General Motors established its pension in the “treaty of Detroit,” the five-year contract that it signed with the United Automobile Workers in 1950..."
It was twenty years before GM saw competition from the Japanese (in the wake of the oil crisis), and it's hard for us to see six months out in our own companies. Any rational shareholder, were they so smart, could have dumped GM in 1973. And, really, 1950 to now is two whole generations (generally defined as 30 years). Fiduciary duty means a "reasonable person" standard. While, yes, it would have been better now if they had the government take on these obligations then, it's clearly not unreasonable for GM to have decided otherwise.
Second, and more interestingly to me, is that it was in GM's interest to bear health care costs. GM needed to attract and retain skilled labor (which is why they compensated them so well in the Treaty of Detroit). Bearing healthcare costs, as a flush company with two full decades of prosperity ahead of it, provided a competitive advantage in attracting and retaining labor versus other fields that these workers could have gone into, such as plumbing, construction, or the like.
I'll leave the historical nature of the Big Three's political biases to others.
So while the unions are certainly a big part of the problem, the responsibility is ultimately with management. It is ALWAYS management's fault.
It doesn't matter if it is GM or a start up, it's management. If you are considering going to work for a startup, the management should be the most important factor in your decision.
GM's management could have changed the company culture to be as efficient and productive as Toyota's. It's not like Toyota made a secret of how it works.
GM could have seen the decline of proven and easy to access oil reserves, and the rise of the middle class in the BRIC countries and done the math. They are in the car business, so they ought to have seen what's coming.
But no, crap giant gas guzzlers. The unions didn't do that, it was management.
And as for the contract, presumably it was also signed by management, not just the union.
"Non computer" stuff is often ok if it's just some random, interesting thing that's "food for the brain", but when you get into politics and economics (at least some kinds of economics) and stuff like that, it's just poison.
As for Toyota-style management? It's difficult to do with strong, uncooperative unions. Want to replace 100 workers by robots? Not happening. Want to give workers decision making power, tempered by accountability for their decisions? The union demands more money for the decisions, and thinks that "accountability" means "talk to the steward."
There is a reason Toyota builds factories in Kentucky instead of Detroit.
http://www.nytimes.com/2007/09/04/business/04uaw.html?_r=1&#...
I'm not saying GM made no mistakes, but unions did play a huge role.
But, alas, I think this is correct. This is a terrible forum for discussing political issues -- because the signal-to-noise in politics is very low (any political discussion is mostly about team-building, horse-trading, and tooth-baring, not problem-solving or analysis and certainly not software or technology) and we don't have the time to wade through waist-deep piles of personal statements, deal memos, and threats; because this site draws people from very diverse political backgrounds who will take a very long time to reach equilibrium if they start team-building, horse-trading, or baring their teeth; but mostly because the place just works better if there's some focus. It helps us to know when to shut up.
I interpret PG's mission statement not as an attempt to ensure that "anything of interest to anyone smart" is on topic, but as a signal that he doesn't want to be the Big Man who sets the agenda for news.yc. He wants the community to do that. And we have: political discussions get discouraged (using our polite jargon: "That's too reddit for this site") and I personally strive to limit my team-building, horse-trading, and tooth-baring efforts to the slyest possible implications. For example, I'm going to go mod up edw519.
It's not as if there are no other political forums on the web.
"When GM offered the UAW more lavish benefits, it did so in order to induce the UAW to accept less generous wages. The money that GM paid in the 1990s and 2000s to fund pension and retiree health bnefits was offset by wages that GM did not have to pay in the 1960s, 1970s, and 1980s. Lowenstein appears to want to live in a world in which GM (a) gets a break on its wage costs in the 1960s, 1970s, and 1980s; and can do so (b) without having to pay any money to fund pensions in the 1990s and 2000s."
Bad management screwed GM, not not the Unions. GM ought to have set aside the money saved on wages to meet these future obligations. That they did not do so is just one of many examples of their management incompetence.
I understand that to someone who saw what happened to reddit, the sight of words like "Obama" or "Union" in a title is very alarming. But not all stories with those words in their titles are boring political ones.
Don't worry, I won't let News.YC go down that road. I'll munge the voting algorithm before I let that happen.
That being said (and to counter my own point), the first Toyota Prius came out in 1997, and I don't think I need to tell everyone what gas cost then.
On what planet?
Wanna buy a buggy whip, a cassette player, or a 5.25" floppy disk drive? All marked up 100%, but still good prices.
That is silly. The capital markets are structured in a way that incentivizes short term returns to the detriment of long term growth. Everyone saw this coming. No one cared.
Whether this is a bad thing or a tolerable thing is an open question. What are the consequences of the death of the American auto industry? The management, employees and investors thrived for decades after this deal was made. It was not secret, so investors were able to price auto industry assets fairly over time. Now, pensioners effectively own a good chunk of the company so they will do just fine. There are no big losers.
Except the people of Detroit. The people of Detroit suffered to be sure. It may have been wise for the City of Detroit to acquire a sizable fraction of the companies so it could have a voice in long term planning. It may also have been wise for the city to actively encourage diversification.
It is not reasonable to expect leading companies to retain their position for centuries. Companies are simply machines that output wealth from humans and material. Machines, as a rule, grow obsolete.
I like hearing what the people on this site have to say about those types of issues and if they hold any relation to your businesses and strategies, even if they are 'off-topic'.
Revenue (ttm): 180.41B
180 Billion dollars revenue suggests to me that they already understand the basics of the auto industry.
No. These weren't "examples". They were caricatures.
Because the statement is absurd. What difference do your margins make if no one wants to buy your stuff?
We're all so good at tech and so used to eyeball driven apps that it's easy to lose sight of the single most important fact of business: sooner or later someone has to be a customer.
I never entered the "labor vs. management" debate here because it's a complex issue that won't easily be resolved here (or anywhere else). Instead I offered a play on pg's "Make Something People Want," slightly modified for Detroit.
I don't know whose fault it is (nor do I care), but face it: hardly anyone wants Detroit's cars. They've delayed the inevitable by bolting 4 door bodys onto pickup truck chasses for 15 years now without preparing themselves for $4 gas. Duh.
Look out your window right now. After the first 100 Camrys, Accords, and Altimas drive by, do you see anything from Detroit that you'd rather have? Neither does anyone else. That's Detroit's biggest problem, so I'll restate my original, they need to "Make Cars People Want".
I know this is Hacker News (thus the questioning about the applicability of this post). We must not forget that the business aspect is just as important as the tech aspect.
No matter what your other financials are, without demand, you have no sales. Without sales, you have no business. Then all of this is just one big hobby.
I actually think that 'boring' isn't the problem though. Boring stuff is easy to ignore. Political stories, on the other hand, are easy for everyone to have an opinion on, and get excited about. This tends to draw people in who otherwise might refrain from commenting... basically what happened to the reddit community. There were initially some political articles with the rest, and they were pretty good, and a decent mix of liberals and libertarians. Then it hit a tipping point, and that stuff completely drowned out the rest of the site.
I trust that you'll ensure that doesn't happen, but part of the equation isn't necessarily better algorithms, IMO, but trying to foster a community spirit of "let's avoid these things for the sake of the site's quality".
Stock Price History: 52-Week Change: -74.19%
I wonder if their owners would agree with you.
There are weak spots in their product line (especially not having a decent entry in the small car market for the US) but their problem is that they have massive debt, not that their sales aren't strong.
What could possibly matter more than their financial situation? Honestly, ownership actually paid management to lose 75% of their equity in one year? That's only a little better than playing the lottery.
especially not having a decent entry in the small car market for the US
What else is there now? Don't you think it's been management's responsibility (maybe their biggest one) to forecast the price of gas? Who does it affect more?
This is like saying, "Other than that, Mrs. Lincoln, how did you enjoy the play?"
And that's just in the US. You wanna know what the top-selling car in Europe is? It's the Opel/Vauxhall Astra -- a GM product -- with nearly half a million sold last year. The Ford Focus comes in third, after the Renault Clio. In Australia the top-selling cars are almost always GM's Holden Commodore and Ford's Falcon.
If you think nobody's buying American cars, that might just be a function of where you live (Northern California?)
But that's not what josefresco said. He said that profit margin is just as important as demand. I say it's not. Nothing "violent" about it.
A huge corporation has violated the most basic business rules, including perhaps the biggest, "Make something people want." And we debate about it.
But if GM was a web app and this was a "How do you like my app" posts, we would be shredding them here. You lost 75% of your equity in one year?!? You have no small cars to sell?!? We'd be telling them to go to barber college.
I'm looking at a list of the top ten cars sold last month. Four models were small cars (Corolla, Civic, Cobalt and Focus), four were mid-to-large sedans sedans (Camry, Accord, Altima and Sonata) and two were big trucks (Ford F-Series and Chevy Silverado).
Doesn't "top selling car in Europe" mean anything to you?
If you have a nice fat profit margin but nobody wants to buy your product, that's no good. If you're selling lots of products but making no profit on it, that's no good either.
But if you're like GM, and you're selling millions of units a year, each for tens of thousands of dollars, and you're still not making a profit, I think we can diagnose the problem as being in the margins, not in the sales.
Seriously though, if you want to go on a whine about how bad American cars are, I suggest the comments at autoblog.com which are suitable for that kind of inanity. But for this site, I have to say that the sales figures don't support the idea that demand for GM cars is small.
For $7.99 a month, you can have "airbag live gold" which automatically deploys the airbags during a crash. A great idea!
My recollection with reddit was that it was a 'tipping point' sort of process, and it went fairly quickly from being good to full of politics articles with roving bands of morons voting down everything they disagreed with.
The other thing is: if you want to discuss the election, or Iran, or Iraq, or unions, or the economy, you can do that on just about every forum on the internet. But if you want to discuss, say, VC-backed vs bootstrapped businesses, or how much stock an eighth employee should get, or [I dunno, insert third example here], there are very few places where you'll find a critical mass of people who know what they're talking about.
Huh? Seems to me that this just proved that the market is a better provider of "social insurance" in the form of products people want (i.e., medical care at market prices) than anything collective offered by either the unions or the government. Hasn't this guy ever heard of Social Security and it's looming insolvency? Why don't the same arguments apply? Just think...how much easier it would be for the government to prop up the financial sector temporarily (not that I'm for that...just following the argument here) if it didn't have 3 limbs tied behind it's back by SS/Medicare/Medicaid?
I was surprised to read this because your comments have usually seemed very good to me. But then I ran across http://news.ycombinator.com/item?id=242733 - so I'll concede the point on that thread. :)
The stock price is a different story. This article misses something important. Was there some massive cover-up with GM's financials? No. The debt due to pensions and such is not new information. If the stock buyers and analysts didn't adequately project a meaningful market price based on GM's published financials, who is to blame? Unions? No, the stock should be priced lower if thats whats on the books. Don't blame unions for bubble markets and the unfounded position that stock prices and company value should always grow.