The success of the current regime

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Profile Gary Charpentier Crowdfunding Project Donor*Special Project $75 donorSpecial Project $250 donor
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Message 1392439 - Posted: 19 Jul 2013, 15:55:19 UTC - in response to Message 1392354.  

I certainly wasn't aware how bad Detroit is.

Comparisons to third world cities would be appropriate.

It is a lesson to the circumspect as to what happens when you take too much off the top and don't leave anything to invest or keep a rainy day fund and also when you then fail to modernize to increase productivity.

The rich accumulate wealth because they learned this lesson. The not rich are not wealthy.

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Message 1392465 - Posted: 19 Jul 2013, 16:25:27 UTC - in response to Message 1392456.  

I find it rather worrying, that major USA cities are filing for bankruptcy protection. At least they are doing that to protect public sector salaries and pensions. So what is your President and your government doing about it?

He his reducing their income by making businesses purchase expensive health care policies for their workers. This expense is tax deductible which is another way of saying the local government doesn't get a slice of this pie. But the expense is real to the business and that makes some of them unprofitable and they file bankruptcy further reducing tax revenues and exacerbating the problem.

Oh, you were wondering if he was doing bailouts. No. The city can't give him a $10 million campaign contribution so they fend for themselves.


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Message 1392481 - Posted: 19 Jul 2013, 17:13:18 UTC - in response to Message 1392467.  

Hmmmmmmm. But would this have happened anyway, Obama or no Obama. Was it there in the background just waiting to happen. Was it kicked off by the sub-prime mortgage business? What is the basic cause of all this?

My take is the failure of the Detroit manufacturers to build products that consumers wanted to purchase in the quantities to keep the factories open. Or else we could blame it on Obama care even though this started decades ago.
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Message 1392482 - Posted: 19 Jul 2013, 17:15:52 UTC - in response to Message 1392467.  

Hmmmmmmm. But would this have happened anyway, Obama or no Obama. Was it there in the background just waiting to happen. Was it kicked off by the sub-prime mortgage business? What is the basic cause of all this?

Basic cause, that the rules and regulations for pension funds permit them to be "underfunded." Here the car companies were forced by unions to have them and offer large payouts, but their profits could not sustain fully funding them. As the car companies did not have to fully fund them, they agreed to union contracts they could not fulfill. This Ponzi scheme wasn't sustainable. Eventually even the union bosses saw this and the car companies were allowed to get rid of excess workers, cut salary and benefits and install robots. A sizable unemployment then followed. The local government suddenly could not support itself and also was in the same pickle on pensions to its union. Oh, Chris, Detroit was in bad bad shape before the sub-prime mess.

The short answer is Detroit is the way it is due to greed and bad government regulations.

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Message 1392485 - Posted: 19 Jul 2013, 17:19:19 UTC - in response to Message 1392482.  

And the car companies built many poor products.
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Message 1392490 - Posted: 19 Jul 2013, 17:28:15 UTC - in response to Message 1392485.  

And the car companies built many poor products.

Is that a surprise? If you are forced to overpay for labor, where does the money come from for quality materials?

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Message 1392509 - Posted: 19 Jul 2013, 18:41:33 UTC - in response to Message 1392164.  

So America really is skint then?

Detroit

Unions made Detroit everything it is today.

incorrect. The Auto industry made Detroit what it is.


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Message 1392510 - Posted: 19 Jul 2013, 18:43:19 UTC - in response to Message 1392481.  

Hmmmmmmm. But would this have happened anyway, Obama or no Obama. Was it there in the background just waiting to happen. Was it kicked off by the sub-prime mortgage business? What is the basic cause of all this?

My take is the failure of the Detroit manufacturers to build products that consumers wanted to purchase in the quantities to keep the factories open. Or else we could blame it on Obama care even though this started decades ago.

remember that most auto manufacturing has moved out of Michigan long ago.


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Message 1392513 - Posted: 19 Jul 2013, 18:51:18 UTC - in response to Message 1392490.  

And the car companies built many poor products.

Is that a surprise? If you are forced to overpay for labor, where does the money come from for quality materials?

Over paid? how? each vehicle made and sold contains profit for the auto maker. Here's the Deal. Using GMC as an example. GMC makes a fuel filters at one of its plants in the US. it takes 3 people to make them. they make about 500/hour. Now when you break down the labor, electricity, and actual manufacturing of the parts you get a cost around $2.50 . GMC then sells that part to its subsidiary which sells it to another subsidiary etc etc. Eventually, that part ends up at a dealership or a parts store costing $50+ for doing nothing more than shifting inventory from one warehouse to another under the same company umbrella. Virtually all of the profit is seen by GMC and very little by the parts store if anyone is dumb enough to buy the part. FYI the 3rd party Fuel filters cost $15 which whould you buy?


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Message 1392523 - Posted: 19 Jul 2013, 19:13:47 UTC

In some cases it is even worse than Mark portrays - the part is manufactured by a third party, who sells them the the vehicle OEM for as £3, and to "second line" suppliers for say £3.50. The OEM, having worked its accounting magic places them on his parts catalogue for say £50. The second line supplier, having worked its accounting magic places them on its parts catalogue for £10. The part is still in the manufacturer's warehouse. You place an order at your local OEM dealer, who orders it through the OEM ordering system, and eventually the part is shipped to the dealer, and thence to you, and you pay £50 for the "OEM" part. Or, you place the order at your local non-franchised repair shop, who orders it from the second-line supplier, who orders it from the manufacturer, who dispatches it from his warehouse to the second-line supplier, who ships it to the repair shop, and you pay £10 for it, and save £40 for exactly the same part, just in a different box..... And OEMs wander why they are loosing spares sales so they hike the price, so loose more.....
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Message 1392528 - Posted: 19 Jul 2013, 19:21:04 UTC - in response to Message 1392513.  

And the car companies built many poor products.

Is that a surprise? If you are forced to overpay for labor, where does the money come from for quality materials?

Over paid? how? each vehicle made and sold contains profit for the auto maker. Here's the Deal. Using GMC as an example. GMC makes a fuel filters at one of its plants in the US. it takes 3 people to make them. they make about 500/hour. Now when you break down the labor, electricity, and actual manufacturing of the parts you get a cost around $2.50 . GMC then sells that part to its subsidiary which sells it to another subsidiary etc etc. Eventually, that part ends up at a dealership or a parts store costing $50+ for doing nothing more than shifting inventory from one warehouse to another under the same company umbrella.

Nice story, but untrue. Even if that part was never shipped from place to place, adding shipping costs and warehousing costs, it still would get sold for $50.

Virtually all of the profit is seen by GMC and very little by the parts store if anyone is dumb enough to buy the part. FYI the 3rd party Fuel filters cost $15 which whould you buy?

That 3rd party fuel filter is made in China and costs $0.75 to make.

What is the fair price of labor? Is the worker in China underpaid or the worker in Detroit overpaid?

OBW that dealer buys that $50 filter for $25. 2x is a pretty standard retail markup.



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Message 1392570 - Posted: 19 Jul 2013, 21:50:08 UTC - in response to Message 1392528.  

nope actually wrong again. My last fuel filter was made in Mexico the one before that was Brazil. So when My dad did the math adding up the average cost per unit he was incorrect? yes, my dad made fuel filters for General Motors and had a bit of time on his hands as he watched his machine produce parts.

so the actual cost is what it is. Its not much. I guarantee you that GMC does in fact sell parts from subsidiary to subsidiary to jack prices up.

If in fact that filter cost $50 in reality and all other individual parts cost that much a $20,000 car would become a $100,000 car in no time. Now we know that isn't true and a person has to put that filter on a car as it is being made which does add cost to a car. So, why other than profit margin does a company that can make a part for $2.50 sell if for $50.00 .

Assumed value in a higher priced product? research shows that people are more apt to buy a product that costs more and works even if it made really cheap.

An example is Suave shampoo vs the Paul Mitchell brand. $1.50 vs $20 for products that pretty much have exactly the same ingredients. but that higher cost enticed people to think they are getting a superior product. Like a Yugo Vs. Mercedes where the Mercedes production costs are exactly the same as the Yugo's. I doubt GMC is selling more filters because of the high price but they certainly are make a lot of money off of the price gouging


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Message 1392730 - Posted: 20 Jul 2013, 4:56:14 UTC - in response to Message 1392570.  

nope you have over simplified.

Obvious you have never done cost accounting or fulfillment.

Those filters your dad made, did they leave his plant individually boxed in nice point of purchase display packing? Or did they leave in bulk packing? Or in special automated assembly line loadable packing? Or any/all of them depending on the order?

What you forget is the packaging the filter is in when it gets to the dealer isn't the same as when it arrives on the assembly line. Plainly the pretty display pack at the dealer costs more and they don't want to take the time to open pretty packages and throw them away on the assembly line. Oh and someone has to be paid to put them in the pretty package and some press-board printing plant has to be paid to make the pretty packages.

Then there is the shipping difference. A full 53' semi trailer headed to one location. Or several thousand packages going all over the world.

There there is the warehousing costs. Landlord wants $$ to keep a trailer full sitting around for dealers to order them one at a time. Someone has to be paid to pull the order, stuff it in a box, label it, and ship it.

Your $2.50 example price doesn't stay $2.50 for the ones that head to the dealer.

So understand the cost of the filter is not just the cost of the parts and the labor to make it. It really isn't the same filter that arrives at the assembly line.

We also haven't included the cost of financing. To have a few pallets of filters in a warehouse, the builders got paid. The money to pay them came from somewhere. A loan perhaps?

This doesn't justify the markup, but it does show you why the cost of the parts in a car is far over the cost of the car.

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Message 1392812 - Posted: 20 Jul 2013, 11:47:53 UTC

I know that Mr.Marchionne, CEO of Fiat, is also managing Chrysler and it seems that he is making money out of it. But where does Chrysler build its cars? Certainly not in Italy.
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Message 1392829 - Posted: 20 Jul 2013, 12:47:09 UTC

My stand is still that Detroit is the fallout of Union greed and corruption.

The big 3 were living high on the hog in their hayday. Life was good, America loved cars, and Detroit was most happy to supply everything they needed to give them their fix. Nothing wrong with that, so far.

The story continues. The UAW smells MONEY......OMG. And not just for the workers, but for the cronies and bosses who stood to gain even more than the working class.

Not that the working class did badly, mind you. The UAW, once entrenched and rabid, demanded ever spiraling contracts. Not just for wages, but the most insidious thing was the benefits packages. Vacation pay, retirement bennies, etc., etc., etc.. Which were ultimately unrealistic and unsustainable.

But at the time, the big 3 were doing so well that rather than stand their ground and fight it, they just said....OK. America was prosperous, they wanted cars. Give the freakin' UAW whatever they want and let's make hay whilst the sun shines. (in best Yoda voice...."Short sighted, you be, my friends.")

Finally it all came tumbling down. Foreign competition saw that they could build a better quality vehicle without paying the insane UAW labor rates and benefits, which by then had made a Detroit auto worker one of the best compensated laborers in the country. And the city of Detroit thrived on their spending.

Now the shit hit the fan. Faced with it's first real competition ever, sales started to slump. Production fell. Profits fell. But the UAW mandated bennies did not. The big 3 started to bleed money. And rather than face reality, the UAW dug in. Contract talks, strikes, more contract talks, more strikes. All in the face of continuing declines in sales. Detroit finally, in a bid to survive the UAW's ravages, started outsourcing. Which led to more contract talks, more strikes.........

It finally just all imploded. Reality became, well, reality.

And what is left of Detroit today is a sad picture of a city that lived beyond it's means for so many years and has nothing left to pay the bill.
"Time is simply the mechanism that keeps everything from happening all at once."

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Message 1392844 - Posted: 20 Jul 2013, 14:01:46 UTC - in response to Message 1392838.  
Last modified: 20 Jul 2013, 14:07:01 UTC

Just to clarify, Chris.

I do not, and never have worked in the automotive industry. I build fire trucks in a non union shop.

What I relay is my knowledge of what the UAW has done over many years, garnered from many sources.

I have had a distaste for unions since I entered the factory workforce when I was little over 18, and was immediately forced to hand over a portion of my paycheck to folks that did little for me personally.

Wages and benefits were not bad, but not as astronomical as the UAW in Detroit.

The only thing I DID see the union do was to have a union steward march up to the foreman's office with the lowlifes that constantly tried to do as little work as possible to maintain their job and try to keep them from being fired as they truly should have been.

And to top it off, even though I was willing to bust my arse and try to do the best I could, the people that recognized that were unable to compensate me for it because of union rules. Otherwise I should have been earning twice as much as some of the longtimers on the shop floor.

I have a story about one such incident.....I'll reiterate it if you wish.
"Time is simply the mechanism that keeps everything from happening all at once."

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