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Old 12-13-2008, 10:56 AM   #61
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Does anybody have a source for expense detail for GM? All the income statements I can find, even in GM's SEC filings, have a single "cost of goods sold" line. I'd like to see the breakdown into wages, depreciation, parts, etc.

My problem is that the UAW claims that its members' total compensation is only 8.4% of the total retail cost of cars. If so, where is the other 91.6%?

I've scraped together a few crude estimates for GM based on scraps I can find here and there.
Total North American sales of about $100 billion.
UAW wages/benefits: $10 billion.
White collar wages/benefits: $7.5 billion.
Salaries/benefits paid at suppliers: $5 billion.
Interest on LT debt: $2.5 billion.
Advertising: $1 billion.
Depreciation: $3 billion (that's a really wild guess).

So I get revenue of $100 billion, and total expenses of $29 billion. I'm missing $70 billion in expenses. That's a huge error, but I can't find a source to clarify what's happening.

The "bailout" or "bankruptcy" questions is, If GM is going to be profitable, does cutting wages/benefits and interest expense really do the trick? Or is their problem in some other area?
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Old 12-13-2008, 10:56 AM   #62
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[*]I would love to see hard numbers on the $75/hour for autoworkers. How much is active employees wages & benefits, how much retiree benefits and other costs like Jobs Banks.[*]I would love to see the real employment numbers for domestic auto makers, suppliers and dealers and whoever else would be directly affected.[/LIST]If someone has them, help us out, I've been trying to find facts with little success. I think this is a critical issue, one that we need to decide correctly, but the facts are hard to find. My opinion is based on less factual information than I'd like.
Here is some information to start from the UAW website. They claim that the average auto worker makes a little over $27/hr and they list some of the things that are used to inflate the number to the $75 per hour meme.

Wages and labor costs - UAW Bargaining 2007
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Old 12-13-2008, 11:03 AM   #63
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Before you say "I'd prefer to take my chances in bankruptcy" know that there is usually a good deal of the "prisoner's dilemma" game that goes on in this type of liability management. Typically bond indentures only require 50% of the holders to consent to a change in terms. Companies can offer security, or cash, or other inducements for those that consent, while leaving those who don't with a more junior position in a company with less cash. So while bondholder's as a group may be better off rejecting the terms of the exchange, individual bondholders who consent could be better off than they would be otherwise.
But to reduce the interest payments and/or principal amount requires unanimity, per the Trust Indenture Act of 1939.
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Old 12-13-2008, 11:05 AM   #64
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Here is some information to start from the UAW website. They claim that the average auto worker makes a little over $27/hr and they list some of the things that are used to inflate the number to the $75 per hour meme.
$27 sounds about right as a base wage. Unfortunately this piece only mentions the straight hourly wage. It says nothing about what the fully burdened hourly wage is (including benefits and other employment costs). So in reality it hasn't debunked the $75 claim when all costs are included, and it looks to me they duck that question for very obvious reasons.

And the other complicating factor is that current UAW contracts basically have multiple tiers of workers, the "haves" with the gold-plated retirements and the "have nots" with only tanking 401Ks. This being an average, you have to believe that the have-nots make considerably less than $27 on straight wages while the haves likely get quite a bit more than that. (Of course, there aren't all that many "have nots" yet because they haven't done much hiring in a long time.)

But this link also shows something very illustrative: about 180,000 active employees and 540,000 retired beneficiaries (retired workers and surviving spouses). There are three retirees for every active employee!
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Old 12-13-2008, 11:06 AM   #65
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Here is some information to start from the UAW website. They claim that the average auto worker makes a little over $27/hr and they list some of the things that are used to inflate the number to the $75 per hour meme.

Wages and labor costs - UAW Bargaining 2007
Thanks, if nothing else it shows how onerous the legacy costs are. 180,681 active employees with 540,344 retirees and surviving spouses (not sure where the Jobs Bank folks are). Everyone has known for at least 10 years that the legacy costs would eventually make it impossible for D3 to compete, if they haven't already. Every domestic industry has had to confront this issue, all have either adjusted or gone under. The management, the UAW and the many politicians are holding on to times long gone by. The D3 are going to have to confront it sooner or later, sure looks like it's time. Bailouts are not the answer if it means the rest of us subsidize active and retiree wages and benefits ongoing that almost no one else has...
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Old 12-13-2008, 11:09 AM   #66
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  1. I would love to see hard numbers on the $75/hour for autoworkers. How much is active employees wages & benefits, how much retiree benefits and other costs like Jobs Banks.
If someone has them, help us out, I've been trying to find facts with little success.
I came across this yesterday -tells part of the story - not exactly what I wanted, but close:

http://www.reuters.com/article/marke...rpc=44&sp=true
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Here are details of the average hourly labor cost of UAW workers employed at Ford and those employed by non-U.S. based automakers with plants in the United States. The figures are similar across the three Detroit automakers.


WAGES: Base wages and cost of living adjustments
UAW: $29
Transplants: $26


WAGE RELATED: Paid vacation, overtime, holidays, night and weekend pay, break time
UAW: $14
Transplants: $9


BENEFITS: Healthcare, training, etc
UAW: $12
Transplants: $11


LEGACY COSTS (Without VEBA): Pension and healthcare benefits for retirees
UAW: $16
Transplants: $3


LEGACY COSTS (With VEBA): Pension and healthcare benefits for retirees
UAW: $3
Transplants: $3


TOTAL LABOR COST:
UAW (without VEBA): $71
UAW (with VEBA): $58
Transplants: $49
Source: Ford.
Note: Average wage assumes 20 percent entry-level employees.
Again, I think legacy costs are best describes on a per sales $ figure, but at $3 post VEBA and on par with others, it's a fairly moot point.

So it looks like post VEBA, approx $9 an hour delta. In light of tax $ going into this, yes, I think that $9 should be flattened, and I think the VEBA thing should be pushed up to today.

I dunno how you would control wages going forward. It's ridiculous to tell the UAW that they must be in-line with other plants, what's the point, how are you going to administer it? More govt involvement?

So in some ways, I think bankruptcy is the cleanest - let them all start with a clean sheet. The D3 would need to restructure in some way that the Unions cannot hold them hostage by way of strike and keep compensation artificially high. And the workers need to restructure in some way that the D3 cannot hold too much power to keep compensation artificially low either.

I'm pretty sure that the way to do that it to diversify the industry, company-wise and location-wise. Having so much industry centered in Detroit created the problem that the D3 had power over wages, which results in a Union forming to fight that power, which results in one becoming dominant and distorting the free market. I think a bunch of factories in a bunch of states, owned by a bunch of different companies, with no single union breaks that lock on power on either side, and allows a free market to function.

-ERD50
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Old 12-13-2008, 11:12 AM   #67
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Outstanding posts guys, where have you been hiding this stuff! And why don't our representatives and media put these kinds of facts into the mix instead of all the unsubstantiated rhetoric that drives the discussion? Damn...
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Old 12-13-2008, 11:29 AM   #68
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And why don't our representatives and media put these kinds of facts into the mix instead of all the unsubstantiated rhetoric that drives the discussion? Damn...
Because we can't let the facts get in the way of our preconceived notions?
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Old 12-13-2008, 12:08 PM   #69
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But this link also shows something very illustrative: about 180,000 active employees and 540,000 retired beneficiaries (retired workers and surviving spouses). There are three retirees for every active employee!
Does this sound like Social Security to anyone else? Looks like the D3 is an early model for the US retirement system.
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Old 12-13-2008, 12:12 PM   #70
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Does this sound like Social Security to anyone else? Looks like the D3 is an early model for the US retirement system.
This is depressingly true.

I think I need to go off and find that "Post a Happy-Thought Video" (or whatever it was called) thread...

-ERD50
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Old 12-13-2008, 12:14 PM   #71
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Does this sound like Social Security to anyone else? Looks like the D3 is an early model for the US retirement system.
Actually, yes and no. (Mostly yes, IMO.)

Yes in that an unsustainable (and increasing) retiree-to-worker ratio can threaten the long-term viability of the retirement plan -- and Social Security and Medicare are staring down the barrel of that gun without reforms.

No in that at least in theory, DB pension plans are funded on behalf of the covered employees at the time the work is performed rather than a pay-as-you-go pure Ponzi-type strategy.

But I am sure there were actuarial assumptions, when setting levels of contribution to the pension fund, that the business would keep growing its profits and could thus keep feeding its pension fund larger and larger sums of money without threatening solvency. Which brings us back to "mostly yes."
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Old 12-13-2008, 03:04 PM   #72
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But to reduce the interest payments and/or principal amount requires unanimity, per the Trust Indenture Act of 1939.
Yes, but I don't necessarily need to amend the indenture to accomplish either.

To cut the principal amount I simply offer to exchange existing unsecured debt with a very low expected recovery value for a lesser face amount of new debt that ranks more senior. Each bondholder is free to act in his/her own perceived best interest without any need to get 100%, or even majority consent. But we're only offering the exchange to the first x% of bonds tendered (although we reserve the right to exchange all bonds that are tendered ). First come, first served . . . and unsecured bondholders who don't go along will find themselves getting squashed behind the increasing amounts of more senior debt offered to those who do.

As a practical matter though, in order to get down to 30 cents on the dollar, they'd almost certainly need 100% participation. GM's unsecured bonds look to me like they are pricing in 20% recovery expectations. The pitch to unsecured bondholder's would be something like "exchange your existing bonds for 25% face amount of new bonds and 75% equity. 100% participation is required. If you don't exchange your bonds, the government's bridge loan will accelerate and we'll be forced to file for bankruptcy. In which case you'll likely end up with only 20 cents, vs. the potential for 25 cents plus equity upside we're offering you. Pick your poison."
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Old 12-13-2008, 03:19 PM   #73
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This is depressingly true.

I think I need to go off and find that "Post a Happy-Thought Video" (or whatever it was called) thread...

-ERD50
I have a pretty good headache now too...let me know if you find the happy thread.
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Old 12-13-2008, 04:05 PM   #74
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and unsecured bondholders who don't go along will find themselves getting squashed behind the increasing amounts of more senior debt offered to those who do.
That would depend on whether there were any anti-layering or "equal and ratable" covenants. With the "covenant-lite" loans that became prevalent in 2006 and early 2007, these may not exist. Older debt might have them.

You are quite correct that it is a giant game of "chicken". A bondholder group, if they stick together, can exert quite a bit of leverage on the debtor.
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Old 12-13-2008, 04:13 PM   #75
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That would depend on whether there were any anti-layering or "equal and ratable" covenants.
Simple enough to include a mandatory consent to remove the negative pledge in the tender/exchange offer . . . now I only need 50.1% to get my principal reduction.

And true, bondholder groups can form and prevent this kind of thing, but they've got to be able to trust the other "prisoners".
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Old 12-13-2008, 04:22 PM   #76
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Sure, it not easy or pretty, but what is the alternative?
Nationalization of passenger railroads has happened in the past and continues to happen with Amtrak. I know it's not fashionable to say we ought to take a page from the French, but didn't the French do that with Renault and later privatized Renault after a period of nationalization?
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Old 12-13-2008, 04:56 PM   #77
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Nationalization of passenger railroads has happened in the past and continues to happen with Amtrak. I know it's not fashionable to say we ought to take a page from the French, but didn't the French do that with Renault and later privatized Renault after a period of nationalization?
I'm not certain Amtrak is a great example, but ...

So OK, Nationalization of the D3 *is* an option. But I think it still comes back to addressing labor compensation either way. If a govt run D3 is still paying higher than free-market compensation to the employees, and is saddled with high legacy costs, it isn't going to be cost competitive with the non-D3. And as I said earlier - if the govt raises all compensation to the higher level, we won't be competitive with imports, and domestic car prices will be even less attractive to buyers. It's just pushing the problem around, it's not addressing it.

Apparently, these legacy costs largely 'go away' in 2010, but I guess the fund that backed them 'goes away' too. So I'm not sure how that really looks overall on a balance sheet, or any estimate of future survivability. I think what it does do, is to keep the UAW from asking for better and better deals on the legacy stuff, because they now 'own it'.

-ERD50

PS: it *is* fashionable among some of us to say to take a page from the French. Nukes for example.
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Old 12-13-2008, 05:12 PM   #78
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It's been said there are six people working in the U.S. for every one in the auto industry; steel, rubber, glass, electrical and wire, carpet, fabric, nuts, bolts and screws, etc.
I keep hearing about this, but no specifics. Does this include the employees that make wire for the auto companies and also for other companies?
I suspect exageration, but without details I am just left to doubt.
Of the people I know with jobs, none are directly affected??
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Old 12-13-2008, 05:34 PM   #79
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So OK, Nationalization of the D3 *is* an option. But I think it still comes back to addressing labor compensation either way. If a govt run D3 is still paying higher than free-market compensation to the employees, and is saddled with high legacy costs, it isn't going to be cost competitive with the non-D3. And as I said earlier - if the govt raises all compensation to the higher level, we won't be competitive with imports, and domestic car prices will be even less attractive to buyers. It's just pushing the problem around, it's not addressing it.
These problems will be compounded by the government's desire to use the automotive industry as a tool to advance environmental policy. Rather than trying to figure out what kind of car the American consumer will want in 5 years, the government will make the kind of car they feel Americans should drive. Down with profitable trucks and up with unprofitable hybrids and plug-ins. When consumer's don't show up to buy them, the government will subsidize its preferred vehicles. Foreign government's will see this as the protectionism it is, and respond in kind.

The foreseeable end result will be an automobile industry that employs too many people, at too high a wage, making expensive cars, that few want to buy, at a massive loss, subsidized by the government, forever.
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Old 12-13-2008, 07:39 PM   #80
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I keep hearing about this, but no specifics. Does this include the employees that make wire for the auto companies and also for other companies?
I suspect exageration, but without details I am just left to doubt.
Of the people I know with jobs, none are directly affected??
One way to look at this is to see how consumers spend their money. The assumption is that overall, wages in "all things automotive" are about average, so total spending is roughly proportional to total employment.

The BLS says that we spend 16.6% on "private transportation". But, only half of this is for the cars, parts, maintenance, and repairs. The rest is gasoline, insurance, and fees.

Of course, consumers are just 70% of the economy, I doubt that the other 30% spends as high a percent on cars.

When I look at the list, I'd say that most of the spending would continue, even in the short run, if the Detroit 3 all stopped building cars tomorrow.

Here's the breakdown from: ftp://ftp.bls.gov/pub/special.reques...05-06_2007.txt

7.2% New and Used purchases
5.5% Fuel
1.5% Parts, Repairs, Maint.
2.0% Insurance
0.5% Fees

16.6% Total
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