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Bronco_Beerslug
05-05-2005, 03:01 PM
American auto makers better open their eyes get out some new products (hybrids, ethanol, battery powered, etc...) in a hurry.
This along with Greenspan's statements today are not very encouraging.

-----------------------------------------------------


By Dan Wilchins

NEW YORK (Reuters) - In a one-two punch for financial markets, Standard & Poor's cut General Motors Corp.'s and Ford Motor Co.'s debt ratings to junk status on Thursday, citing brutal global competition and flagging sales of the automakers' most profitable vehicles.
ADVERTISEMENT

The downgrades, which total about $290 billion and are the largest cuts to junk in a single day, jolted financial markets. Stocks and the dollar weakened. Safe-haven Treasury debt prices rose. The broad junk bond market, which by some measures will expand about 15 percent in short order, dropped.

Burdened by junk ratings, the automakers have fewer avenues for raising funds. Their shares extended their losses and their bonds fell by about 5 cents on the dollar as investors braced for investment grade portfolio managers to sell auto debt.

The companies are facing difficult times and cuts to junk were expected later this year, but investors were surprised that S&P took action so soon.

GM and Ford are struggling with high health-care, pension and materials costs, which, combined with brutal competition from overseas companies have winnowed their market share.

The companies have ample cash for at least the next several years. The two other major ratings agencies still rate Ford and GM at investment-grade status, but further cuts for the companies are possible, analysts said.

"Potentially we've seen one or two shoes drop now, but it might be a four- or five-legged thing with more shoes to drop," said Jon Brorson, managing director of growth equities at Neuberger Berman in Chicago.

Investors had become more hopeful for dramatic changes at GM on Wednesday after billionaire Kirk Kerkorian, known for being an activist investor, said he was more than doubling his stake in the company to about 9 percent.

GM and Ford reported lower April U.S. vehicle sales on Tuesday, even as
Toyota Motor Corp.'s U.S. sales rose 21 percent from last year for its best month ever.

Crucially, GM and Ford's sports utility vehicle and truck sales fell. These vehicles have provided most of their auto-related profits since the late 1990s, but are less attractive as gas prices rise.

Standard & Poor's cut GM and General Motors Acceptance Corp.'s long-term credit ratings by two notches to "BB," the second-highest junk rating. The outlook on the new rating is negative, signaling that another downgrade in the next 24 months is possible.

The agency also cut Ford and Ford Motor Credit Co.'s long-term credit ratings by one notch to "BB-plus," the highest junk rating, from "BBB-minus." The outlook on the new rating is also negative.

A GM spokesman said in a statement that the company was disappointed with the downgrades, but that it has ample cash and liquidity to fund its business for the foreseeable future.

Ford Chief Financial Officer Don Leclair said in a statement the company disagreed with S&P's action. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."

GM BONDS SPEED LOWER

S&P's downgrades of GM and Ford may force many investment-grade investors to sell holdings to the much smaller group of portfolio managers eligible to hold junk debt.

Junk, or speculative grade status, signals that a company is more likely to default on its debt.

Between them, the two auto giants have some $453 billion of debt outstanding, including some $290 billion of unsecured corporate bonds that will become junk after the cuts.

General Motors Corp.'s bonds due 2033 with an 8.75 percent coupon fell to about 74 cents on the dollar from about 79 cents before the news, traders said. Yields on other GM debt relative to Treasuries rose by about 50 to 60 basis points.

A basis point is 0.01 percentage point.

The rising gap between GM and Treasury yields is a sign investors see more risk in holding the automaker's debt.

Yield spreads on Ford Motor Credit's 7 percent notes due 2013 widened by about 60 basis points to 460 basis more than Treasuries, a trader said. Ford Credit is Ford's finance arm. (Additional reporting by Dean Aubin in New York and Mike Ellis in Detroit)
http://story.news.yahoo.com/news?tmpl=story&cid=580&e=1&u=/nm/20050505/bs_nm/autos_gm_junk_dc

Beantown Bronco
05-05-2005, 03:09 PM
Talk about some of the worst run companies in the world....Toyota will be #1 in the world in less than 5 years.

ND Bronco Fan
05-05-2005, 03:14 PM
Talk about some of the worst run companies in the world....Toyota will be #1 in the world in less than 5 years.

Unfortunately I have to agree, mostly everyone will be driving foreign if things do not change for the better in the near future.

delany
05-05-2005, 03:14 PM
Talk about some of the worst run companies in the world....Toyota will be #1 in the world in less than 5 years.

Car companies have NOTHING on airlines.

The entire industry is poorly run.

I wish I had as much help from the government as they have when I screw up my life.

Beantown Bronco
05-05-2005, 03:17 PM
Unfortunately I have to agree, mostly everyone will be driving foreign if things do not change for the better in the near future.

It's not all that bad. Most "foreign" cars (at least Toyotas) are assembled in U.S. factories now, while most "domestic" cars are being assembled in factories in Mexico or elsewhere outside the States. It's almost better for the U.S. economy if the "foreign" automakers thrive.

Garcia Bronco
05-05-2005, 03:21 PM
Car companies have NOTHING on airlines.

The entire industry is poorly run.

I wish I had as much help from the government as they have when I screw up my life.


The Government?...You mean...you and me...and every other tax payer.

Bronco_Beerslug
05-05-2005, 03:21 PM
It's not all that bad. Most "foreign" cars (at least Toyotas) are assembled in U.S. factories now, while most "domestic" cars are being assembled in factories in Mexico or elsewhere outside the States. It's almost better for the U.S. economy if the "foreign" automakers thrive.
Well, it really is that bad. We're talking about 100s of thousands of good paying jobs at stake. And foreign made vehicles are basically that, employing thousands overseas making all the components (even though some are assembled here).

bendog
05-05-2005, 03:25 PM
I sold my Ford. It was my fav stock. Owned it for .... ten years at least. Sad day.

GM Ford and, I think, Chrys too, have about 1500 per vehicle more going in benefits than do the Japanese ... mainly because of older workers on defined pension benefit plans. Ford took three big hits too. The Taurus mis design. It was the leading sedan seller in the US before that. The explorer debacle. Ironically the new explorer is supposed to be safe, but the thing's huge. And the current management has to accept the blame for the fact that the one vehicle they haven't redesigned is the Ranger, and Toyota and even Dodge have very nice downsized PU's out there. And their little car ... the fiesta or whatever it is didn't get good crash tests.

delany
05-05-2005, 03:28 PM
The Government?...You mean...you and me...and every other tax payer.

exactly.

Being held hostage by an NFL owner by having to build him a stadium and pay obsene prices for BEER...is nothing compared to having to bail out companies and an entire industry that makes ENRON look well managed.

bendog
05-05-2005, 03:34 PM
the irony is that the Ford currently the ceo was a gore supporter cause he wanted more mpg incentive/regs.

Meck77
10-22-2012, 03:27 AM
American auto makers better open their eyes get out some new products (hybrids, ethanol, battery powered, etc...) in a hurry.
This along with Greenspan's statements today are not very encouraging.

-----------------------------------------------------


By Dan Wilchins

NEW YORK (Reuters) - In a one-two punch for financial markets, Standard & Poor's cut General Motors Corp.'s and Ford Motor Co.'s debt ratings to junk status on Thursday, citing brutal global competition and flagging sales of the automakers' most profitable vehicles.
ADVERTISEMENT

The downgrades, which total about $290 billion and are the largest cuts to junk in a single day, jolted financial markets. Stocks and the dollar weakened. Safe-haven Treasury debt prices rose. The broad junk bond market, which by some measures will expand about 15 percent in short order, dropped.

Burdened by junk ratings, the automakers have fewer avenues for raising funds. Their shares extended their losses and their bonds fell by about 5 cents on the dollar as investors braced for investment grade portfolio managers to sell auto debt.

The companies are facing difficult times and cuts to junk were expected later this year, but investors were surprised that S&P took action so soon.

GM and Ford are struggling with high health-care, pension and materials costs, which, combined with brutal competition from overseas companies have winnowed their market share.

The companies have ample cash for at least the next several years. The two other major ratings agencies still rate Ford and GM at investment-grade status, but further cuts for the companies are possible, analysts said.

"Potentially we've seen one or two shoes drop now, but it might be a four- or five-legged thing with more shoes to drop," said Jon Brorson, managing director of growth equities at Neuberger Berman in Chicago.

Investors had become more hopeful for dramatic changes at GM on Wednesday after billionaire Kirk Kerkorian, known for being an activist investor, said he was more than doubling his stake in the company to about 9 percent.

GM and Ford reported lower April U.S. vehicle sales on Tuesday, even as
Toyota Motor Corp.'s U.S. sales rose 21 percent from last year for its best month ever.

Crucially, GM and Ford's sports utility vehicle and truck sales fell. These vehicles have provided most of their auto-related profits since the late 1990s, but are less attractive as gas prices rise.

Standard & Poor's cut GM and General Motors Acceptance Corp.'s long-term credit ratings by two notches to "BB," the second-highest junk rating. The outlook on the new rating is negative, signaling that another downgrade in the next 24 months is possible.

The agency also cut Ford and Ford Motor Credit Co.'s long-term credit ratings by one notch to "BB-plus," the highest junk rating, from "BBB-minus." The outlook on the new rating is also negative.

A GM spokesman said in a statement that the company was disappointed with the downgrades, but that it has ample cash and liquidity to fund its business for the foreseeable future.

Ford Chief Financial Officer Don Leclair said in a statement the company disagreed with S&P's action. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."

GM BONDS SPEED LOWER

S&P's downgrades of GM and Ford may force many investment-grade investors to sell holdings to the much smaller group of portfolio managers eligible to hold junk debt.

Junk, or speculative grade status, signals that a company is more likely to default on its debt.

Between them, the two auto giants have some $453 billion of debt outstanding, including some $290 billion of unsecured corporate bonds that will become junk after the cuts.

General Motors Corp.'s bonds due 2033 with an 8.75 percent coupon fell to about 74 cents on the dollar from about 79 cents before the news, traders said. Yields on other GM debt relative to Treasuries rose by about 50 to 60 basis points.

A basis point is 0.01 percentage point.

The rising gap between GM and Treasury yields is a sign investors see more risk in holding the automaker's debt.

Yield spreads on Ford Motor Credit's 7 percent notes due 2013 widened by about 60 basis points to 460 basis more than Treasuries, a trader said. Ford Credit is Ford's finance arm. (Additional reporting by Dean Aubin in New York and Mike Ellis in Detroit)
http://story.news.yahoo.com/news?tmpl=story&cid=580&e=1&u=/nm/20050505/bs_nm/autos_gm_junk_dc

I wonder who is going to bail out GM the next time?
http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

Jetmeck
10-22-2012, 05:07 AM
exactly.

Being held hostage by an NFL owner by having to build him a stadium and pay obsene prices for BEER...is nothing compared to having to bail out companies and an entire industry that makes ENRON look well managed.


That's it......piss poor management. I have been through multiple bankruptcies and paycuts galore with two airlines, just don't blame the workers. Lot more to it than that.

Unless you all want to work for 90 cents an hour I don't know what to tell you other than management never shoulders ANY OF THE BLAME (LONESTAR), IT'S always labor fault even if they have taken multiple pay cuts already.


Sales are up for American automakers, I don't really see an issue in the forseable future.....we shall see.

NUB
10-22-2012, 05:15 AM
Some of it is the power of the unions, and some of it just the simple fact that American automakers do not have the product to compete. And this isn't new, either. American carmakers have been behind the ball for almost thirty years now.

Drek
10-22-2012, 05:50 AM
Talk about some of the worst run companies in the world....Toyota will be #1 in the world in less than 5 years.

You do realize that the major reason why Toyota is so competitive is because they're a government subsidized entity, right? The Japanese gov't. lets them operate at a net loss to create jobs and be more competitive than they really are.

So ask yourself how GM and Ford are supposed to run a business model that lets them make a profit in a sector where their primary competitor is free to just bleed money.

Toyota is basically a socialist endeavor by the Japanese gov't. to create a global power for Japan.

It's not all that bad. Most "foreign" cars (at least Toyotas) are assembled in U.S. factories now, while most "domestic" cars are being assembled in factories in Mexico or elsewhere outside the States. It's almost better for the U.S. economy if the "foreign" automakers thrive.
Toyotas are constructed in right to work states where high school drop outs get paid $11 an hour to put together your car.

If you pay attention as to where your domestic car came from you can buy one made here in the U.S.A. by someone getting paid a legitimate wage who has gone through extensive training and know what he's doing.

My car was built in Flint, Michigan by guys who can afford to buy the same car as me. I'm rather happy about that fact.

And the current management has to accept the blame for the fact that the one vehicle they haven't redesigned is the Ranger, and Toyota and even Dodge have very nice downsized PU's out there.
They have overhauled the Ranger, it's ****ing sweet. It's also only available in South America and Europe because Ford is concerned about it "cannibalizing" F-150 sales. Its a damn shame. He's a photo:
http://www.creativecrash.com/system/photos/000/129/613/129613/big/ford_ranger_2012_1.jpg?1298399255

http://www.gandzcars.com/wp-content/uploads/2012/02/fd2012ranger49136764m.jpg

http://cdn3.worldcarfans.co/2011/4/12/medium/4624257111914197978.jpg

They even sell it as a turbo diesel that gets fantastic mileage with good hauling power.

Beantown Bronco
10-22-2012, 08:47 AM
You do realize that the major reason why Toyota is so competitive is because they're a government subsidized entity, right?

I'd say "not making a piece of crap" is higher on the "major reason" list.

Rohirrim
10-22-2012, 09:29 AM
I really like that Ford Ranger. I've always hated GM cars, other than some of the classics they made in the 50s and early 60s. I could dig having a '61 Corvette, for instance. But I've always been a Ford guy. As far as the bailout goes, I think the president was faced with a Hobson's choice. Damned if you do. Damned if you don't.

ludo21
10-22-2012, 09:58 AM
Id rather buy a Toyota, but I like my Honda and Hyundai currently

FrankieTwoThumbs
10-22-2012, 10:19 AM
You do realize that the major reason why Toyota is so competitive is because they're a government subsidized entity, right? The Japanese gov't. lets them operate at a net loss to create jobs and be more competitive than they really are.

So ask yourself how GM and Ford are supposed to run a business model that lets them make a profit in a sector where their primary competitor is free to just bleed money.

Toyota is basically a socialist endeavor by the Japanese gov't. to create a global power for Japan.




GM and Ford haven't been subsidized? In any event, competing to the death on margins is a loser battle anyways, as Toyota can tell you right now. Toyota is declining in value, they can no longer afford both low prices and high quality materials and ownership costs are going up, with European car companies beating them out at what was their trademark. They will lose business and as you pointed out, they weren't really making themselves rich even before this. GM and Ford shouldn't compete with Toyota to be the lowest profit car company, they should find ways to compete in quality or branding or appeals to patriotism or whatever. If they can't then they shouldn't be in business.

Rohirrim
10-22-2012, 10:22 AM
Anyway, like Krugman points out, people are not going to spend during a recession. They'll keep the car they have and make do.

broncocalijohn
10-22-2012, 10:26 AM
Id rather buy a Toyota, but I like my Honda and Hyundai currently

Ludo, you are too young to know this but there was a time when you would never mention that you own a Hyundai. They have come a long ways since those days of the Excel.

Tombstone RJ
10-22-2012, 10:33 AM
GM and Ford are struggling with high health-care, pension and materials costs, which, combined with brutal competition from overseas companies have winnowed their market share.

Aaannd I stopped reading right there. It's amazing, simply freaking amazing that health care is such a culprit to this sagging economy.

Why is the cost rising? Two reasons--inflation (this is huge but the fed just keeps printing money and the Obama defenders are simply ignorant and wrong but they will defend BO to the death, right Paul-****-for-brains-Krugman?) and the fact that the Health Insurance lobby is dictating the pricing.

Why, because the Health Insurance Lobby is a friggen cartel and they are in bed--IN BED WITH THE FEDERAL GOVERNMENT!

Thanks for nothing congress.

Tombstone RJ
10-22-2012, 10:37 AM
Anyway, like Krugman points out, people are not going to spend during a recession. They'll keep the car they have and make do.

Krugman has some good points but he completely overlooks inflation. The shrinking value of the dollar also reeks havoc on people buying stuff, yah know?

Rohirrim
10-22-2012, 10:59 AM
Aaannd I stopped reading right there. It's amazing, simply freaking amazing that health care is such a culprit to this sagging economy.

Why is the cost rising? Two reasons--inflation (this is huge but the fed just keeps printing money and the Obama defenders are simply ignorant and wrong but they will defend BO to the death, right Paul-****-for-brains-Krugman?) and the fact that the Health Insurance lobby is dictating the pricing.

Why, because the Health Insurance Lobby is a friggen cartel and they are in bed--IN BED WITH THE FEDERAL GOVERNMENT!

Thanks for nothing congress.

Krugman bases his theories on available evidence not on ideological philosophy.
http://www.nytimes.com/2012/10/22/opinion/krugman-the-secret-of-our-non-success.html?_r=1&

Having a massive insurance industry profiting from its middle man position between patient and doctor will raise prices endlessly. Until we realize that medicine is not widgets, and does not fit into the profit matrix, our economy will continue to suffer under this burden. Imagine what would happen to this economy if businesses were suddenly off the hook for health care costs?

Tombstone RJ
10-22-2012, 11:06 AM
Krugman bases his theories on available evidence not on ideological philosophy.
http://www.nytimes.com/2012/10/22/opinion/krugman-the-secret-of-our-non-success.html?_r=1&

Having a massive insurance industry profiting from its middle man position between patient and doctor will raise prices endlessly. Until we realize that medicine is not widgets, and does not fit into the profit matrix, our economy will continue to suffer under this burden. Imagine what would happen to this economy if businesses were suddenly off the hook for health care costs?

Let's be honest Roh, this is stuff you, me and others have debated ad nausium on this message board. Krugman is not saying anything that I have not already stated. The reason for the rising cost of health care is directly due to the Health Insurance lobby. Why BO tried to federalize a system that is corrupted to begin with does not make sense (this is where I say the Health Insurance Lobby controls DC).

Break up the cartel. Let people buy health insurance across state lines. That is, increase the pool of people paying into the system and it will immediately bring down the cost for everyone involved.

Control inflation too as this will help the buying power of the middle class. This aint' rocket science and you don't need Krugman to tell you this stuff.

rugbythug
10-22-2012, 11:56 AM
Krugman bases his theories on available evidence not on ideological philosophy.
http://www.nytimes.com/2012/10/22/opinion/krugman-the-secret-of-our-non-success.html?_r=1&

Having a massive insurance industry profiting from its middle man position between patient and doctor will raise prices endlessly. Until we realize that medicine is not widgets, and does not fit into the profit matrix, our economy will continue to suffer under this burden. Imagine what would happen to this economy if businesses were suddenly off the hook for health care costs?

Everything is a choice between what you want and can afford. The real problem is people are not paying their own bill so they ask for everything and want to pay nothing.

If everybody had to pay 1% up front health care would get better.

Rohirrim
10-22-2012, 12:00 PM
Let's be honest Roh, this is stuff you, me and others have debated ad nausium on this message board. Krugman is not saying anything that I have not already stated. The reason for the rising cost of health care is directly due to the Health Insurance lobby. Why BO tried to federalize a system that is corrupted to begin with does not make sense (this is where I say the Health Insurance Lobby controls DC).

Break up the cartel. Let people buy health insurance across state lines. That is, increase the pool of people paying into the system and it will immediately bring down the cost for everyone involved.

Control inflation too as this will help the buying power of the middle class. This aint' rocket science and you don't need Krugman to tell you this stuff.

Unfortunately, the health insurance lobby isn't the only one in control of Washington. You have Ike's military/industrial complex running defense. Oil companies running our energy policy. Banks and Wall Street running our financial policies. Even down to the meat and dairy councils running our nutrition policies. The average American's voice is just not heard in Washington. Their ears are stuffed full of money.

My idea goes all the way back to Teddy Roosevelt. Nationalized health care. Single payer. Make medicine non-profit and available to all.

Lolad
10-22-2012, 12:13 PM
Unfortunately, the health insurance lobby isn't the only one in control of Washington. You have Ike's military/industrial complex running defense. Oil companies running our energy policy. Banks and Wall Street running our financial policies. Even down to the meat and dairy councils running our nutrition policies. The average American's voice is just not heard in Washington. Their ears are stuffed full of money.

My idea goes all the way back to Teddy Roosevelt. Nationalized health care. Single payer. Make medicine non-profit and available to all.

It will never happen.... You're talking about getting rid of "job creators"

ColoradoDarin
10-22-2012, 12:13 PM
Unfortunately, the health insurance lobby isn't the only one in control of Washington. You have Ike's military/industrial complex running defense. Oil companies running our energy policy. Banks and Wall Street running our financial policies. Even down to the meat and dairy councils running our nutrition policies. The average American's voice is just not heard in Washington. Their ears are stuffed full of money.

My idea goes all the way back to Teddy Roosevelt. Nationalized health care. Single payer. Make medicine non-profit and available to all.

Can you force people to become doctors and nurses? If not, what do you do about shortages in labor?

Tombstone RJ
10-22-2012, 12:17 PM
Unfortunately, the health insurance lobby isn't the only one in control of Washington. You have Ike's military/industrial complex running defense. Oil companies running our energy policy. Banks and Wall Street running our financial policies. Even down to the meat and dairy councils running our nutrition policies. The average American's voice is just not heard in Washington. Their ears are stuffed full of money.

My idea goes all the way back to Teddy Roosevelt. Nationalized health care. Single payer. Make medicine non-profit and available to all.

I agree with all of the above except nationalizing. If medicine was non profit this would immediately bring down costs. However, I disagree with nationalizing it because the US Fed gov has never demonstrated a compitent capacity to manage anything really. Look at the USPS as example 1.

Beantown Bronco
10-22-2012, 12:34 PM
I agree with all of the above except nationalizing. If medicine was non profit this would immediately bring down costs. However, I disagree with nationalizing it because the US Fed gov has never demonstrated a compitent capacity to manage anything really. Look at the USPS as example 1.

The government ran the USPS fine for over 200 years with zero taxpayer dollars. It's hardly their fault that everyone is using computers, email and online bill pay now instead of the mail.

ZONA
10-22-2012, 12:35 PM
American auto makers better open their eyes get out some new products (hybrids, ethanol, battery powered, etc...) in a hurry.
This along with Greenspan's statements today are not very encouraging.


You're first mistake is to be concerned over anything Greenspan has to say. Worst economic mind in quite some time.

mkporter
10-22-2012, 12:35 PM
Krugman has some good points but he completely overlooks inflation. The shrinking value of the dollar also reeks havoc on people buying stuff, yah know?


Well, two problems here. 1) Inflation has been at reasonable levels for a few decades now. 2) Not all effects of inflation are bad. For instance, any outstanding debt, priced in dollars, shrinks. Nice for a highly indebted society. Also, US based companies get a nice boost when the dollar shrinks relative to other countries currencies.

If inflation going up was always bad, then by definition, decreasing inflation is always good. We know this not to be true, as deflation can be a very big problem. The answer of course lies some where in the middle. Krugman argues that some increased inflation would actually be beneficial in strengthening the economy right now.

As a general comment for this thread, nice 7 year thread bump!

As a pedantic grammar note:

reek/rēk/
Verb: Smell strongly and unpleasantly; stink.
Noun: A foul smell.

wreak/rēk/
Verb: Cause (a large amount of damage or harm): "torrential rainstorms wreaked havoc yesterday".
Inflict (vengeance): "he was determined to wreak his revenge on them".

mkporter
10-22-2012, 12:44 PM
The government ran the USPS fine for over 200 years with zero taxpayer dollars. It's hardly their fault that everyone is using computers, email and online bill pay now instead of the mail.

The other thing is that it isn't really fair to directly compare government run entities to private corporations. Government's number one issue isn't necessarily maximizing profit. It also provides services for the commonwealth of the country and to achieve national goals. For instance, FedEx could decide (and does, I think) not to serve some people in rural areas, which the USPS does at a loss.

The real problem with the USPS is that they have to go through Congress to achieve rate hikes and other policy changes that would make them more competitive. That is one point in the "Government sucks at running things" column.

Tombstone RJ
10-22-2012, 12:45 PM
Well, two problems here. 1) Inflation has been at reasonable levels for a few decades now. 2) Not all effects of inflation are bad. For instance, any outstanding debt, priced in dollars, shrinks. Nice for a highly indebted society. Also, US based companies get a nice boost when the dollar shrinks relative to other countries currencies.

If inflation going up was always bad, then by definition, decreasing inflation is always good. We know this not to be true, as deflation can be a very big problem. The answer of course lies some where in the middle. Krugman argues that some increased inflation would actually be beneficial in strengthening the economy right now.

As a general comment for this thread, nice 7 year thread bump!

As a pedantic grammar note:

reek/rēk/
Verb: Smell strongly and unpleasantly; stink.
Noun: A foul smell.

wreak/rēk/
Verb: Cause (a large amount of damage or harm): "torrential rainstorms wreaked havoc yesterday".
Inflict (vengeance): "he was determined to wreak his revenge on them".


Yes, my grammar sucks. Yes, some inflation is ok, but only in moderation. That being said, when the price of goods goes up, it affects the middle and lower classes much, much more than the upper classes. If you want to protect these classes (middle class especially) you have to control inflation. $4.50 for a gallon of gas and $3.50 for a loaf o bread is just a couple of examples where inflation hits the middle and lower classes right in the gut.

Deflation is a little different. In the business world deflation can be a self induced problem. The businesses that practice this inevitably go out of business for obvious reasons

Tombstone RJ
10-22-2012, 12:48 PM
The government ran the USPS fine for over 200 years with zero taxpayer dollars. It's hardly their fault that everyone is using computers, email and online bill pay now instead of the mail.

fair enough, but there are other issues as well that I'm not going to expand upon here.

Rock Chalk
10-22-2012, 12:53 PM
The problem with this theory is that it takes like 10 minutes to train a monkey to work on a vehicle assembly line. Not one of those workers is worth more than 11 bucks an hour.
You do realize that the major reason why Toyota is so competitive is because they're a government subsidized entity, right? The Japanese gov't. lets them operate at a net loss to create jobs and be more competitive than they really are.

So ask yourself how GM and Ford are supposed to run a business model that lets them make a profit in a sector where their primary competitor is free to just bleed money.

Toyota is basically a socialist endeavor by the Japanese gov't. to create a global power for Japan.


Toyotas are constructed in right to work states where high school drop outs get paid $11 an hour to put together your car.

If you pay attention as to where your domestic car came from you can buy one made here in the U.S.A. by someone getting paid a legitimate wage who has gone through extensive training and know what he's doing.

My car was built in Flint, Michigan by guys who can afford to buy the same car as me. I'm rather happy about that fact.


They have overhauled the Ranger, it's ****ing sweet. It's also only available in South America and Europe because Ford is concerned about it "cannibalizing" F-150 sales. Its a damn shame. He's a photo:
http://www.creativecrash.com/system/photos/000/129/613/129613/big/ford_ranger_2012_1.jpg?1298399255

http://www.gandzcars.com/wp-content/uploads/2012/02/fd2012ranger49136764m.jpg

http://cdn3.worldcarfans.co/2011/4/12/medium/4624257111914197978.jpg

They even sell it as a turbo diesel that gets fantastic mileage with good hauling power.

Fedaykin
10-22-2012, 12:57 PM
https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcRZZUXAFZEI3jAbo_oYR2fGhH8_okvwv eNb6BqiYlDK4GxXsXLm

gyldenlove
10-22-2012, 01:15 PM
The other thing is that it isn't really fair to directly compare government run entities to private corporations. Government's number one issue isn't necessarily maximizing profit. It also provides services for the commonwealth of the country and to achieve national goals. For instance, FedEx could decide (and does, I think) not to serve some people in rural areas, which the USPS does at a loss.

The real problem with the USPS is that they have to go through Congress to achieve rate hikes and other policy changes that would make them more competitive. That is one point in the "Government sucks at running things" column.

The USPS has been running quite well for a very long time, if not for the liability funding mandate that cost them more than 20 billion in a 4 year span they would have been producing profits. Considering that they have to operate a large number of deficit operations to service rural and remote areas on a daily basis that is impressive.

mkporter
10-22-2012, 02:10 PM
The USPS has been running quite well for a very long time, if not for the liability funding mandate that cost them more than 20 billion in a 4 year span they would have been producing profits. Considering that they have to operate a large number of deficit operations to service rural and remote areas on a daily basis that is impressive.

Agreed.

cutthemdown
10-22-2012, 02:35 PM
You do realize that the major reason why Toyota is so competitive is because they're a government subsidized entity, right? The Japanese gov't. lets them operate at a net loss to create jobs and be more competitive than they really are.

So ask yourself how GM and Ford are supposed to run a business model that lets them make a profit in a sector where their primary competitor is free to just bleed money.

Toyota is basically a socialist endeavor by the Japanese gov't. to create a global power for Japan.


Toyotas are constructed in right to work states where high school drop outs get paid $11 an hour to put together your car.

If you pay attention as to where your domestic car came from you can buy one made here in the U.S.A. by someone getting paid a legitimate wage who has gone through extensive training and know what he's doing.

My car was built in Flint, Michigan by guys who can afford to buy the same car as me. I'm rather happy about that fact.


They have overhauled the Ranger, it's ****ing sweet. It's also only available in South America and Europe because Ford is concerned about it "cannibalizing" F-150 sales. Its a damn shame. He's a photo:
http://www.creativecrash.com/system/photos/000/129/613/129613/big/ford_ranger_2012_1.jpg?1298399255

http://www.gandzcars.com/wp-content/uploads/2012/02/fd2012ranger49136764m.jpg

http://cdn3.worldcarfans.co/2011/4/12/medium/4624257111914197978.jpg

They even sell it as a turbo diesel that gets fantastic mileage with good hauling power.

Wow so other countries and compaines pay less to build the vehicles, and their quality is as good or better, and the styling probably better in most cases. Crazy.

Lolad
10-22-2012, 02:50 PM
The problem with this theory is that it takes like 10 minutes to train a monkey to work on a vehicle assembly line. Not one of those workers is worth more than 11 bucks an hour.

Even at $11 thats not what i would call a living wage. You can't possibly expect rent, food, health insurance, gas, utilities etc to be paid for by bringing home roughly $1200 a month.

rugbythug
10-22-2012, 02:57 PM
Even at $11 thats not what i would call a living wage. You can't possibly expect rent, food, health insurance, gas, utilities etc to be paid for by bringing home roughly $1200 a month.

What does that have to do with anything. Just because you wouldn't doesn't mean no one would. If I can get the job done for 11 why pay 12.

menonite
10-22-2012, 03:13 PM
I don't know much about economics, but "Cut to Junk" status can't be good.

Drek
10-22-2012, 04:08 PM
I'd say "not making a piece of crap" is higher on the "major reason" list.

And your example of "not making a piece of crap" is the company that just went through the largest, most expensive recall in automotive history over something that actually endangered lives.

Also, American made cars have taken a massive spike upward in quality post-bailout, FYI. The Malibu is an excellent car. The F-150 is head and shoulders above all it's competition.

GM and Ford haven't been subsidized? In any event, competing to the death on margins is a loser battle anyways, as Toyota can tell you right now. Toyota is declining in value, they can no longer afford both low prices and high quality materials and ownership costs are going up, with European car companies beating them out at what was their trademark. They will lose business and as you pointed out, they weren't really making themselves rich even before this. GM and Ford shouldn't compete with Toyota to be the lowest profit car company, they should find ways to compete in quality or branding or appeals to patriotism or whatever. If they can't then they shouldn't be in business.
But look at people like Beantown and Rock Chalk for why this "alternative branding" doesn't work. People want cheap, stylish, and lots of bells and whistles. Patriotism is the furthest thing form their minds, what they'll do for repairs in years 5-10 are just a speck on the distant horizon, and the notion that it might be better in the long run for all of us to buy a car made by someone who actually knows why X nut goes on Y bolt and therefore makes enough to afford this same car strikes far too many as commie talk.

Also, GM and the like have gotten a one time bailout. Toyota literally gets its tab picked up by the Japanese government annually. Only in the last couple years has that started to waiver and suddenly their quality is dropping, their prices aren't, and they're having recalls.

Until consumers grow a conscience or a brain all markets, including the automotive industry, will be a race to the bottom.

I hope those hating on the U.S. auto industry are looking forward to driving their Tata Nanos and similar clones in the not too distant future.

Drek
10-22-2012, 04:09 PM
What does that have to do with anything. Just because you wouldn't doesn't mean no one would. If I can get the job done for 11 why pay 12.

Why not ask Henry Ford, father of the assembly line, why he paid his workers considerably more than he had to.

Tombstone RJ
10-22-2012, 04:50 PM
Why not ask Henry Ford, father of the assembly line, why he paid his workers considerably more than he had to.

I'm not going to get off my inflation soap box just yet: labor is another perfect example of why inflation can "wreak" havoc over the entire economy. If you gotta pay people more, yet they can't buy as much stuff, then you gotta keep paying them more to compensate, yes?

It's a crappy cycle. Labor rates are just one cost that is killing the US manufacturer. You gotta pay people more because things just cost more, like a friggen loaf of bread. Rent costs more. The overall cost of living goes up--not luxury items, but necessities!!

This is not good. This damages the economy. People spend less because they can't afford anything. They save their money because they are scared to spend it. Businesses don't grow because their cost to do business is greatly increased and this directly affects their profit margins. Lower profit margins in turn mean less growth as again, businesses are scared to grow. Overall there is just less spending, less buying, less jobs, less taxes, etc., etc., etc.,

/off soap box.

Drek
10-22-2012, 06:22 PM
I'm not going to get off my inflation soap box just yet: labor is another perfect example of why inflation can "wreak" havoc over the entire economy. If you gotta pay people more, yet they can't buy as much stuff, then you gotta keep paying them more to compensate, yes?

It's a crappy cycle. Labor rates are just one cost that is killing the US manufacturer. You gotta pay people more because things just cost more, like a friggen loaf of bread. Rent costs more. The overall cost of living goes up--not luxury items, but necessities!!

This is not good. This damages the economy. People spend less because they can't afford anything. They save their money because they are scared to spend it. Businesses don't grow because their cost to do business is greatly increased and this directly affects their profit margins. Lower profit margins in turn mean less growth as again, businesses are scared to grow. Overall there is just less spending, less buying, less jobs, less taxes, etc., etc., etc.,

/off soap box.

I agree completely. One of the best examples of this I frequently give people is to go watch season 1 of Mad Men. At one point word gets out that Don Draper, then senior ad man, was making 30,000 a year. The other college educated, white collar office guys were bitching to one another that he made "10 times what I make" and "no one is worth 30,000".

That was the conversation from a show set in the late 50's at that point. If you don't make more than 30,000 now you're flirting with the poverty line, if not well below it.

Inflation is a tough thing to fix because there are so many ancillary things outside the government's control that can potentially make it more necessary than you think. Economic hardship coupled with other countries manipulating their own currencies through intentional inflation and deflation can force a nation's hand.

But we could go a long ways to improving our current situation if we repealed farm subsidies and ethanol subsides, instead using that money to incentivize growing on all the unfarmed, highly arable land. It would increase the annual crop helping to protect us from drought while at the same time driving down cost most years.

The cost of things like corn and wheat have major repercussions throughout all necessities. The cost of any meat product is very dependent on the price of corn and wheat for example.

If you use that to drive down the cost of staple food items you free up more resources for other things, which helps drive discretionary spending.

This is why mortgage reform is also a key overhaul our government needs to get done. People need to be able to refinance at reduced numbers and banks just need to suck it up and eat the losses because foreclosing on 10% of the nation's homes isn't a worthwhile option. The banks made their bad bets and we paid for them once already, time to return the favor and give the people struggling but still making their payments some liquidity.

Things like this will free up more discretionary income, which will help to improve the economy, which ends up in less of a need for running the printing presses to cover governmental shortfalls. Team that with real tax reform and strong gov't budgetary reform and we'll see the U.S. rally back like it did following WWII.

Cito Pelon
10-22-2012, 06:31 PM
Non-UAW companies pay union scale wages and provide good benefits, that's how they keep the UAW out - their employees get to vote if they want the UAW in or not, but they say no because they're getting the same wages and bennies without the UAW protecting bums that don't perform. Younger people that perform better get their chance because older workers that are way over the hill get told "Either retire or get fired, your choice" and there's no Union Rep there as the nanny.

I've been both a union worker and management. The union often stunts progress because they insist older workers get coddled and insist older workers getting phased out of one aspect of the business get first chance at a new aspect rather than bringing in new more talented blood from outside of the company. They insist older workers get preference for new positions even if they're nowhere near as educated, as motivated, as enthusiastic.

Also, a UAW company (and with union companies across the board) has TWO pension plans, a solely company-funded plan PLUS a 401k plan. Non-UAW companies only have the 401k, and that pretty much is par for union vs. non-union across the board. Same with government employee unions like teachers, police, firefighters, etc, they get TWO retirement plans both solely taxpayer-funded and a 401k also.

Hell, the UAW companies Ford, GM, Chrysler as part of the UAW contracts (had) to continually fund those company-provided retiree pension plans - up until the recent bailout. As part of the bailout, the government forced the UAW to end that, which is probably a big part of the turnaround for GM.

So, off my soapbox, we'll see how it all turns out. The stock market is kicking ass, I'm way up over 2008 with my IRA's, let's hope whoever takes over the Presidency, the Senate, and the House keeps the progress going.

Lolad
10-22-2012, 06:39 PM
What does that have to do with anything. Just because you wouldn't doesn't mean no one would. If I can get the job done for 11 why pay 12.

There in lies the problem and the need for an increased federal minimum wage.

rugbythug
10-22-2012, 08:55 PM
Why not ask Henry Ford, father of the assembly line, why he paid his workers considerably more than he had to.

So? My boss pays me more than he has to. Actually he pays me just enough to keep me from going somewhere else. And I do the same. I pay people what they are worth to me. A living wage is just high talk for someone else paying more for people that aren't worth what they make now.

rugbythug
10-22-2012, 08:57 PM
There in lies the problem and the need for an increased federal minimum wage.

Why? Find me job posting for minimum wage.

Tombstone RJ
10-22-2012, 10:42 PM
I agree completely. One of the best examples of this I frequently give people is to go watch season 1 of Mad Men. At one point word gets out that Don Draper, then senior ad man, was making 30,000 a year. The other college educated, white collar office guys were b****ing to one another that he made "10 times what I make" and "no one is worth 30,000".

That was the conversation from a show set in the late 50's at that point. If you don't make more than 30,000 now you're flirting with the poverty line, if not well below it.

Inflation is a tough thing to fix because there are so many 1. ancillary things outside the government's control that can potentially make it more necessary than you think. Economic hardship coupled with other countries manipulating their own currencies through intentional inflation and 2. deflation can force a nation's hand.

3. But we could go a long ways to improving our current situation if we repealed farm subsidies and ethanol subsides, instead using that money to incentivize growing on all the unfarmed, highly arable land. It would increase the annual crop helping to protect us from drought while at the same time driving down cost most years.

The cost of things like corn and wheat have major repercussions throughout all necessities. The cost of any meat product is very dependent on the price of corn and wheat for example.

If you use that to drive down the cost of staple food items you free up more resources for other things, which helps drive discretionary spending.

This is why mortgage reform is also a key overhaul our government needs to get done. People need to be able to refinance at reduced numbers and banks just need to suck it up and eat the losses because foreclosing on 10% of the nation's homes isn't a worthwhile option. The banks made their bad bets and we paid for them once already, time to return the favor and give the people struggling but still making their payments some liquidity.

Things like this will free up more discretionary income, which will help to improve the economy, which ends up in less of a need for running the printing presses to cover governmental shortfalls. Team that with real tax reform and strong gov't budgetary reform and we'll see the U.S. rally back like it did following WWII.

1. Yes, there are other factors and/or reasons for some inflation, for example, when the dollar is too strong, that is, the middle and lower classes have too much "buying power" then the retailers raise prices. This is a big arguement by conservatives for not raising the minimum wage (and there is some truth to it) because raising the minimum wage just automatically raises the cost of goods because retailers raise prices accordingly. So, if and when the US Fed Gov decides to raise the minimum wage, it has to do so with a stipulation from retailers that sell necessities (super markets, the Wal-Marts, K-Marts, etc. of the world) that they will not automatically raise prices. This is a great way for the Fed Gov to actually "govern" fairly by protecting the buying power of the middle/lower class. The Wal-Marts of the world simply see the ability of profit margins to go up, thus increasing their stock's value and making shareholders happy. The US Fed Gov could stop this by saying something along the lines of "there will by no substantial price increases on necessities (food, raw goods like cotton and in turn basic clothing like tee shirts and jeans, perhaps petrol or energy too) due to raising the minimum wage for a period of 10 years, yadda, yadda, yadda." It only takes one major retailer like Wal Mart to raise prices for all the other retailers to follow suit. The reality is the retailers will continue to make crap loads of $ by sheer volume alone. This is a very "LIMITED" way for the Fed Gov to protect the buying power of the middle class and keep the US dollar strong while at the same time not over regulating markets.

2. The practice of DEFLATION by countries like China is a HUGE problem. This is why the Fed Gov's trading policies have to be completely revamped.

3. I really don't know too much about farm subsidies and whatnot. I really don't like the practice overall, it just seems counter intuitive to me. Why pay farmers to fail? I'm all for things like growing INDUSTRIAL HEMP and letting the free market dictate pricing.

I agree.

Beantown Bronco
10-23-2012, 07:25 AM
And your example of "not making a piece of crap" is the company that just went through the largest, most expensive recall in automotive history over something that actually endangered lives.

That was a few years ago, but ok. And it made the news because it was them and not "the American junk cars" once again. They all have had pretty major recalls in the last few years. Some just get more pub than others. Having said that, I did jump off the toyota wagon a few years ago, in part because of that and also because of the minor, but annoying, fit and finish issues I was noticing with some of their recent offerings. I jumped on the Hyundai/Kia family bandwagon and haven't looked back. I couldn't find a domestic car company that would come close in price for what I was getting.

Also, American made cars have taken a massive spike upward in quality post-bailout, FYI. The Malibu is an excellent car. The F-150 is head and shoulders above all it's competition.

This is like the classic OMane statement with little basis in fact. If enough posters repeat it, it's all of a sudden true. Somehow, this myth has taken off in recent years, but when people actually look at the hard data (initial quality surveys + long term ownership satisfaction surveys), "domestic" brands are still at or near the bottom across the board.

But look at people like Beantown and Rock Chalk for why this "alternative branding" doesn't work. People want cheap, stylish, and lots of bells and whistles. Patriotism is the furthest thing form their minds, what they'll do for repairs in years 5-10 are just a speck on the distant horizon, and the notion that it might be better in the long run for all of us to buy a car made by someone who actually knows why X nut goes on Y bolt and therefore makes enough to afford this same car strikes far too many as commie talk.

This isn't entirely true, for me at least. When I purchase anything that costs more than $100, I do some pretty extensive research on it. If two competing products are similar in quality and price, and the only thing that distinguishes them is one is made in the US and the other isn't, I'll buy the US one every single time. Recent example: I just spent a few grand for my man cave furniture. 100% made in the US and that was honestly the deciding factor for me.

Same with the clothes I buy.

I'm sorry, but the US auto industry just isn't there IMO. If they do get there the next time I'm in the market, I'll be first in line at a domestic dealership.

Lolad
10-23-2012, 07:58 AM
Why? Find me job posting for minimum wage.

The job description doesn't matter, if we as a country do not want to give handouts receiving government assistance they need to make enough money to live on. The appreciation of being employed makes them stay loyal, happy, and love their jobs. In turn their boss doesn't have to spend time retraining because of high turnover.

There is a domino effect in not having a living wage