obviously never set foot on a rig, nor worked on one either.

Wow, what an assinine couple of posts.

They "get" to stay outside? No, they HAVE to stay outside, in bitterly cold weather. And after a ridiculously long shift each day, they "get" to go back to a makeshift camp and shower in hauled in water that I wouldn't bathe my DOG in.

I DID it before, it is brutal.






NOT Claeren

Ah, I also said it was silly to say that!?

My point was that BOTH jobs are hard and that both can be made to seem simple to someone from the opposite job.

Albertans are quick to condemn auto workers as overpaid lazy asses who do nothing but sweep floors while Easterners have been lining up for years to come out to Alberta for 'the easy money in the oil patch'.

The reality is that those auto assembly jobs are hard hard work and those rig jobs are hard hard work.


(I have not worked in the field but most of my immediate family does and I have even lost a good friend due to the dangerous nature of rig work so I know the costs. Much of my extended family has worked in manufacturing though, and I can assure you they would have been better off having worked in the field for 30 years than in auto-plants. They are visibly more worn out and their weathered in old age despite having just 'swept the floor all day for $70/hour'. Again though, 'life' is hard work no matter what you do.)




Claeren.

[Table 5]

Screw the line and rig work. You kids these days have no idea how effin hard it is to sit in front of a computer in a warm office, listening to music all day and chatting it up on a hockey forum!

kids these days...

[Dan02]

Originally Posted by Table 5

Screw the line and rig work. You kids these days have no idea how effin hard it is to sit in front of a computer in a warm office, listening to music all day and chatting it up on a hockey forum!

kids these days...

you pansys probably have a fancy water cooler too don't you?

[Table 5]

Originally Posted by Dan02

you pansys probably have a fancy water cooler too don't you?

yeah, but the hot water lever is totally jammed. absolutely brutal.