The Big 2.5 on Main Street
I’ve been talking about the bloat among the ranks of the American manufacturers’ car dealerships in just about every post I do on the auto crisis. My premise is two-fold. First, one of the big problems the Big Two and a Half have in restoring their brands to credibility–even though the quality of their cars now matches the Japanese–is that there are too many dealerships out there given the number of cars being sold. This means that dealers have been discounting for years, cheapening the cars and leading consumers to expect deep discounts every time they buy American. This has cut into profit.
Then there’s the recent credit problems that exactly parallel the credit problems of the country as a whole and the manufacturers themselves: Car dealers buy their wholesale every month using credit. So if they can’t get credit, they can’t get new cars to sell. And if they’re stuck paying interest on a bunch of big trucks they can’t sell (as happened in August), then they’re paying into a black hole.
Any return to profitability for the Big Two and a Half is going to have to be accompanied by a gradual decrease in the number of dealers. But this excellent profile shows how dealers are disappearing much more rapidly than that–and with them, thousands of jobs.
Top executives of the Big Three automakers are preparing to return to Washington this week with business plans they hope will lead to a federal bailout. But any government help will probably come too late for thousands of dealers like Mr. Thomas who sell American brands.
They have been struggling for years, as Detroit’s fortunes waned, but what remains of their sales is evaporating along with consumer confidence and credit.
The National Automobile Dealers Association predicts that roughly 900 of the nation’s 20,770 new-car dealers will go out of business this year, and automobile analysts say the number of failed dealerships could rise into the thousands next year.
The article puts a scale on the importance of dealerships in smaller towns for good-paying retail employment.
In October alone, 20,000 employees of auto dealerships lost their jobs nationwide, more than half of those who were newly unemployed in the retail trade, according to the Labor Department.
The auto dealers association estimates that new-car dealers produce a $54 billion annual payroll for 1.1 million workers and nearly 20 percent of the retail sales and sales taxes in small and large communities alike. [my emphasis]
Read the whole article to get a sense of the further effects this has locally.
A Big Two and a Half bailout will help in one way–because it’ll get credit flowing again to dealers and to consumers. But consumer spending–especially on big ticket items like cars–is down significantly. Until people are buying cars in big numbers again, dealers are going to continue to go under.
I’ll be curious to see this week whether a couple of weeks back home watching dealerships struggle will help convince Congress that this crunch will affect more than just Michigan and Ohio.
I would like to add one point. One of the big arguments for the mouth breathing “put the Big 2.5 in Bankruptcy reorganization” crowd is the difficulty in shuttering dealerships and consolidating car lines (especially GM) is the prevalence of state laws that restrict actions against dealerships and their territories and, in some cases, even manufacturing brands of autos. You DO NOT need BK court to fix that; one simple little bill out of DC occupying and preempting state authority in that regard would solve that issue immediately.
Course, correct me if I’m wrong, but if Bruce Thomas goes under, GM/Chrysler won’t have to buy him out. But if he doesn’t and they eventually have to buy him out of the dealer, then he gets something for shutting down. Right?
I pretty sure you’re right, Marcy. A good friend of mine is a partner in a CPJ dealership in a small town about 50 miles outside of the Twin City area and he told me that is the case. In BK the contract with his supplier is abrogated, but if he and his partner lose their franchise they have to compensate them. He gave the impression that his dealership is in relatively good shape compared to others in his town and the surrounding area, but that if the credit squeeze drags on almost all dealerships will be in trouble. Just a few weeks ago the largest CPJ dealer company in the TC area, who also owns some stores out of state and also some stores of other franchises, lost his CPJ credit and had to shut down his 6 or 8 or whatever dealerships of that brand. At dinner last weekend his wife told me that he voted Democrat for federal offices this year for the first time ever.
Both Minnesotachuck and I are referring to Denny Hecker Realigns Dealer Group.
That dealer you’re referring to, Denny Hecker, also lost a ton of money in a real estate development company because he got greedy…
Auto companies don’t fail because there are too many dealerships, dealerships fail.
Heh, I was about to ask who the hell Bruce Thomas is, but then I read your link. I dunno that answer to your question; depends on the dealership agreements and particular state laws I guess. But yes, the general model is to give dealerships compensation in the form of a buyout and time to sort it out so that it does not happen overnight. Kind of the way that the Mercury and Oldmobile winding up was accomplished.
Repeating Tarmac the Insignificant predictions:
1. The Big 2.5 will get their bailout. This will allow them to pay their bills for the next 6+ months, but what then? Will the commercial and consumer credit markets thaw?
2. The Dealers won’t get a bailout, and assuming EW is correct, many will fold or disappear in Chapter 7 (here in Minnesota, Denny Hecker closes 6 car lots, sells 3; GM sues), and more unemployment.
Someone in TradMed reported that Hank Paulson sees himself as “plugging leaks in a dike”, so the obvious question is: “What happens when he runs out of fingers?”
Another analogy might be that the patient is reporting lousy circulation in the arms and legs. The Doctor says to exercise more. Neither remarks on the bullet hole in the patient’s heart.
Two things.
First, if the Big 2.5 get their bailout, it will fix one of the big problems for the dealers–credit. You got credit to use and to give, and at least you can move product.
I’d be shocked if there weren’t at least a discussion of some other assistance for the dealers (hopefully, rebates for energy efficient cars, with some kind of tie in that the OEMs have to take a gas guzzler that will never sell in return and dismantle it). But unfortuntely, the Dealers were only represented at the House hearing, not the Senate one. Ditto the suppliers (who of course will be better off with credit too).
I do agree that the Big 2.5 will use some of the bailout for dealer credit, but I don’t know what percentage of dealer credit is from the Big 2.5. Do you have a handle on that?
As regards the 1st part of this, the Big 2.5 have little in the near-term (and perhaps mid-term as well) pipeline that can be defined as really energy efficient. That is why I asked, after 6 months, what then?
And who supplies the credit here? I’m guessing that it is not the Big 2.5, but instead the normal commercial credit market. Whither that?
While the sub-prime mortgage market may have been the match that started the fire, it is not the fuel that is now propelling the blaze.
A major component now of the financial crisis is in the realm of the psychological. The worldwide market herd is spooked.
The means to affect this that the Fed, the Treasury and their foreign counterparts have used thusfar are dull tools at best.
The worldwide market herd has yet to assuaged.
A bailout of the Big 2.5 is but one finger in the dike. Yes, it can help stop that leak, but right now, apparently the leaks outnumber the amount of fingers and toes available.
I think the dealers are more reliant on the 2.5 than their Japanese counterparts, but in the 4 sets of paired dealers I was in last year, everyone was getting credit from the OEM.
The credit to pay the suppliers is loans to the 2.5.
As for efficient cars, you don’t even have to get to new cars to push efficiency. You’ve got standard cars that get 30+; GM has more than anyone, the same model cars for Ford are more efficient now than Honda (I had to go down a model to improve my efficiency with a Honda). Or push the hybrid Fusion or even get people in a goddamn 30 MPG small hybrid SUV. There’s plenty that’s already in the chain to sell.
Cruze and Fiesta are out next year (approximately 9 months, not 6), and both should be excellent cars.
I have a modest suggestion . . . .
I was interested to find VW current facing European Commission pressure to strip its five decades old protective measures from its board structure, a lot of this business evidently dating back to the time when people were discovering VW’s economy and its other unique appeals. I noticed some of this in studying telcos in Europe, which are structured with altruism toward nationstate economy (e.g. Alcatel, Deutsche Telekom).
On the US dealership closures, we had one in our small farflung suburb, the only remaining brandname showroom; though trucks and some passenger vehicles are in ample supply both further from the megapolis about 40 miles away from our tiny town, as well as 20 miles closer to the megapolis, near a span of ag enterprise.
My local GM dealer is right out of 1968 or 1971: buy up cheap ag land, pave it, and sell cars right in the middle of the floodplain. It does not seem to bother him one bit that paving acres near a river floods out the dairy farmers downriver, and also screws up salmon runs.
To most of us: “Water runs downriver” is a pretty simple concept; nevertheless, my local GM dealer sued the county and the state in order to have the ‘right’ to pave acres of farmland near a freeway exit. His actions are environmentally irresponsible, and GM needs to be aware of the deep antipathy that his kind of behavior produces for a consumer like myself.
People like me get to:
– pick up the tab for his flood damage, after
– contributing significant time and money to fight his lawsuits (he eventually won after a series of expen$ive appeals), and
– reading about our dairies going out of business.
If GM is serious about building ‘green cars’, then to attract consumers like myself they also need to rethink the environmental impacts of their dealerships. Because I’m not buying a car in a floodplain.
I don’t care HOW ‘eco’ the vehicle is.
That doesn’t mean that I oppose a bailout.
I can (barely) see the Bigger Picture if EW patiently points out the critical value of patents and a manufacturing base.
I realize the value of patents and a manufacturing base.
But I think GM — and all auto companies — need to rethink where they site dealerships, and stop paving farmland. Because a buyer like myself is not about to buy a car that puts my local dairies and farmers out of business, while increasing my property taxes because of flood costs.
I look forward to GM addressing this problem, because I’d far rather put my money into a car than into fighting stupid land use lawsuits and higher taxes for flooding impacts.
bmaz, feel free to try and ‘talk me down’.
And I hope someone passes the word on to whatever GM exec comes around to FDL; it’s a great idea, but man do they ever need to hold some of their dealerships to at least a basic level of environmental stewardship (!).
It’s not rocket science.
They need to build vertically. It’s already being done in LA – there are dealers with three and four story lots, because it uses less expensive land than the big flat lots. (Many of them are selling imports, but that’s another matter.) You don’t get many large flat lot dealerships here anyway, because it’s too expensive any more; even big ones are generally under five acres. (Yes, malls are doing vertical parking also.)
OT, MDog, NARA January 20 databurst worry, ‘restored’ millions of lost OCIO emails.
I read that earlier in the week. It read like a content-free action plan, at least regarding the White House email archive, or more appropriately, non-archive policies and practices.
It does little to mollify the concerns of anyone, including CREW, that this Administration and NARA have a handle on the White House’s emails.
I challenge that. It is the conventional BS everybody flails around, but I think Detroit, at least GM which is what I know better, has a lot coming you are not up on.
And, in that regard, I would like to note that we are lining up a very senior executive at GM to come to FDL for an exclusive discussion of just this topic. It is my hope to be able to announce the details very soon. I think you will find what they have up their sleeve very eye opening.
Hah! They are going to turn it around in 6 months? I’ve got a nickel that says they won’t/can’t. *g*
Then I will hold my breath. Did I mention I look good in blue? *g*
No not everything will be online in six months, but keep in mind that the reason GM needs a bridge loan is not that they were not getting by while they change the nature of the company, but that their credit sources and modalities that they rely on to do business have dried up and they are being slammed by the financial crisis. If the credit markets loosen up a bit and a little semblance of normalcy, not full recovery but just a little, returns, they will be fine.
Yup, and it is the credit markets that I don’t expect to be back to normal in 6 months.
I’d love to be wrong on that, but it sure seems that somebody has pulled the loose end and no matter how hard the Fed and the Treasury try, the sweater is going to unravel.
I’d also love to think that my pessimism is unwarranted, but sadly I think we’re in for worse than what we’ve seen thusfar.
I think part of that is due to the worldwide market herd psychology. They are spooked like nothing you or I have seen in our lifetimes.
And all the bad news that will continue to pour out over the winter will spook them even further.
I’d still love to be wrong, but I’m not feeling that way nor do I expect to anytime soon.
Here’s one of many reasons that I agree with you: look at the absolute, utter lack of transparency regarding the bailout so far.
If I were in Congress, I’d be breathing fire if I caught sight of Paulson or Bernacke. I think they (and their staffs) are in way over their heads, but that could be mitigated if there were at least a minimal amount of transparency.
As things currently stand, who trusts people who refuse to provide information about how much money has gone to which recipients? And if they can’t tell you that, why not?
If markets rely on trust, their conduct is precisely the opposite of what would be required to rebuild trust. Which is more reason for pessimism.
That’s not the whole picture.
GM (as did most of the others, including Japs, but to greater extent GM) got caught w/their pants down when gas hit $4… they didn’t see it coming, & didn’t have effecient products to meet that demand. When CDO meltdown hit, along w/dropping DOW, layoffs etc., double whammy made it worse. As a percentage of market share, GM lost much more than Jap big 3.
So gas back down to “cheap” levels, but hangover from $4 p/gallon remains (most people expect price to go back up when world economy rebounds). With per/capita income way down & all the rest, your comment:
IMO, is very much in doubt, at least over minimum next 2 years.
…
WRT subject of Marcy’s post: one thing big 2.5 sure as hell could is begin publishing computer codes (eg: auto system diagnostics): beginning (I believe) w/’08 and following years, they have proprietized ‘em thus eliminating whole swath of very capable local repair shops from maintaining/repairing/even tuning them.
AFAIC, this is shitty kind’a stuff designed to inflate cost of their services and force customers into their shops. Their are a number of local independent shops here saying this policy is already seriously eroding their business, and threatens viability in very near term.
It’s artificial market manipulation AFAIC. Beyond that, last few years dealer service hasn’t been the gold standard it used to be: many instances I’m aware of (and not just GM) of sub-standard work from dealers. Most of the mechanics in dealer shops (at least here) now piecework (eg. get paid by the job) as opposed to paid hourly, as they always have in past. Unchecked, mechanic’s incentive to get-it-done-faster vs. get-it done-right becomes similar to “market forces” that drove standards on Wall Street off the cliff.
And lastly, through times of new car slow sales dealerships ramp up their used car sales efforts… always have. And having fewer trade ins they go buy @ same used car auctions as all the used-car lots do. Over the years, buyer would always pay a premium of 10-40% buying same used car from dealer as they’d pay from private party of used car lot. The advantage was (most) dealers could be counted on to go through those cars w/fine tooth comb ensuring they were selling good equipment.
On wide swath of dealerships, this “quality assurance” for used cars has slipped dramatically… same dealer premium exists, but guarantee of quality way, way down. I’ve seen it over & over again, in a number of cases to obscene levels.
My parents are now 89/87 yrs old. 3 years ago they moved to Spokane. They traded in ‘94 Maxima in pristine (literally) shape, w/57k original miles, for ‘99 Subaru Legendd (for AWD in icy winters). Their old, not as sharp as they used to be.
Dealer gave ‘em $1100 for Maxima, less than a quarter low bluebook at the time. They sold ‘em this Legend w/110k miles, looked ok but some paint fade/rock dings and moderately worn interior. And they sold it to ‘em w/leaky rear engine seals… in fact leaked like a sieve. When I lifted hood and checked around, the oil hadn’t even been changed… filthy.
And worst of all, they nicked my octagenarian folks $12k (after Maxima trade in) for a car, in that condition, worth +/- $2700. This dealership was APPLEWAY, FWIW. Took 4 months of getting awful nasty to get situation resolved, an even then resolution not quite up to the satisfactory level.
I’ve heard these stories over and over.
AFAIC, if those fuckers go belly up it’s fine w/me.
1. As far as I know, the only person in an entire dealership who has a steady paycheck is the receptionist. Everybody else is on some form of commission.
2. I wonder if the stories about all the wonderful cars coming out soon aren’t working against current sales. Might customers be waiting to see the new stuff?
3. If there are fewer dealerships, at least some of the jobs will merely be transfered to other places. If the demand for the jobs was really there, it will remain.
4. I’ve always wondered if those diagnostic codes couldn’t be displayed on the dashboard, in clear english, along with repair instructions. Actually, I haven’t wondered, I knew they could have been. It does present significant barriers to entry for small mechanics shops.
5. There are few frauds in the world that will match the “book rate” that customers are charges for repair time. Book rate times labor rate equals customer charge. I changed a generator in my jeep once and finished before I finished my cigarette. Book rate on this job was .6 hours. And I was using a crescent wrench
Wow, that is a really interesting point!
I am sticking with my aging Toyota for a number of reasons, including the fact that I have a ‘genius auto mechanic’ (my term). He’s told me how much he pays each year for updates to diagnostics for the computers in Toyotas and Nissan’s, and I don’t recall the numbers accurately but I was dumbfounded at his annual expenses for these costs.
You make a really intriguing point here.
Wow, I found this comment particularly interesting.
I happen to know that Spokane is in Washington State (and also the city of the ‘Zags’, for all you Final Four fans — Gonzaga University is in Spokane).
In fact, my ‘genius’ mechanic, whose name I got via my network of friends and family, runs his own shop. And one of the things that he dislikes about WA state is that there is zero quality control for mechanics — not anywhere in the state. So those of us who live here basically have to rely on ‘word of mouth’, which may be why Angie’s List has done well in this area.
The Spokane Better Business Bureau should hear your story, because it’s outrageous. My own parents aren’t in Spokane, but I totally understand where you are coming from — and dealerships would be wise to pay a lot more attention to their reputations.
Every single time my spouse takes his car to the VW dealership, he gets a follow-up phone call asking whether he was pleased with the services, etc, etc. That’s a sign of any well run biz, IMHO.
actually, that’s only a sign that they got someone making followup phone calls.
well-run-business can mean different things: sometimes comforting, and sometimes scary as hell. Seriously. AIG was one of those well run ones until… well, ‘ya know…
A better sign is action that follows the phone call, and quality delivered before it.
Just trying to make a few distinctions here in these tough times ROTL.
Point well taken ;-))
I have to agree with your distinctions.
MD @12, OT2, For some reason my subjective impression was a concern about available bandwidth at Nara.
First, I got to say that I never heard of a paved car selling lot way out in the ”wilderness?” farming community messing up the flood plain? Then you say that it is near a ”freeway” and I start to wonder if there were perhaps other more significant problems.
Assuming that the usual environmental engineering requirements for water collection and runoff were made, I don’t think that the dairy farmers flooding problems are much connected to that car dealer.
As for the big 3, and car dealerships are concerned. I believe that if (and I hope it does happen) GM, Ford, and Chrysler get the amount of help that will enable them to survive for say 2 more years, then those companies will be changed very much and greatly reduced in size.
The UAW and the fat cat Automobile executives have had quite a run in the USA for a lot of years. They fed on each other like these bad mortgage deals we have been hearing about. The UAW said ”we know you can pay it,” and the Car Company Executives, being strangled by a strike, said ”yes we can.” ”Liar, Liar.”
Like the dinosaurs found out, ”ages” end and newer more nimble creatures populate the earth.
Freeways extend out into urban fringe. Ag land is the cheapest land available, and easier to pave because it is mostly flat. The interstates throughout the US often connect cities, running through farming properties between one town and the next.
One would like to think that good engineering data would drive decisions. It would if the auto dealers didn’t have so much money to contribute to election campaigns for local officials who make the land use decisions. In fact, water weighs about 7 lb/gallon; consider a couple hundred pounds of water in your spa or hot tub. Then multiply that by about 10,000 hot tubs worth, and you begin to see the amount of weight that builds up. Then send those thousands of pounds of water at rapid velocities, and you have tremendous destructive power that obliterates houses, barns, uproots giant trees, and generally creates havoc.
Yes, the engineering specs make clear that this is a stupid land use move. But engineers are not the final decision makers; elected officials and judges (in this region, also elected) make those calls.
Whether they are reduced in size or not, my main concern is having to pay creditors to use the patents that GM created. Why pay someone else for your years of research and development, simply because they got all your patents at fire-sale prices when you were forced out of biz?
In addition, auto sales drive entire networks of mechanics, suppliers, and other economic sectors. The auto companies are the tip of a large economic ‘iceberg’ that needs to be viable, IMHO.
Well, if car company execs made only 20 times the income of a UAW employee, then I might agree with you. When they make 200 times as much, I think you might be wise to rethink your views.
First, how productive is the average UAW employee?
Second, how does the exec justify his vastly larger paycheck + bonus? (Maybe s/he can, but I’m skeptical.)
But at least I hope we can agree that auto execs and UAW employees both contribute to the economic welfare of the US and produce goods and services. In contrast, Wall Street produces services and their ’salaries’ and bonuses are extravagant — particularly in view of the fact that they’ve sunk the entire economy.
There’s plenty of blame to go around, but to put it all on the auto companies does not fit the facts. Far more of this mess can be laid at the feet of the already-bailed out Wall Street credit-swaps crowd.
If you’ve read EW’s earlier posts on the Big 2.5, you’ll have noted that she’s pointed toward a lot of restructuring, as well as R&D, on the part of the Big 2.5.
It may have taken them too long to turn around, but Ford has been working on hybrids for a number of years, and has also put money into ‘green building’ in its Dearborn plant. (I happen to be acquainted with an engineering professor who loves her Ford hybrid SUV, so I figure that Ford produces a good product on that model.)
The past is gone and we can’t remake it; but why cut off our noses to spite our faces when the Volt and other newer technologies appear to be promising?
If we can bail out Wall Street — whose salaries are obscene and mostly based on computer programming — then surely we can act wisely with respect to manufacturing.
But the auto dealerships should not be on ag land in floodplains; as PJEvans points out, there are wiser, more appealing ways to build showrooms.
OT
Thanks for this post EW. Some great comments. My family is back to a regular routine–sort of.
We have a new puppy. He’s a rescue of sorts. (Mom and Dad were rescued and the Mom was carrying pups at the time of the rescue.) He’s a black min. schnauzer. Cute as can be. We have no name.
EW, we could use suggestions…Feel free to have a “name the pup” contest.
I don’t think anyone has mentioned this but here is a point my dad has been making for about 5 years.
cars can last forever, they don’t really have a duty cycle, they run great and easily go without any major repair 300,000 miles
mostly if we buy a new car it’s because we want it not because we need it
in tough times there is no reason on the planet to buy a new car.
a second point;
consumers and stock holders have allowed ceo’s to make much more exponentially then the workers and this is far more disproportionate then any other time in history.
that needs to be addressed, through regulation or through marketing and stock holders need to have in the contracts that they vote for limits, or bonuses based on performance of sales/vs jobs not bonuses based on the value of a stock
see all later
The glut of cars in the U.S. provides an opportunity to remove old polluting cars from the roads and help the working poor and middle class. France recently bought old cars from owners to permanently remove them as a way to improve air quality. Unfortunately older cars are owned by people who cannot afford to replace their cars with newer models. So the impact of a government purchase program is limited, especially in suburban, exurban and rural regions of the country where mass transit is not available.
The auto industry is overloaded with new and used cars that it needs to sell. Every day the value of these cars is falling and prospects for selling these vehicles are dim. What if people could trade their old (ten years or older) cars in for a used (5 to 7 years old) car? That would allow owners to continue to drive, but would take the polluting cars off the road. These polluting cars would have to be destroyed and materials recycled. Title transfer would be to owners or the financing company of the old car. Although the value of the car will go up, payments will not increase and interest rates will fall under federal guidance for financing companies that participate in the program.
The federal government could also create a second tier subsidy for owners of cars 5 to 7 years old, allowing them to trade up for a new car much like a rebate. Government would pay the difference to the dealers. The auto industry would do its part in reducing the base cost of the cars to the dealers, who would have to operate on a lower margin to make the project successful. This program would have a 12 to 18 month lifespan depending on the state of the economy. This program would allow the auto industry the time to retool for green transportation.
Auto companies and dealerships would receive tax credits on a portion of their lost margins that would not expire for several years, which would help them as the economy recovers in the future.
It’s apparent that this program will cause price distortions in the auto markets, but it would be temporary; the current auto inventory would disappear and the air quality would improve.
Here in Maine there’s a dealership advertising that there is money to be lent out if you want to buy a car and to not listen to those in DC who are trying to scare you into thinking otherwise. Everytime I hear this commercial I think, “Yeah. The dealership will lend you money at a 13% interest rate!”. Spit.
I had a guy stop by my office Friday asking about house/apt rentals. He has enough cash to put down almost half the purchase price but the banks won’t lend to him. The largest Ford dealership in the area, Ernie Haire Ford, is closing its doors. The banks refuse to loan. They’ve gone from lending to anyone with a pulse to not lending at all.
yep, they are scared to death. there will be a new def. for normal in a few years. i wonder how banks will stay in business without cash flow.
this topic is yet another reason to let the whole industry go belly up.
The other day I passed the yard where new cars & trucks are off loaded from the trains to be delivered to the dealers in the Denver area. There was acres and acres of vehicles and no sign of anything being loaded on any of the transport trucks which were all parked.
there are many thousands stacked up at the la port of entry. nowhere to go.
When we were in Europe this summer we rented a GM Opel diesel and calculated that we were getting 66 mpg. The VW Golf we rented in Crete also got similar millage….
We did some research and the reason these cars are not sold here is because the diesel fuel sold in the US is not pure and high quality enough to run in these cars. The oil refineries need to improve the quality of the diesel so that Americans can take advantage of these vehicles.
The technology is out there, the cars exist, it is the refineries who are holding it up.
speaking of fuel – we are below $2 here in socal. the first time in memory that mx folks are shopping here for gas. it’s 2.35 there.
Gas is $1.73 here in Gulfport FL.
Same in AZ….. saw a station prices yesterday at $1.69….
Seen several commercial construction projects just halted mid build, one 4-5 story structure near a high end mall just sitting there all summer, other areas where there signs of “future” structures are just gone, no signs, no chain link, just bare ground.
what are the characteristics of better diesel that you mentioned? if you know.
Elmore did the research because of an argument with a co-worker…. I wish I had the info, it was the old argument that the European cars would not pass US emission standards that is why they are not here but actually, the cars run on high quality diesel which is not available here. If our current diesel used it would clog up the engine.
Section 2 of this article refers to low and ultra low level sulfur fuel and its availability.
http://www.factsonfuel.org/diesel/index.html
Diesel prices have gone up significantly, they used to be less than reg. gas. Refineries here have been forced to reformulate.
After the first of the year a new wave of the meltdown will occur as the financial industry fails to renew mortgages on all matter of commercial real estate including shopping malls, stores etc.
It’s “There are” not “There’s” when the subject is plural.
Unless you’re a Midwesterner.
Everybody here is ignoring one of the biggest questions facing GM today.
If they go down, what will happen to their longest continually-running, most successful nameplate, the Corvette?
Please, save the EV1 snark for another post, this is an American institution we’re talking about. If the Corvette dies, and the other sporty nameplate within GM, Camaro, dies as well, then the passion within GM dies, too. And if Ford kills the Mustang… then the passion within all of the domestics die, too. And I’ll just buy a Nissan 370Z or Hyundai Genesis Coupe instead of an econobox…
Well the mechanics are certainly in a different class from the line men who work building the cars. I have to agree however that the whole mechanics industry (regardless of car brand or small time shop) needs regulations.
My husband can fix any car. Has spent his life loving and working on cars. Does it for friends and family and none of us who have ever had to venture back into the land of “auto mechanic for hire” miss him more than when we get those bills and when we find out they didn’t fix what they said they did. This happens so frequently that it makes me wonder if there is a single honest mechanic out there. My husband in his early days worked at many of the big companies and said that he couldn’t think of a single one who wouldn’t attempt a swindle if they could get away with it.
I know my poorest clients have repeated ripoffs when trying to get a car repaired. Losing their hard earned money over and over again. If it were ethical I would have them see my husband but I can’t do that. He can’t recommend a single place in town that is “safe” for my poor clients.
To me that’s a whole different issue of it’s own. There needs to be regulations in the field of mechanics and prosecution for those who violate the law. But to me that whole field is rife with dishonesty and unregulated.
To the auto “makers” separate from “repair” I still think the key is in the restructuring and verifying the books.
I want congress to start seeing the books of these companies that they bail out. We have to know where the money went. It may seem obvious, but I would be willing to bet that we would find some important information that would help us avoid these pitfalls in the future.
In Response to ReaderofTealeaves at 45
My friend, you misunderstand my point about the executives. They as usual made ”decisions for the benefit of the decision makers, themselves.” That is prevalent everywhere even in the military out on the real big flood plains of which I am most familiar, the oceans. Certainly in our Congress and White House.
The executives wanted to keep their cushy jobs with large pay, and they needed to keep the stock up and the plants open, so they caved in to the UAW.
If you want to pillory the executives, then fine, but you are dealing with two groups, executives and the UAW, who together decided to commit a crime against the well being of their company which finally caught up with them.
Sorta like a prositute and her ”john” and when they both get HIV or Aids, each blames the other.
If, especially, in the old days when there were mainly 3 manufacturers in America, the union strike had had to be against all 3 of the manufacturers at once, more sensible deals might have been made. Instead each of the big 3 were whipsawed against each other by the clever Unions. Sometimes our cleverness comes back to haunt us.
But one more lash at the executives. Sure they make obscene amounts of money, but they are typically mobile, and they can trash and cash in on their company and move on. BUT as a group the executives don’t make anyway near the money that the UAW workers make as a group so the UAW workers which aren’t nearly that mobile should have been more careful and kept an eye on their counterparts which weren’t in their union because that became their real competition.
The UAW, like the old steel workers just priced themselves out of a job. You can say the Executives were bad, bad, bad, but that doesn’t ease the pain or the plight the UAW finds itself in.
As far as hybrids and electric cars are concerned, you should rent the DVD that just came out. ”Who killed the electric car?”
It is more than interesting and shocking, it is mind boggling.
The damn Congress should play that video for the Auto Executives when they show up on Dec 2 or whenever they are due for another stupid performance.
I saw that crockumentary, and it did nothing for me. Nothing. Can you guys please stop bringing it up like it’s a smoking gun or something, please?
Thank you. I got tired of killing that meme and just didn’t have the energy to do it again today. Damn car should have been killed. With prejudice.
Here is an interesting note for those that keep bellowing about this
documockumentary as some kind of slam on GM today, the makers of that previous one are now seeking Bob Lutz and GM’s cooperation in making a new documentary about Lutz to be tentatively titled “The Man Who Saved The Electric Car”.So give it up with the putrid EV-1. It was a horrid car.
Here are the fundamental issues:
1. The Big 2.5 need to maintain control of their patents for emerging new technologies.
2. Maintaining control of their patents allows them to build on the momentum they’ve developed toward a new energy economy that is not based on heavy, inefficient oil consumption.
3. There are parties who desire the patents and bargain-basement, fire sale prices; these parties find ‘reasons’ to object to the Big 2.5 bailout — one of their primary methods being to conflate the Big 2.5 bailout with the Wall Street bailout.
So we must ask: are these two bailouts ‘equivalent’?
How are they similar?
How are they different?
If the Big 2.5 bailout was to use the same logic as Wall Street, it would go like this:
1. Dealer A buys Auto A1.
2 To ensure that Dealer A gets all his money (plus interest) from the sale of A1, he goes out to the ‘insurance market’ to purchase a ’swap’ that will ensure he gets his full expected amount.
3. He is allowed to purchase the ‘insurance’ on the total of the cost of A1 + interest, and he is allowed to buy it at ratios of 30:1.
—– 3a. This means that if the total amount of A1 + interest is $30,000, he only has to put down $1,000.
—–3b. Under ‘Wall Street Roulette’ Dealer A puts down $1,000 — and this INSURES that he is guaranteed to get back $30,000.
—– 3c. Meanwhile, other dealers are also out spending $1,000 to INSURE that they can get back their full $30,000 for each vehicle they ‘option’.
—– 3d. In a very short time, a lot of $1,000 amounts change hands; it only has to do that about 100,000 times and someone (say, AIG) is in debt to the tune of $3,000,000. Not to worry; AIG doesn’t think everyone will come to collect at once.
—– 3e. The dynamic continues: dealers ‘option’ the odds that if they spend $1,000, then they are ‘guaranteed’ a return of $30,000. None of this is overseen, because back in 1999 Sen Phil Gramm argued that non of this should be regulated. So the insanity builds.
—– 3f. In practically no time, dealers each spending $1,000 apiece to INSURE their $30,000 ‘contracts’ for autos heat this market up faster than a Finnish sauna on Mercury — it’s wild, it’s the heydays, it’s Bonus Time on Wall Street because so many $1,000 checks are changing hands, all these jackasses think that money flows like wine and the Good Times Will Last Forevah. (No doubt I’m leaving out the random details: great cocaine and the long-legged hookers, but hang in here with me.)
—– 3g. So after about 1,000,000 of these exchanges in amounts of $1,000, AIG is ‘leveraged’ for something on the order of $30,000,000…. it’s basically a big math problem that people like to disguise with a lot of bullshit mumbo-jumbo about Free Markets.
—– 3h. So let this ‘Free Marketering’ cook a little hotter, and a little longer… and whoopee!! In almost no time at all, you have about $10,000,000 leveraged up to $300,000,000. Now, suddenly, some dealer out in Omaha, or in St Cloud, or in Denver wants to collect… and then another dealer wants to collect…
—– 3i. Someone says, “Fuuuuuuuckkkkkkk!” under their breath and probably wishes they had more good cocaine and great whiskey, cause guess what…? They’re about $290,000,000 short of the amount they’ve written contracts to cover.
Shit. Hits. Fan.
So then what? Well, if you are Wall Street, and you have a lot of friends in D.C, you belly up to your pals in the Capital and act like you’ve obligated the entire US public to pay off your gambling. The system will collapse! The markets — free, unregulated, and glorious as they were! — will collapse! The end is near! Your corner office? Gone.
Now, I despise my local GM dealer — the jackass who’s screwing up my floodplain, my dairy farmers, and my environment. And my taxes.
But I’ll give him this much credit — that jackass still didn’t expect me and mine to bail out his sleazy, sorry ass at the ratio of 30:1.
And at least he sells a tangible good.
So if you want to digress about whether a combined total of a few million UAW employees make a total sum that is larger than the combined (obscene) exec salaries + bonuses, go for it. Personally, I view it as a digression.
What pisses me off is to have to listen to ignorant bullshit that FALSELY equates keeping control of patents, with bailing out gamblers who make EVEN MORE than the auto execs. (If any auto exec made more than the $84 million/year attributed to the head of AIG, feel free to correct me.)
Just because two animals are ‘brown’ does not make them both grizzly bears.
One might be a puppy; the other might be a cougar.
Their ‘browness’ is one property that happens to be shared.
In no way, shape or form does that make them ‘the same’.
They are not.
Similarly, to say a bailout makes the Big 2.5 ‘the same’ as Wall Street is seriously flawed reasoning.
These are very different economic sectors.
Wall Street makes money from money — and, as we now see, from fraud, deceit, and corruption.
The Big 2.5 still make tangible goods.
All tangible goods are based on copyrighted, or patented intellectual property.
Control of that form of wealth — control of intellectual property such as patents — is a national security issue.
You do not hand your ass on a platter to people who aren’t as good as you are at developing novel, innovative solutions — NOT UNLESS you are explictly ‘Open Source’ or have some shared agreements.
Now, perhaps the Big 2.5 will move that direction, but for the present it is essential that the patents remain in US control, which means bailing out the sorry asses of the US auto companies — and setting strict conditions in doing so.
As for ‘outpricing’ themselves, I’d say this; UAW needs to work with management to make sure that its members do good work.
I don’t tell my dentist that he’s ‘outpriced himself’ — he’s a professional, and I pay for his expertise.
I don’t tell my doctor that she’s ‘outpriced herself’ — she happens to have some prestigious degrees and many years of experience that I regard as ‘valuable’.
I don’t tell teachers they’ve ‘outpriced themselves’ if they know what they’re doing and students learn.
If the UAW workers produce good cars, and have good safety records, then compared with the money spent to bail out ‘leveraged’ bullshit on Wall Street, IMHO the auto workers are a hell of a deal!
The main issue as I’ve followed EW’s threads are these:
1. How and why Wall Street and Big 2.5 bailouts are dramatically different things, despite the term ‘bailout.’
2. How and why it is important for momentum that the investments made by the Big 2.5 to move toward cleaner energy be retained by ensuring they remain in business to retain control of their patents.
3. There are powerful interests for whom the Big 2.5 are worth ‘more dead than alive’; they have spokesmen like Sen Richard Shelby of Alabama who can waste hours of time wankering on about the shortcomings of the Big 2.5. Such muddled thinkers should be ignored and scorned.
Other than that, you could easily spend a decade tossing around blame, excuses, and false claims.
I expect that the moron who has impacted my local floodplain will, under the new, ‘greener’ Big 2.5, discover that the auto companies no longer tolerate showrooms in floodplains, and that kind of lunacy will stop. In the future, as the car companies adapt to a new ethos, and new products, it will be a no brainer to recognize that their marketing, showrooms, customer service, and contact with consumers will need to align with more sustainable practices.
That will be a refreshing change, and I’d sure rather put my money toward that outcome, than cover the hedges, options, swaps, and gambling of egotistical frauds.
Wall Street is history.
We need to invest in Big 2.5 to move forward.
Apologies for this wayyyyyyy too long comment.
Don’t know how to delete it; put up a post at Oxdown, which is what I should have done in the first place.
The floodplain issue took several years of monitoring and part-time focus; clearly, I have too much passion to squeeze into a reasonably sized comment.
Apologies!
Isn’t this precisely why the auto industry developed into the finance industry? Isn’t that why GMAC created it’s own loan department and financing? We need to see the books. In my opinion this created a dual relationship, an unethical marriage, so to speak.
bmaz, ferrarimanf355
well if you or someone else doesn’t mind, please clue me in about why the EV1 was bad. The people in the documentary seemed to love it, and why were the cars destroyed? That seems a little crazy.
readerOfTeaLeaves,
at item 3., I dropped out. Way too muddy for me. I just hope these financial guys, Republicans, Democrats and various Savants know what they are doing and get the economy back on track. I have lost the value of a fair sized house in my 401 so far. I would like to get it back.
I do agree with you that I would rather spend money on saving an homegrown industry making cars and trucks than on International Hedge Fund jocks, and Derivative swamis. But, all the powers that be seem to think that saving the Finance Industry is vital! Not so much the Auto Industry.
My only problem with GM, etc., is what will it take? How much and how long? And will the Auto Companies and the Union both continue changing their stripes to more match their competition.
readeroftealeaves, putting it another way, I don’t want to have to be putting money into that Auto operation year after year because the public just won’t buy the cars. Regardless of what kind of patents they hold, they still have to sell cars.
I have to point out the “changing of stripes” is an interesting concept
in light of http://emptywheel.firedoglake……nt-116099:
The thought of risking our national security through tanking the auto industry, creating a reverse stimulus on our economy due to tanking the auto industry; thus, creating yet more national security threats is simply wreckless and destructive.
We cannot go there.
Thanks Gerald, you make some points that I agree with.
I know several people well enough to have heard the sums of money that they’ve lost since about Sept 5th, 2008 and it’s really, really emotionally intense — I’m as worried as anyone else, although my fundamental view is that we humans can’t handle the complexity of many of our tools and technologies at this point.
Personally, the last person that I’d put as head of Treasury right now is the former CEO of Goldman Sachs, mostly because no matter how smart he may be, his whole worldview is far too Wall Street and NY focused (’obsessed’ would probably be more accurate). Ditto the other Bu$hCo appointees.
George Soros has the best track record that I am aware of — but the Bushies loathe him, because he sees the Really Big Picture and he values openness and transparency. The fact that the Bushies all keep secrets, that all the Wall Street money is based on ‘private information’, and that the bailout is not one bit transparent pretty much tells me:
1 They don’t know what they’re doing.
2. They’re terrified we’ll all catch on that they don’t know what they’re doing – despite the fact that given Paulson’s erratic behavior it’s already obvious that they’re simply reacting and don’t have a handle on things.
3. They’re used to keeping secrets, they value insider information, and their power fundamentally relies on insisting that no one can make them accountable for any of their decisions — kind of the way the Mafia operates, which tells me all that I really need to know.
4. They’re used to getting what they want and believing they are valuable and important, so the phenomenal contempt and resentment that someone like me feels toward them must come as rather a shock — which means, they’re entrenched in self-delusion that is only making them more inept, and the economic problems worse.
Not a pretty picture.
People who are decent will figure out a way to make them work better.
Sociopaths will take advantage of the confusion, and those are the people that we need to spot and guard against — no matter whether they’re running governments, institutions, or the local gas station. For that reason, my own view is that far more law enforcement resources and procedures are critical for solving our economic woes going forward.
The most dangerous thing that occurred in the financial meltdown is that incentives were created by which companies were “worth more dead than alive” on the balance sheets. (FWIW, one reason that I utterly loath Mitt Romney is that Bain Capital was an early phase of this kind of ‘killing companies to pick off the best parts’, and I think that is fundamentally amoral within the larger social context.)
People have made millions from destroying companies – and now they’ve built this disastrous system up to such an extent that their next victims are that Big 2.5.
This really is a key, fundamental, critical conflict — and there are financial interests and third parties who want the Big 2.5 to fail so they can pick off the ‘carcass’ (i.e., the patents and intellectual property).
Agree with you that we’re all tired of supporting sluggards, particularly those who probably make more than most who read and comment around these parts. But despite that fact, as klynn points out there are bigger issues — how do we address them in a socially responsible way? The old methods are clearly NOT working for nearly enough people.
Bailouts have not worked, and are not working as predicted.
So now what?
How to retain the Big 2.5 on life support in order to maintain control of the patents while other factors shift so that they are more competitive going forward — in a society in which millions of people have just watched billions vaporize in their homes and portfolios?
And as wavpeac shrewdly points out, there is an overlap between ‘auto’ and ‘finance’.
(Kevin Phillips pointed out a few years back in a book titled “American Theocracy” that by the early 1990s GM was making more off finance than off products; we’d become a ’service economy’ back in the 1980s making more money off loans than off goods.)
wavpeac probably makes the most fundamental point of anyone on this thread:
There is a dual relationship between Big 2.5 and finance.
Those threads need to be untangled, and we need to figure out how to enforce restrictions on finance, while enabling the Big 2.5 to lead the way toward more sustainable solutions.
The one thing that I am certain of is this: if the Big 2.5 go under, it will impede America’s move toward more sustainable economic activities.
Sounds like Congress needs to figure out “Bailout 3.0: the Upgrade” and figure out what THAT could look like.