Defender Central

[Carpe]

Amen.

I know several people that are aware of the big three buying up patents for fuel efficient engines since the 1940's. We were getting 36mpg in 1930. That is a fact. And yet, they want us to believe that in 2008, 78 years later that 22mpg is good? ("Top of its class in mpg," as they like to say.)

I say let them go bankrupt and then let them reform (under chapter 11 guidelines) and start producing some of the fuel efficient designs they have been sitting on for 60+ years.

Sounds good in principle, but the number of jobs lost for an auto industry bankrupcy would boggle your mind. The bank bailout was much about conceptual money; Billions of dollars of losses were on paper based on speculation of returns and interest lost. When a bank makes a loan, they only have to have 10% of those physical dollars on hand to guarantee the loan. If someone defaulted on a loan, the bank claims the full amount for bad debt write-off because the loans that they sold as securities will no longer to be able to pay the full amount of interest to the investors, but the banks themselves are only out that initial 10% that they were required to have for the loan...bottom line, the loss wasn't as bad as it looked on paper.

In contrast, the auto industry has to deal with physical inventory that is generated by multiple tiers of suppliers. When GM gets debt relief, Delphi is stiffed, Delphi's suppliers are stiffed, Delphi's suppliers' suppliers are stiffed, etc...what that translates to is MASSIVE job losses from the bottom up. To support an OEM operation like the Toyota plant in Canton, MS, it takes upwards of 250 suppliers / service firms (everyone from injection mold companies, to paint suppliers, to office supply companies, to cleaning crews, to communications companies, to food services, etc...) to keep the plant operational. Every time we let one factory tank, you can guarantee that there will be very painful financial and job loss problems for 2 shock circles - the most intense is within 75 miles of the plant, and the second is within 115 miles of the plant. Drive through lovely Flint, MI if you doubt it.

One key problem is Union labor. The average full price of labor for a union worker (salary+benefits+healthcare+amortized retirement / perpetuation of retirement) is roughly $64/hr. Shocking, isn't it?! The average full price of labor for a non union worker under the same considerations is $32/hr. Union labor is an unsustainable model. They have made some great advances for the cause of the worker, but that's about all I can say positively about them. The fact of the matter is that the US automakers don't make a car that is twice as good or twice as reliable or twice as fuel efficient to justify paying their workers twice as much.

We need the US auto industry to succeed for a lot of reasons. We need them to retool to help them succeed. We also need to understand, though, that for every Rover we buy, that's one less GM car sold to us, which means that we are voting on the outcome of this crisis with our dollars.

[Carpe]

I had a Defender. Never again. I loved the truck, but they have nothing on a well restored series.

EwS

Just out of curiosity, what is your criteria for enjoyment of the Series over the Defender? Is it character, dependability, comfort, durability, etc...? Is it something subjective or relatively objective that drives that feeling?

[Eric W S]

Sounds good in principle, but the number of jobs lost for an auto industry bankrupcy would boggle your mind. The bank bailout was much about conceptual money; Billions of dollars of losses were on paper based on speculation of returns and interest lost. When a bank makes a loan, they only have to have 10% of those physical dollars on hand to guarantee the loan. If someone defaulted on a loan, the bank claims the full amount for bad debt write-off because the loans that they sold as securities will no longer to be able to pay the full amount of interest to the investors, but the banks themselves are only out that initial 10% that they were required to have for the loan...bottom line, the loss wasn't as bad as it looked on paper.

In contrast, the auto industry has to deal with physical inventory that is generated by multiple tiers of suppliers. When GM gets debt relief, Delphi is stiffed, Delphi's suppliers are stiffed, Delphi's suppliers' suppliers are stiffed, etc...what that translates to is MASSIVE job losses from the bottom up. To support an OEM operation like the Toyota plant in Canton, MS, it takes upwards of 250 suppliers / service firms (everyone from injection mold companies, to paint suppliers, to office supply companies, to cleaning crews, to communications companies, to food services, etc...) to keep the plant operational. Every time we let one factory tank, you can guarantee that there will be very painful financial and job loss problems for 2 shock circles - the most intense is within 75 miles of the plant, and the second is within 115 miles of the plant. Drive through lovely Flint, MI if you doubt it.

One key problem is Union labor. The average full price of labor for a union worker (salary+benefits+healthcare+amortized retirement / perpetuation of retirement) is roughly $64/hr. Shocking, isn't it?! The average full price of labor for a non union worker under the same considerations is $32/hr. Union labor is an unsustainable model. They have made some great advances for the cause of the worker, but that's about all I can say positively about them. The fact of the matter is that the US automakers don't make a car that is twice as good or twice as reliable or twice as fuel efficient to justify paying their workers twice as much.

We need the US auto industry to succeed for a lot of reasons. We need them to retool to help them succeed. We also need to understand, though, that for every Rover we buy, that's one less GM car sold to us, which means that we are voting on the outcome of this crisis with our dollars.

That's not exactly a true statement about how loans are handled. If they are collateralized, then they aren't on the banks books since they were sold as an asset. GAAP would not allow a loss to be taken by the bank.

Wall Street losses aren't paper losses. That's why we have a credit issue on the street. That's why banks failed. The investors lost real money.

We don't need a US auto Industry that can't compete in today's market. They are out of touch with just about everyone and everything. Let the market do it's thing and wipe the slate clean. The US voted for years on the outcome. We want imports for everything but US trucks if you look at recent sales. I may buy a Jeep, but that is about it.

[Eric W S]

Just out of curiosity, what is your criteria for enjoyment of the Series over the Defender? Is it character, dependability, comfort, durability, etc...? Is it something subjective or relatively objective that drives that feeling?

Series are better off road. They climb well, have a better COG. I outwheeled a 90 rather easily over the summer. You can lock and load a series truck just like any D.

Field repairable. Cheap parts. Simple systems that can be easily diagnosed anywhere.

Copmpared to an under powered 3.9/4.0, no real superiority off road in the D, expensive and limited after market, expensive parts, expensive trips to the shop if you need a diagnosis on the ECM, emmissions, ...

Even the TDI Euro version have gone drive by wire, power windows, air con et al.

AND FINALLY they are making any more series trucks but they will be importing many more crappy old 90s in the near future.

[jp-]

Union labor is an unsustainable model.

I completely agree with you there, and that is reason enough to let them go under, to break the unions.

I know there will be a ripple effect, but that is not reason enough for my tax dollars to go into a black hole. Who is going to bailout the American taxpayer when we get done bailing everyone else out? Let the free market work. We are moving more and more toward socialism and I hope I am not the only one who is more than a little bit afraid of that.

The $700b bailout is an utter disgrace in my view. The fact is the loans are no good. Just because the government takes them over doesn't make them good all of a sudden. And no one is stepping up to pay off my mortgage so why do I have to help pay off someone else's when they never should have bought a house in the first place?

Also - Nissan is in Canton. Toyota is in Tupelo.

Almost went to work for Nissan...


The American car makers have been ignoring the warning signs of Toyota and Honda since the seventies.

[Rineheitzgabot]

I agree with those who think a bailout is a bad idea; here's why:

It is a matter of principle for me. It is not the government's job to do this sort of thing. Would it hurt the economy to let it tank? Absolutely, and it would be, as Carpe put it; mind-boggling. Would it hurt me personally? Absoultely, my 401k has been bleeding for months, and I hate it, but I want a system of government/economy, to be guided by the "invisible hand". Natural adjustments happen all the time in our economy. It is like life. What doesn't kill us, would serve to make us stronger.

Even if it were GUARANTEED to work, in the next year or two, to repair the big three, I would still be against it. It is like junk food. It feels, smells, tastes good, but it is not good for the long haul. Where does this stop? This bailing-out thing. How big does a company have to be, in order to be helped? My company is struggling, why can't they get help?

These gazilion-dollar-a-year CEO's have demonstrated clearly how serious they are about their companies surviving with their $20k chartered jet rides to the capitol this week. They are fat, happy, complacent. This philosophy comes from the top down, and probably says something about our country in general.

In reference to Carpe's per-hour estimate on big-3 workers, I heard it was over $70/hour, to Toyota's just-over $40/hour. This illustrates the "spoiled" nature of labor unions, and it also shines the light on how irresponsible some of the negotiations were in times past, when these benefits packages were developed and signed with said unions. One can only blame management of these companies for these ridiculous contracts, they knew when it came time to "pay the piper", they would be long-since retired.

The only reason I might agree with a bailout is to keep the capacity open for production of war implements for the united states, should we ever need it. There should be extremely tight restrictions on any bailout, including turnover of all upper management. I almost think there are so many layers of management in these fat organizations, that they could get rid of the top three layers, and still function; and possibly even more efficiently.

Accountability has alot to do with it for me as well. When we as people make a bad decision, bad consequences follow; or they should follow. The big three should be made responsible for the bad decisions they have made for decades. This will happen if they are allowed to fail.

If they fail, and if the market supports it, new automakers will take their place; this is the natural course of events. I'll be willing to bet, that the new automakers' business model would be more like the Asian automakers.

I have three children, and I want there to be a healthy landscape for them, and their children. And yes, I believe if we bail them out, that the landscape will be tainted. Like JP used the "S" word.

I could literally go on for pages about this subject, but I'm stepping off my soapbox now.

[LaneRover]

One key problem is Union labor. The average full price of labor for a union worker (salary+benefits+healthcare+amortized retirement / perpetuation of retirement) is roughly $64/hr. Shocking, isn't it?! The average full price of labor for a non union worker under the same considerations is $32/hr. Union labor is an unsustainable model. They have made some great advances for the cause of the worker, but that's about all I can say positively about them. The fact of the matter is that the US automakers don't make a car that is twice as good or twice as reliable or twice as fuel efficient to justify paying their workers twice as much. [/B]

Not that this is actually a winnable argument - think of it as more of a comment. The US automakers don't have to make a car that is twice as good or twice as reliable in order to pay their workers twice as much, as long as the workers are twice as efficient. Or as long as a lot of their work is being sent to cheaper suppliers overseas - oh wait, they are doing that...

There are definitely arguments for and against unions and whenever either side is too powerful it is bad. I personally find it amazing that with so many of the blue collar auto jobs being sent overseas that the white collar end of it has not gotten significantly smaller. You think that with fewer people to manage, you would need fewer managers...

[greenmeanie]

Lanerover,
You bring up a good point about jobs going oversees. Unfortunately the management in my aerospace company have jumped on the globaliziation band wagon and have a plan to send all design work oversees to what they call developing markets. They won't sack my generation but they willnot hire a new generation of US designers. Most of the manufacturing has already gone with only the top level of assembly and testing done here so that the product can get a 'Made in the USA' sticker slapped on it.

They actually perceive an increased need for management in the US as someone has to control the flow of work. I find this an odd outlook as mangement is the most universal of skills but the technical know how that goes into our machinery is the thing you want to protect.

For a lesson on where the US is headed just look at the UK in the 70's and 80's. In some unfortunate respects we are decades ahead of you.

[JimCT]

Car makers

It is so disappointing to see LR owners spouting Rush Limbaug garbage. Don't you think the Japanese and Korean car makers have their government's help? Certainly when it comes to health care.

[LaneRover]

It is so disappointing to see LR owners spouting Rush Limbaug garbage. Don't you think the Japanese and Korean car makers have their government's help? Certainly when it comes to health care.

Not sure if you are including me with the Rush comment (I am OK if you are and OK if you are not) but the way that government keeps getting bigger and not better (under Dem or Repub) the last thing I want them in charge of is healthcare! Ask the Canadians how long they have to wait for an operation and why those that can afford it come here to get things done.

You definitely can't only blame the unions for the carmakers woes. Too many companies and businesses (and banks) focus too much on the what is profitable NOW and don't look too far enough into the future, don't look enough into the riskiness of focusing too much on their current money making house of cards. I work in the film industry and my work comes and goes, after investing in equipment to help me do what I do I decided to start investing in a little bit of real estate to help make money when work was slow, I decided to diversify a bit. Luckily I started in '98! (Unfortunately I haven't gotten that far but at least far enough that I have a nice piece of property that can hold a lot of derelict Rovers!)

Also too many execs make millions upon millions even while running companies into the ground. But you really can't limit what a company can profit or what it can pay its execs because they will move overseas and you will have even less control over them. Did anyone know that Exxon/Mobile is now a company based in Dubai and not the US?

And as to a comment made earlier. I always heard that it wasn't the car companies that were buying up fuel efficient patents and not using them but the oil companies. Why would the car companies not want fuel efficient vehicles? The oil companies make more money selling us more fuel, they are the ones that would care.

[Jim-ME]

Normally I wouldn't say anything in this type of thread but I can't not say something. We have become a country, quite possibly a world of mindless sheep. Most people do not think for themselves any longer they just jump on the latest bandwagon. Until individuals start being willing to invest the time and effort to become informed and to make decisions based on facts we can't succeed. We need to learn to ask questions, not accept anything but facts, and then to make our own decisions based on fact. I don't care if it is health care or Land Rovers. Use brains not emotions is what will keep this country strong.
Jim

[LaneRover]

Normally I wouldn't say anything in this type of thread but I can't not say something. We have become a country, quite possibly a world of mindless sheep. Most people do not think for themselves any longer they just jump on the latest bandwagon. Until individuals start being willing to invest the time and effort to become informed and to make decisions based on facts we can't succeed. We need to learn to ask questions, not accept anything but facts, and then to make our own decisions based on fact. I don't care if it is health care or Land Rovers. Use brains not emotions is what will keep this country strong.
Jim

I totally agree, the problem today is that with the internet and the plethura of sites on either side of any problem people think they have the truth when in fact they have decided to choose what they think is true.

[yorker]

For a lesson on where the US is headed just look at the UK in the 70's and 80's. In some unfortunate respects we are decades ahead of you.

You know, it is funny more people haven't noted that...

http://www.nytimes.com/2008/11/18/bu...gewanted=print


November 18, 2008

A British Lesson on Auto Bailouts

By NELSON D. SCHWARTZ
PARIS — A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.
This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.
“It’s all too evocative,” said Leon Brittan, a top official in the government of Margaret Thatcher, the free-market-minded prime minister who nevertheless backed the rescue. “I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad. British Leyland carried on for a few more years, but they’re not there now, are they?”
Other experts are sounding the same alarm. “The British Leyland experience is a relevant and cautionary one,” said John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group in New York. “The government got in the business of trying to make a winner out of a structurally flawed company. That’s the risk in the U.S. as well.”
Though Continental automakers have fared better than British ones, Mr. Casesa argues that the long history of government support in Europe made companies like Renault and Fiat strong players in their home markets, but not worldwide.
“With the exception of BMW and Mercedes, European automakers haven’t been globally successful,” he said. “Nor have they been hugely profitable.”
That comparative history is receiving new attention as Congress turns its attention this week to the fate of Detroit.
The British Leyland bailout remains the classic example of a futile government intervention. The tight cooperation between governments and automakers on the Continent has produced happier results.
For half a century after World War II, the French government was the majority stakeholder in Renault, and Paris still holds a 15 percent stake in the company. In the 1980s, the company received a bailout equal to nearly 4 billion euros, or $5.1 billion in today’s money. Now it is highly profitable — at least compared with its American counterparts.
Today, G.M.’s German subsidiary, Opel, is appealing to Berlin for help, seeking more than 1 billion euros in credit guarantees, according to Carl-Peter Forster, G.M.’s European chief.
Monday, Chancellor Angela Merkel of Germany said her government would make a decision before Christmas.
“It’s not decided yet whether these loan guarantees will become necessary,” Mrs. Merkel told reporters in Berlin after meeting with Mr. Forster and other management and labor officials.
“If these guarantees become necessary, those funds should remain within Opel” in Germany, she added, echoing a concern some Americans have expressed that any United States bailout money go only to American automakers.
So far, Asian companies have not complained that such a bailout would amount to an anticompetitive subsidy. But José Manuel Barroso, president of the European Commission, said last week that he thought an aid package for Detroit could be “illegal” under World Trade Organization rules.
That has not stopped European automakers from seeking 40 billion euros in loans from the European Investment Bank, ostensibly to help develop cleaner cars.
For Garel Rhys, head of the Center for Automotive Industry Research at Cardiff University in Wales, the trajectory of General Motors is reminiscent of British Leyland not only because of the former’s decision to seek aid to avert bankruptcy, but also for its slow, seemingly inexorable loss of market share. “Both had a history of being the biggest in their market but couldn’t adapt as they lost sales,” he said. “They couldn’t get customers back.”
Historically, British Leyland’s roots stretched back further than Henry Ford’s Model T. The company controlled 36 percent of the British market well into the 1970s, with mass-market brands like Austin and Morris and premium lines like MG and Jaguar. But rising competition from Japanese and German automakers, shoddy workmanship and a breakdown in labor relations brought the company to near bankruptcy by 1975, Mr. Rhys said.
Michael Edwardes, who took over as British Leyland’s chief executive in November 1977, recalled that when he joined, no one even knew whether individual brands were profitable. “It was a farce — no one knew what the costs were,” he said.
As it turned out, every MG the company sold in the United States resulted in a loss of $2,000 for British Leyland.
Wildcat strikes consumed more than 32 million worker-hours in 1977, and the company became a symbol of labor strife, with some employees walking out the door with spark plugs in their coat pockets and engines in the trunks of their cars, Mr. Edwardes said.
Mr. Edwardes immediately began reducing the company’s work force of roughly 200,000 — to 104,000 within five years — and closing 19 factories. He appealed to the Thatcher government for aid, arguing the money was needed if British Leyland was going to be able to afford to lay off workers while investing in new models.
Eventually, the government put up £3.6 billion, equal to £11 billion in today’s money. But the rescue did not do much to preserve British Leyland’s labor force or market share in the long term.
By the time it received its last government infusion of cash in 1988, Mr. Rhys said, British Leyland’s market share had slumped to 15 percent. British Leyland evolved into MG Rover, which was eventually acquired by BMW, then spun off, finally going bankrupt in 2005.
According to Mr. Rhys, just 22,000 workers remain at British Leyland’s successor companies, about 10 percent of its work force in the mid-1970s.
“It was a very poor return,” he said. “We felt collectively and nationally that we got our fingers burnt, and this was always used as a reason to avoid bailouts, both by Labor and Conservative governments in Britain.”
Mr. Edwardes still defends the government aid, arguing it preserved parts of the company that remain in business now — like Jaguar and Land Rover, which were bought by Ford.
Jaguar never made a profit for Ford, however, and was sold with Land Rover to Tata Motors of India earlier this year. Ford recouped only about half of what it paid to acquire the two brands, and is estimated to have poured $10 billion into Jaguar.
Despite the British experience, the case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.
The French government help for Renault also came amid increasing losses for the company. But Mr. Rhys said that unlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.
If Washington does go ahead and help Detroit, Mr. Edwardes said, it is crucial that the government overhaul the management of the Big Three. “Throwing money at them isn’t enough,” he said. “They need money and they need new management. They need both, not one or the other.”

[Rineheitzgabot]

It is so disappointing to see LR owners spouting Rush Limbaug garbage. Don't you think the Japanese and Korean car makers have their government's help? Certainly when it comes to health care.

I assume you are referring to me (if you are not, sorry. If you are, here you go). The things I wrote probably do seem similar to Rush Limbaugh's "garbage". I am fairly conservative.

Let's examine what you stated: "...LR owners and Rush Limbaugh...". I have no idea what these have to do with each other, so I am not going to say anything except, should LR owners NOT agree with Rush Limbaugh?

"Don't you think the Japanese and Korean car makers have their government's help?" I don't care if Japanese and Korean car makers get gov't. help. Aside from the fact that they kick our a$$ in all relevant aspects of business that can be measured; if it is true, then I think they are being restricted by socialism as well. They could be so much better than they are now. Government is NOT the answer. REP or DEM. Politicians are happer to take the responsibility because it gives them power.

"Certainly when it comes to health care." As far as human nature goes, I think Lane Rover hit on this. If the doctor you visit does not give a rat's patoot if you are happy with his service, you will receive bad service. This is a given, and will certainly happen if he does not have to compete with his competitors to earn your business. It is unrealistic to think otherwise. Nationalized healthcare is a horrible, horrible idea.

Normally I wouldn't say anything in this type of thread but I can't not say something. We have become a country, quite possibly a world of mindless sheep. Most people do not think for themselves any longer they just jump on the latest bandwagon. Until individuals start being willing to invest the time and effort to become informed and to make decisions based on facts we can't succeed. We need to learn to ask questions, not accept anything but facts, and then to make our own decisions based on fact. I don't care if it is health care or Land Rovers. Use brains not emotions is what will keep this country strong.

I completely agree with you. Look at the concept of global warming. Millions of people around the world have subscribed to this with almost religious fervor, and it is still in the theory stage; it has not been proven.

[greenmeanie]

"Certainly when it comes to health care." As far as human nature goes, I think Lane Rover hit on this. If the doctor you visit does not give a rat's patoot if you are happy with his service, you will receive bad service. This is a given, and will certainly happen if he does not have to compete with his competitors to earn your business. It is unrealistic to think otherwise. Nationalized healthcare is a horrible, horrible idea.

As a UK citizen who has experienced both systems I can safely say I'd take the nationalised health care any day of the week. I have two siblings who have had cause to make good use of the system - one with nerve damage from a car crash and the other with a degenerative nerve issue affecting their throat. Both have received excellent care that would have bankcrupted me under the US system. My grandmother received care that while not extravagent, alllowed her to live a comfortable life up till her 100th year. Not all doctors in the world do it just for the money - some people actually choose the career based onthe idea that it is a noble calling. Understand that in our country you always have the option of buying private health care should you desire it.

I never trust the US system where the doctors are essentially bribed by the drug companies to prescribe their product or test whether you need it or not. Since when did an insurance agent become the expert on the limit of the care I should receive? Nationalized health care is not free as you pay for it with taxes. I do, however, regard it as value for money compared to the services I receive here.

Ok rant off.