Submitted by SteadySelling on Mon, 05/18/2009 - 1:08pm.
I agree that we probably have not seen the bottom of this thing yet. However, I would appreciate if Stallion could educate me on what makes this recession worse than the 80's. According to the information I have the unemployment rate hit 10.8 percent and stayed within 1 percent of that for a good six months in 1982. Obviously you are basing your assesment on something other than unemployment and I realize there may be more to the picture than gauging by the unemployment rate. Maybe we are splitting hairs here, but if you factor in the relatively low interest rates and the low cost of gasoline (yes, low price, if you factor in inflation) I think we are better off today than in the 80's. Unfortanely, being an 82 model myself I wasn't there to know and can only base this information on the research I have done. What am I missing, Mr. Stallion.
Submitted by Appliance Stallion on Mon, 05/18/2009 - 1:43pm.
We could probably argue government statistics all day ...instead. Unemployment stats do not take into consideration people who have drifted out of the employment base. Those who receive no unemployment and are not a stat any more. In California the written stat is 11.8% .I truly believe that we have another 3-4% unemployed that these days are not part of the measurement country wide More importantly millions of jobs have been exported and will not come back. This did not happen in '82.In 1982 the banking industry had not collapsed,we have higher national debt and we keep draining money for the war effort during a time the business model is down. The housing industry is in collapse ,the auto companies are bankrupt and most manufacturers are going off shore at a faster rate than ever.Jobs that are left are service type ,lower paying jobs. So , in past years the model said ,consumer confidence up people buy cars ,appliances etc.Those may be bought but they will be from exported jobs. We have a new business model and the scary part is the business leaders cannot figure out what is going on.We are on the verge of commercial foreclosures due to the economy. I have seen it begin in California.Saying everything is ok does not make it ok.
Submitted by SteadySelling on Thu, 05/21/2009 - 9:40pm.
You do make some good points and I am not going to deny the accuracy of any of them. I do continue to be optimistic about our situation but only because we would be in better shape if we would all change our irresposible habbits today. I drive domestic vehicles, I don't shop at Walmart and I do my best to buy American whenever possible. If you are in retail support your local business community and pray that they will return the favor. There is still a good amount of US manufactured products and if we all focused on this it would make a huge impact on our economy - if, as you say, we keep buying from "exported jobs" then we all better get used to this business climate 'cause it will be here awhile. Yea, it's me again, the buy American freek. I feel their is still hope for our industry and I am impressed when I see the steps that some of the manufacturers are taking to actually compete with the imports and win. It is sad to see GE outsourcing almost everything. Frigidaire is OK but I believe Whirlpool deserves a medal of honor for the steps they have taken since and including their purchase of Maytag. Well, when everything goes down the tubes just look for the idiot sitting in the dark, closed appliance showroom in the tub of an American made washer with a smile on his face - that'll be me just happy the washer was made in the USA.
That said, in 79/80 (the last downturn) Chrysler did get a government bailout. Had they been allowed to fail then GM may be much stronger today. Obviously that wouldn't fix the banks issues, but seriously, that is our own stupid fault. They may share the blame, but it is not theirs alone.
If Chrysler were allowed to disappear, there's a better chance that GM would have reached its moment of bankruptcy much earlier. Nimble, and more importantly, desperate, Chrysler invented the two segments that have kept the domestics afloat these last 30 years. The minivan and the SUV (Jeep Cherokee). The auto companies still failed to adapt with the introduction of small cars, but they were crippled by a system requiring them to pay for health insurance and retirement so couldn't build one profitably. If we had government policy taking these costs off the shoulders of companies, it is unlikely that these companies wouldn't now be declaring bankruptcy. If the government had applied a 25 or 50 cent gasoline tax before the 1980's, manufacturers THEN, and NOW would have had the incentive to figure out how to build small cars and be ready for the oil shocks of 1974, 1979 and the final nail: 2008.
By and large, the countries which are kicking us in the teeth, are those with government involvement. Your idealistic belief in unfettered capitalism could only be the product of someone who was not around during the hay-day of the oil, coal, and railroad, trusts, or prior to worker safety regulations, but certainly you remember the explosion of innovation that resulted from breaking up AT&T. Couldn't we have used more government intervention to thwart the creation of the national super-banks of Citibank and Bank of America or perhaps of Whirlpool's purchase of Maytag? You want a good example of Laissez-faire: Somalia comes to mind.
Submitted by Bermuda Bob on Sat, 05/23/2009 - 1:14pm.
The main reason we're in this mess is because good ole' Alan Greenspan belief in a Laissez-faire policy when it came to "inflicting" restrictions on business, thinking that it was the ultimate in free trade !!! He was obviously wrong !!! What became of his policies was the evolution of companies who were allowed to become "too large to be allowed to fail" like AIG and Citi ... that's pure and simple BULL !!!
Chrysler was bailed out primarily because Lee Ioccoca was considered and automobile industry icon who could not possibly be wrong ... but in retrospect it's the same debate as "New Coke - Old Coke" ... the problem eventually because evident that everyone who touched Chrysler made poor decisions ... even Daimler, who centered their efforts on developing the "300" and continuing to push min-vans when SUV's and alike were coming in vogue !!! Then came the idiot Nardelli, who screwed up everything he ever touched ... and when everyone else was developing gas conserving, or even hybrid cars, Chrysler introduced "muscle cars" & "hemi" engines !!! The only division of Chrylser that made money was Jeep !!!
I honestly don't think that prohibiting Whirlpool from buying Maytag would have had much effect either way ... he main reason is that while they do business in the US, they don't necessarily manufacture here, where the likes of AIG, Citi, B of A, and Chrysler do ... just look @ other appliance manufacturers who outsource production of certain products to places like Mexico, South Korea, or even Turkey ... that's almost impossible to control !!!
What the bankruptcies of Chrysler & GM prove is that politicians have long pandered to the large voting block of the labour unions and thereby rendered themselves powerless to restrict union conduct until they had a stranglehold on business so it could not realize profits ... unions once were a necessary entity to protect the rights of employees, but no longer ... no employee has the right to inflict their, sometimes convoluted, agendas on an employer to the detriment of the whole because the employee has not invested as the owner has ... the owner has a fiduciary responsibility to act ethically and morally towards the employees, but the employees do not have the right to influence business decisions by owners ... they are not partners as the unions now believe !!! That is why companies flee the USA for more favourable locations where the voice of the employee is muted !!!
If we, as a people, don't learn that the core of American culture is it's business who provide good, services, and jobs to the rest of us and stop restricting business by unreasonable contract demands, governmental restrictions, and ridiculous taxes, we are doomed to experience this present condition over and over again ... each time getting more dire !!!What America needs is a simply set of an "Employee Bill of Rights" ...
(1) The right to a reasonable wage commensurate with the employee's talents and education ... no high school graduate has the right to make an outrageous wage compared to someone who has invested in their education or training ...
... and a guarantee that upper management will be compensated based solely on their investment and contributions to the success of the business !!!
(2) The right to safe and secure working conditions ...
(3) The right to complete & all encompassing family health care ...
(4) The right to a reasonable standard of living in retirement !!! Simple rules ... simply results ... a stronger business sector ... and a stronger America !!!
Submitted by SteadySelling on Tue, 06/02/2009 - 8:23am.
Your comment "I honestly don't think that prohibiting Whirlpool from buying Maytag would have had much effect either way ... he main reason is that while they do business in the US, they don't necessarily manufacture here" doesn't make a whole lot of sense to me. As far as I can tell the only thing that Whirlpool doesn't manufacture here is microwaves, a limited number of side x side refrigerators and front load washers. That leaves top mount refrigerators, bottom mount refrigerators, all the rest of the side x sides, cooktops ,ovens, dishwashers, and ranges. They employ more American workers than any other appliance manufacturer. Call me crazy, but this seems to be a better alternative than China buying Maytag.
Submitted by SteadySelling on Fri, 05/22/2009 - 8:29pm.
Mr. Advisor, I appreciate your insight and success on this site, but I do have a few issues with your posting. Chrysler came out with the Jeep Cherokee in 1984, Chevy the Suburban in 1936, so I feel Chevy invented the SUV market and Ford made it huge with the introduction of the Explorer. Does the fact that Chrysler invented the minivan mean no one else could have? My point is that with one less propped up, poorly managed competitor GM could have been more successful. They may have still chosen to make poor decisions. It is true, our automakers were "crippled by a system requiring them to pay for health insurance and retirement so couldn't build one profitably". That system is the labor unions, which I think you agree with. Toyota, Honda and all the other "domestic factories" work with the same US government system of having to pay for health insurance and retirement but they have done it successfully and fairly without the influence of unions. If the government did take that off their shoulders it would be on each one of our shoulders which wouldn't help the economy either. I don't care what universal health care plan the government comes up with for anyone it will never pay us for retirement which is the big cost these companies have to deal with because of their labor contracts which they signed. I do kind of agree with you on the gas tax thing as long as that tax was used to develop better fuel economy instead of doing a study on prostitution in Asian countries. Our government doesn't know how to use the taxes they collect. And yes, the government could have prevented Whirlpool from buying Maytag and we know it would have been purchased by Haier which is financed by the Chinese government. Do you actually think that would have been a better alternative? The Chinese government would have succesfully killed our appliance industry like they did our electronics industry. I also agree with you that the we are being hit the worst by companies who are supported by their government. This could be controlled by import tariffs taxing other countries instead of taxing US citizense to help our companies compete against foriegn governments. Finally, where did the Somolia comment come from? We live in the most productive country in the world that has invented everything of any importance. Why? Because of unfettered free market concepts. Every, I repeat, Every country based on Socialism has been and will continue to be failures economically. Name one instance where I am wrong. We will have our bad times, but we will always rebound as long as the Good Lord allows us to live on this old planet. Think about the economy in France, Japan, Russia, and Haiti for starters. Let's try to learn from history, because it WILL repeate itself.
Submitted by Appliance Stallion on Sat, 05/23/2009 - 1:06pm.
Your comments on the auto industry lack experience. When the big three was negotiating some very good deals with their union employees there was no competition from anyone overseas. Sure some English and German cars were sold here but not a major threat. Economically cars were fairly inexpensive and even the workers who built them could comfortably afford them. Anything wrong with that ? When Toyota and Datsun began to spread their wings here the big three were not prepared to react to the threat. I am not sure they thought the threat of the smaller car was going to be real at the time. So some of the deals made with unions in the 1950's and 1960's were difficult to change. Then in about 1974 came the famous"thirty and out" retirement deal. That allowed people who had thirty years seniority to retire at 52 or 55 and collect their pension. That spilled over to suppliers. Now ,those seem like problems but at the time were innocent efforts to make a comfortable life for someone who carried a lunch pail to be able to have some security and retire and continue to own their home. Since that time of the late 1970's there has been some lousy and then later some very good efforts to change the process ,reduce labor costs and become very productive. The American auto makers are more productive than their counterparts my friend. Less workers doing more with automation which bears a large capital cost. To support the auto makers will be the right thing to do and eventually this will work itself out. The auto workers recently worked with GM to make major changes in pay , retirement and benefits. Don't count them out yet. As the "Advisor of Oz" says the automakers of other countries are subsidized by the government. That is the only reason they can compete with us my friend. I believe in the free enterprise system and nothing wrong with helping that to even the playing field.I am also one who respects the older workers and they should not be thrown out with the bathwater just because you may be uncomfortable with the benefits they have worked hard for over the years. Think it is easy ? Try working on an assembly line and take a break only when a relief worker comes along. Try eating in twenty minutes and working with a headache or some other ailment.Time we respected our workers and our companies. Root out the greedy managers ,executives and union leaders ? I think that is transforming our society right now.America is resellient..Respect that. Don't sell us short.Give thanks this Memorial Day for your privilege to speak out.Keep a free society with self control, that will work.
I was working from memory, based on the new SUV interior designs, target segment (women) and explosive growth in sales, but research backs my memory:
"The transportation curator at the Henry Ford Museum, Robert Casey, contends persuasively that the Cherokee was the first true sport utility vehicle in the modern understanding of the term.[5] Marketed to urban families as a substitute for a traditional car, the Chrerokee had four wheel drive in a more manageable size (compared to the full-size Wagoneer), as well as a plush interior resembling a station wagon." See Wikipedia
Could others have invented the minivan? Evidently not. Henry Ford II, turned down the idea. Only Chrysler's desperation allowed it to get built. Your point that companies flourish without competition, (even government propped up competition) has no basis in fact. More competition is better. Chrysler in this case was bankrupted by the energy crisis because it had been "building what the people wanted" guzzlers. Government intervention in energy prices by limiting imports or taxing consumption would have better positioned us for the shocks. They retooled with the government money and continued to innovate for 2 more decades. Bankruptcy would have taken an entire supply base down the drain.
Labor unions. How can you complain about labor unions? Companies get the unions they deserve. Companies can pay or not pay, sign or not sign. I think you missed my point about foreign manufacturers domestically located. They do not have the health or retirement costs of the domestics because their workers are young and don't yet breath from O2 tanks.
Government provided health insurance is really the only one that makes sense, and is the one used by ALL of our chief competitors. Single payer/government backed insurance solves many many problems, but in this particular case, it solves the problem of a company like GM which is shrinking. Companies with shrinking employment continue to be responsible for health care for a retiree population which isn't dying fast enough. An ever increasing % of its meager profit is spent on lingering retirees. Bring on the ice flows. Single payer is cheaper, for you too.....but that's a discussion for another time.
Maytag: A stronger industrial policy can allow the foreign purchase of a domestic manufacturer while building in protections for workers and hence production. We just have to require it if we want it.
I was not suggesting that we are being hit the worst by companies supported by their governments, though who knows maybe that's true. I was implying that the countries which have grown the most in the last 50 years have done so with significant government planning, direction and investment, etc.
Socialism: I never know if people are saying Socialism, but actually mean Communism. We do not have unfettered free market, though Somalia may (that was the Somalia reference). Communism has not done well, but socialism is doing great. Singapore, Canada, Europe. Growth, income parity, literacy, life expectancy, infant mortality, health care. Economically? Weren't the last 6 months an indictment of unfettered financial markets?
Submitted by Appliance Stallion on Fri, 05/22/2009 - 1:19pm.
I do think that bailouts are needed and you are correct when you say that importers get government support all the time. Look at China's 16-18% subsidy of products exported from China. Look at Europe. The problem is needed change at the level required to make systemic changes. If I led the union I would do my darndest to save as many jobs as possible and work with a streamlined management that wanted to take an honest look at what and how to change. I think even the most cynical union member would consider that as opposed to losing job and pension. To me the bigger problem is the mismanagement of the pension funds and the crooks on Wall Street do not want to get the program straight,consequently the worker will suffer and probably takes more blame then they should. After having been a senior executive for over 25 years I conclude that management is 95 % of the problem ,not 85 % like Deming thought.Not that I worked for bad companies but I see the power the executives have in making decisions,good or bad.
Submitted by Mr. Allen on Fri, 05/15/2009 - 10:12am.
"I honestly believe that we will never see another time of "faux prosperity" as we experienced and caused the recession .."
Perhaps it's the pessimist in me, but this sort of economic downturn is not new to our country. Sure, the global effects are perhaps larger than they have been in the past, as it is true that we are becoming a global community. Even so, these sorts of downturns have happened before, with equal or greater severity. When times get good, the general public forgets how bad things can get, and most are naive enough to believe things will continue to get better. History shows that everything goes in cycles, and the economy certainly falls into that category. Sure, it might be another 25-35 years before something like this happens again, but it probably will. You could be right... people might realize that when times get good, don't get greedy, but I don't think that will happen. A new generation of people will be on this planet... a generation that never experienced anything like this before. That's how myself, and many in my generation got caught up in this mess. I'm just young enough where I didn't see the last major American recession. I entered the workforce as the bubble was growing exponentially. I had no idea how even the most basic economics worked. I thought that with time it would get even better and better. So, like many others who had never seen how bad things could be, I made decisions based on the silly assumption that things would continue to get better.
Thankfully, I didn't make such poor decisions that I am losing my home out of the deal. Even if, God/Allah/Darwin forbid, I lose my job, my family can cut back on enough extraneous spending to offset that loss of income. It certainly wouldn't be easy, but I didn't get myself so horribly buried that I could not make it otherwise.
And in truth, some of that probably comes from my local credit union. In the last ten years, at the very least, they have lent responsibly. They certainly allowed me to accrue enough debt where it's not always easy to pay the bills and still live a comfortable lifestyle, but they were responsible enough to not over-lend to me. Had they done with me like many banks did with others, I too would be foreclosing on my home.
I guess nobody has a crystal ball, but if looking back at history has taught me anything, everything happens in cycles. History is not considered by most to be an important subject. Math perhaps, or maybe English (although that's a debate for another day, given the terrible literacy rate in this country), but it seems history gets neglected. I think it's a shame. If more history was taught to the children of this world, they might... possibly, not make the mistakes of those who came before them.
I guess only time will tell. All I know is this... I intend to be prepared for the next great recession to not only survive it but be able to take full advantage of it and prosper as a result. I can only hope. :)
Submitted by Appliance Stallion on Fri, 05/15/2009 - 5:20pm.
There has not been a recession the likes of today's since the depression. Are you telling me you witnessed the depression from '29-'40 ? Some important differences has much to do with globalization and jobs being exported. This is a newer twist that is catching up with America.This is the new world order and you younger folks will suffer more because of it. You can only have so many computer jobs and they don't produce durable goods.
Submitted by Mr. Allen on Sat, 05/16/2009 - 9:53am.
I learned that one in 2001. I was naive enough to think I could take my first computer related job, use the company to get me training, then advance properly when I earned the proper certifications. It was a field I really wanted to be in, then the bubble popped and hundreds of people in my area (a small town) were out of a job. Then I realized just how unstable that field was, and never went back.
And no, I was not around during the depression, and I wasn't even around during the recession around 1980 (born in 82), but I have so many people around me who were there telling me that as bad as this has been, that one was worse. Of course, geography probably plays a certain role when it comes to the severity of these sorts of things. While our economy in my neck of the woods isn't great, it never really was anyhow, so it hasn't been as sharp a decline for us as other locations. For reference, I'm in Maine, if that helps as a reference.
As for us younger ones suffering, I'm not overly concerned about that. Perhaps I should be, and perhaps I'm overconfident, but I am not worried in the least. At the risk of sounding arrogant, I'm very creative, and quite brilliant in certain respects (and in other respects, I'm a complete moron, but... another arguement for another day). I am also excellent when it comes to adaptation. In truth, as a worker, and as a person in general, I stagnate if the environment stays the same too long (no wonder I've stayed in this field for five years when I never held a job longer than a year prior). Thankfully, I've been blessed with what is currently termed a type of illness (which is, again, another argument for another day), which causes me to thrive in these kinds of environment. I'm prone to taking risks, but I never take a risk so big that I can't afford the loss.
Things will go up and down. Things will be tough, and sometimes they will be easier. I am fully confident that I have and will learn a great deal from this recession and be able to use those lessons to my full advantage. I find that every year, I am exponentially more intelligent than the year before, and I feel that I am better for that. Of course, in a simple word, that's what we call "experience." Unfortunately, you can't get experience without time. It amazes me how much more I know than I did ten years ago. I can't even imagine how much I will have gained in another ten years.
Submitted by Appliance Stallion on Sat, 05/16/2009 - 12:29pm.
Many bright people are suffering from the exportation of durable goods jobs. A real problem. The recession/depression of today is country wide the worst since '29. I agree that regionality can affect the economy status and some areas suffer more than others. However ,this is the worst and the worst is yet to come.One thing to learn , if we do not produce durable products in this country the standard of living will drop ,the tax base will drop and we will become a third world country. Low paying jobs will overtake the thrust for education and schools will dry up for lack of funding. Think this through.
Submitted by Bermuda Bob on Mon, 05/18/2009 - 10:45pm.
Stallion, you are absolutely, positively, without-a-shadow-of-a-doubt, right !!! This recession is nothing like anything we have ever experienced before ... simply because of the global dominance the American economy portrays, however, the real reason is primarily because the government is doing everything to perpetuate commerce (AKA Big Business) because the members of Congress are beholding to them ... which means "Joe Lunch Bucket" gets screwed !!! Stay tuned everyone ... it's going to get more and more interesting, but also more and more detrimental to the common man ... Woe be to us !!!
Submitted by Appliance Stallion on Tue, 05/19/2009 - 4:41pm.
This one will hit the working man and more. We have never as a country seen anything like this. Even Geinther ( not sure of spelling) has indicated that jobs will lag far behind recovery. I can only think that is true because products will be made out of country first. My friends , no matter what anyone does we are failing..badly. This is because of uncontrolled spending ,irresponsible behavior and not following the ethical standards set for many years.This is because we have developed a level of "soft" executives that cannot get their hands dirty to reduce cost but look like geniuses by exporting to China , India ,etc and then bragging how smart they were. Most of them never worked hard a day in their lives. Then we have the mirror image on Wall Street,banking and the likes of AIG who use classroom techniques to develop short term profits with no good long term effects. This is no longer my grandparents country where hard work and honesty meant something , where law was treated with respect ,where people had respect for almost everyone. We are in a bad way. I truly hope I am only half right.
Submitted by Bermuda Bob on Thu, 05/14/2009 - 9:53pm.
I honestly believe that we will never see another time of "faux prosperity" as we experienced and caused the recession ...
Manufacturers became over-confident and took risks which were not justified by well thought out market research ... just look @ some of the decadent products they introduced, instead of using tried-and-true products as the anchors for their new additions to the product lines !!!
Why else would Home Depot and Sears foolishly create their high-end "uber-showrooms" like EXPO and GREAT INDOORS ???
A simple review of the retail survivors thus far in this recession are those who kept their eye-on-the-ball and stayed the course by doing what they do best for their individual demographics ... just look @ PC Richards ... now purchasing six (6) ex-Circuit City locations and opening them as new PC Richards stores ... and in the metropolitan area no less !!! Who expands in a recession except those who, as they say in the military "maintained an even strain" ???
Any manufacturer or retailer who comes out the other end of this mess will do so because they were circumspect enough to realize what their customers want, need, and expect ... not some pie-in-the-sky disconnection with their customer base !!!
Submitted by Appliance Stallion on Thu, 05/14/2009 - 3:11pm.
Good cartoon !! The point is that people see what they want to see. This day and age is void of pragmatism for sure. That is caused by the lucky bubble of the 1990's. Some of those companies that flourished , especially in California would not survive given today's environment if they had the same situation as they did then. The biggest problem is that some of the organizations are having trouble reducing fixed costs and other overhead costs to match current sales. Ones that will survive are the low debt or debt free companies.Cuts come tough for sure. I do not like to see anyone lose their job.
Stallion .... you're spot on. Making money between 1995 - 2005 was a no-brainer. The problem was that too many companies (manufacturers, distributors and dealers) spent money like there was no tomorrow. In some cases it was just plain foolish spending. In other cases there was capital invested to boost capacity or to remodel showrooms that became an anchor around the neck of the people trying to reduce expenses when the bottom began to fall out. A lesson to be learned by the survivors of this mess ... when the economy does finally turn around, don't expect it to boom forever. Sometimes, what goes up comes down.
Submitted by Appliance Stallion on Fri, 05/15/2009 - 5:24pm.
If one can reduce debt through a purchase of an existing business this is the best time to buy since the purchase price will be reflected in current performance which usually equals lower asking prices. Since some of these guys are losing so much they will decide that they cannot ride out the recession. You and I certainly have seen how this developed for sure.
Current recession worse?
I agree that we probably have not seen the bottom of this thing yet. However, I would appreciate if Stallion could educate me on what makes this recession worse than the 80's. According to the information I have the unemployment rate hit 10.8 percent and stayed within 1 percent of that for a good six months in 1982. Obviously you are basing your assesment on something other than unemployment and I realize there may be more to the picture than gauging by the unemployment rate. Maybe we are splitting hairs here, but if you factor in the relatively low interest rates and the low cost of gasoline (yes, low price, if you factor in inflation) I think we are better off today than in the 80's. Unfortanely, being an 82 model myself I wasn't there to know and can only base this information on the research I have done. What am I missing, Mr. Stallion.
Statistics Today
Good points....
You do make some good points and I am not going to deny the accuracy of any of them. I do continue to be optimistic about our situation but only because we would be in better shape if we would all change our irresposible habbits today. I drive domestic vehicles, I don't shop at Walmart and I do my best to buy American whenever possible. If you are in retail support your local business community and pray that they will return the favor. There is still a good amount of US manufactured products and if we all focused on this it would make a huge impact on our economy - if, as you say, we keep buying from "exported jobs" then we all better get used to this business climate 'cause it will be here awhile. Yea, it's me again, the buy American freek. I feel their is still hope for our industry and I am impressed when I see the steps that some of the manufacturers are taking to actually compete with the imports and win. It is sad to see GE outsourcing almost everything. Frigidaire is OK but I believe Whirlpool deserves a medal of honor for the steps they have taken since and including their purchase of Maytag. Well, when everything goes down the tubes just look for the idiot sitting in the dark, closed appliance showroom in the tub of an American made washer with a smile on his face - that'll be me just happy the washer was made in the USA.
That said, in 79/80 (the last downturn) Chrysler did get a government bailout. Had they been allowed to fail then GM may be much stronger today. Obviously that wouldn't fix the banks issues, but seriously, that is our own stupid fault. They may share the blame, but it is not theirs alone.
In Defense of Bailouts
If Chrysler were allowed to disappear, there's a better chance that GM would have reached its moment of bankruptcy much earlier. Nimble, and more importantly, desperate, Chrysler invented the two segments that have kept the domestics afloat these last 30 years. The minivan and the SUV (Jeep Cherokee). The auto companies still failed to adapt with the introduction of small cars, but they were crippled by a system requiring them to pay for health insurance and retirement so couldn't build one profitably. If we had government policy taking these costs off the shoulders of companies, it is unlikely that these companies wouldn't now be declaring bankruptcy. If the government had applied a 25 or 50 cent gasoline tax before the 1980's, manufacturers THEN, and NOW would have had the incentive to figure out how to build small cars and be ready for the oil shocks of 1974, 1979 and the final nail: 2008.
By and large, the countries which are kicking us in the teeth, are those with government involvement.
Your idealistic belief in unfettered capitalism could only be the product of someone who was not around during the hay-day of the oil, coal, and railroad, trusts, or prior to worker safety regulations, but certainly you remember the explosion of innovation that resulted from breaking up AT&T. Couldn't we have used more government intervention to thwart the creation of the national super-banks of Citibank and Bank of America or perhaps of Whirlpool's purchase of Maytag?
You want a good example of Laissez-faire: Somalia comes to mind.
Laissez-faire is Right !!!
The main reason we're in this mess is because good ole' Alan Greenspan belief in a Laissez-faire policy when it came to "inflicting" restrictions on business, thinking that it was the ultimate in free trade !!! He was obviously wrong !!! What became of his policies was the evolution of companies who were allowed to become "too large to be allowed to fail" like AIG and Citi ... that's pure and simple BULL !!!
Chrysler was bailed out primarily because Lee Ioccoca was considered and automobile industry icon who could not possibly be wrong ... but in retrospect it's the same debate as "New Coke - Old Coke" ... the problem eventually because evident that everyone who touched Chrysler made poor decisions ... even Daimler, who centered their efforts on developing the "300" and continuing to push min-vans when SUV's and alike were coming in vogue !!! Then came the idiot Nardelli, who screwed up everything he ever touched ... and when everyone else was developing gas conserving, or even hybrid cars, Chrysler introduced "muscle cars" & "hemi" engines !!! The only division of Chrylser that made money was Jeep !!!
I honestly don't think that prohibiting Whirlpool from buying Maytag would have had much effect either way ... he main reason is that while they do business in the US, they don't necessarily manufacture here, where the likes of AIG, Citi, B of A, and Chrysler do ... just look @ other appliance manufacturers who outsource production of certain products to places like Mexico, South Korea, or even Turkey ... that's almost impossible to control !!!
What the bankruptcies of Chrysler & GM prove is that politicians have long pandered to the large voting block of the labour unions and thereby rendered themselves powerless to restrict union conduct until they had a stranglehold on business so it could not realize profits ... unions once were a necessary entity to protect the rights of employees, but no longer ... no employee has the right to inflict their, sometimes convoluted, agendas on an employer to the detriment of the whole because the employee has not invested as the owner has ... the owner has a fiduciary responsibility to act ethically and morally towards the employees, but the employees do not have the right to influence business decisions by owners ... they are not partners as the unions now believe !!! That is why companies flee the USA for more favourable locations where the voice of the employee is muted !!!
If we, as a people, don't learn that the core of American culture is it's business who provide good, services, and jobs to the rest of us and stop restricting business by unreasonable contract demands, governmental restrictions, and ridiculous taxes, we are doomed to experience this present condition over and over again ... each time getting more dire !!!What America needs is a simply set of an "Employee Bill of Rights" ...
(1) The right to a reasonable wage commensurate with the employee's talents and education ... no high school graduate has the right to make an outrageous wage compared to someone who has invested in their education or training ...
... and a guarantee that upper management will be compensated based solely on their investment and contributions to the success of the business !!!
(2) The right to safe and secure working conditions ...
(3) The right to complete & all encompassing family health care ...
(4) The right to a reasonable standard of living in retirement !!! Simple rules ... simply results ... a stronger business sector ... and a stronger America !!!
Whirlpool doesn't manufacture here?
Your comment "I honestly don't think that prohibiting Whirlpool from buying Maytag would have had much effect either way ... he main reason is that while they do business in the US, they don't necessarily manufacture here" doesn't make a whole lot of sense to me. As far as I can tell the only thing that Whirlpool doesn't manufacture here is microwaves, a limited number of side x side refrigerators and front load washers. That leaves top mount refrigerators, bottom mount refrigerators, all the rest of the side x sides, cooktops ,ovens, dishwashers, and ranges. They employ more American workers than any other appliance manufacturer. Call me crazy, but this seems to be a better alternative than China buying Maytag.
Yes Sir
Steadyselling you are on the button. Whirlpool walks the walk and then some.
FactCheck.SteadySelling
Mr. Advisor, I appreciate your insight and success on this site, but I do have a few issues with your posting. Chrysler came out with the Jeep Cherokee in 1984, Chevy the Suburban in 1936, so I feel Chevy invented the SUV market and Ford made it huge with the introduction of the Explorer. Does the fact that Chrysler invented the minivan mean no one else could have? My point is that with one less propped up, poorly managed competitor GM could have been more successful. They may have still chosen to make poor decisions. It is true, our automakers were "crippled by a system requiring them to pay for health insurance and retirement so couldn't build one profitably". That system is the labor unions, which I think you agree with. Toyota, Honda and all the other "domestic factories" work with the same US government system of having to pay for health insurance and retirement but they have done it successfully and fairly without the influence of unions. If the government did take that off their shoulders it would be on each one of our shoulders which wouldn't help the economy either. I don't care what universal health care plan the government comes up with for anyone it will never pay us for retirement which is the big cost these companies have to deal with because of their labor contracts which they signed. I do kind of agree with you on the gas tax thing as long as that tax was used to develop better fuel economy instead of doing a study on prostitution in Asian countries. Our government doesn't know how to use the taxes they collect. And yes, the government could have prevented Whirlpool from buying Maytag and we know it would have been purchased by Haier which is financed by the Chinese government. Do you actually think that would have been a better alternative? The Chinese government would have succesfully killed our appliance industry like they did our electronics industry. I also agree with you that the we are being hit the worst by companies who are supported by their government. This could be controlled by import tariffs taxing other countries instead of taxing US citizense to help our companies compete against foriegn governments. Finally, where did the Somolia comment come from? We live in the most productive country in the world that has invented everything of any importance. Why? Because of unfettered free market concepts. Every, I repeat, Every country based on Socialism has been and will continue to be failures economically. Name one instance where I am wrong. We will have our bad times, but we will always rebound as long as the Good Lord allows us to live on this old planet. Think about the economy in France, Japan, Russia, and Haiti for starters. Let's try to learn from history, because it WILL repeate itself.
SteadySelling
Your comments on the auto industry lack experience. When the big three was negotiating some very good deals with their union employees there was no competition from anyone overseas. Sure some English and German cars were sold here but not a major threat. Economically cars were fairly inexpensive and even the workers who built them could comfortably afford them. Anything wrong with that ? When Toyota and Datsun began to spread their wings here the big three were not prepared to react to the threat. I am not sure they thought the threat of the smaller car was going to be real at the time. So some of the deals made with unions in the 1950's and 1960's were difficult to change. Then in about 1974 came the famous"thirty and out" retirement deal. That allowed people who had thirty years seniority to retire at 52 or 55 and collect their pension. That spilled over to suppliers. Now ,those seem like problems but at the time were innocent efforts to make a comfortable life for someone who carried a lunch pail to be able to have some security and retire and continue to own their home. Since that time of the late 1970's there has been some lousy and then later some very good efforts to change the process ,reduce labor costs and become very productive. The American auto makers are more productive than their counterparts my friend. Less workers doing more with automation which bears a large capital cost. To support the auto makers will be the right thing to do and eventually this will work itself out. The auto workers recently worked with GM to make major changes in pay , retirement and benefits. Don't count them out yet. As the "Advisor of Oz" says the automakers of other countries are subsidized by the government. That is the only reason they can compete with us my friend. I believe in the free enterprise system and nothing wrong with helping that to even the playing field.I am also one who respects the older workers and they should not be thrown out with the bathwater just because you may be uncomfortable with the benefits they have worked hard for over the years. Think it is easy ? Try working on an assembly line and take a break only when a relief worker comes along. Try eating in twenty minutes and working with a headache or some other ailment.Time we respected our workers and our companies. Root out the greedy managers ,executives and union leaders ? I think that is transforming our society right now.America is resellient..Respect that. Don't sell us short.Give thanks this Memorial Day for your privilege to speak out.Keep a free society with self control, that will work.
Fact Check Check
I was working from memory, based on the new SUV interior designs, target segment (women) and explosive growth in sales, but research backs my memory:
"The transportation curator at the Henry Ford Museum, Robert Casey, contends persuasively that the Cherokee was the first true sport utility vehicle in the modern understanding of the term.[5] Marketed to urban families as a substitute for a traditional car, the Chrerokee had four wheel drive in a more manageable size (compared to the full-size Wagoneer), as well as a plush interior resembling a station wagon." See Wikipedia
Could others have invented the minivan? Evidently not. Henry Ford II, turned down the idea. Only Chrysler's desperation allowed it to get built. Your point that companies flourish without competition, (even government propped up competition) has no basis in fact. More competition is better. Chrysler in this case was bankrupted by the energy crisis because it had been "building what the people wanted" guzzlers. Government intervention in energy prices by limiting imports or taxing consumption would have better positioned us for the shocks. They retooled with the government money and continued to innovate for 2 more decades. Bankruptcy would have taken an entire supply base down the drain.
Labor unions. How can you complain about labor unions? Companies get the unions they deserve. Companies can pay or not pay, sign or not sign.
I think you missed my point about foreign manufacturers domestically located. They do not have the health or retirement costs of the domestics because their workers are young and don't yet breath from O2 tanks.
Government provided health insurance is really the only one that makes sense, and is the one used by ALL of our chief competitors. Single payer/government backed insurance solves many many problems, but in this particular case, it solves the problem of a company like GM which is shrinking. Companies with shrinking employment continue to be responsible for health care for a retiree population which isn't dying fast enough. An ever increasing % of its meager profit is spent on lingering retirees. Bring on the ice flows. Single payer is cheaper, for you too.....but that's a discussion for another time.
Maytag: A stronger industrial policy can allow the foreign purchase of a domestic manufacturer while building in protections for workers and hence production. We just have to require it if we want it.
I was not suggesting that we are being hit the worst by companies supported by their governments, though who knows maybe that's true. I was implying that the countries which have grown the most in the last 50 years have done so with significant government planning, direction and investment, etc.
Socialism: I never know if people are saying Socialism, but actually mean Communism. We do not have unfettered free market, though Somalia may (that was the Somalia reference). Communism has not done well, but socialism is doing great. Singapore, Canada, Europe. Growth, income parity, literacy, life expectancy, infant mortality, health care. Economically? Weren't the last 6 months an indictment of unfettered financial markets?
Bail Outs Part 2.
I do think that bailouts are needed and you are correct when you say that importers get government support all the time. Look at China's 16-18% subsidy of products exported from China. Look at Europe. The problem is needed change at the level required to make systemic changes. If I led the union I would do my darndest to save as many jobs as possible and work with a streamlined management that wanted to take an honest look at what and how to change. I think even the most cynical union member would consider that as opposed to losing job and pension. To me the bigger problem is the mismanagement of the pension funds and the crooks on Wall Street do not want to get the program straight,consequently the worker will suffer and probably takes more blame then they should. After having been a senior executive for over 25 years I conclude that management is 95 % of the problem ,not 85 % like Deming thought.Not that I worked for bad companies but I see the power the executives have in making decisions,good or bad.
I would have to disagree with this one point.
"I honestly believe that we will never see another time of "faux prosperity" as we experienced and caused the recession .."
Perhaps it's the pessimist in me, but this sort of economic downturn is not new to our country. Sure, the global effects are perhaps larger than they have been in the past, as it is true that we are becoming a global community. Even so, these sorts of downturns have happened before, with equal or greater severity. When times get good, the general public forgets how bad things can get, and most are naive enough to believe things will continue to get better. History shows that everything goes in cycles, and the economy certainly falls into that category. Sure, it might be another 25-35 years before something like this happens again, but it probably will. You could be right... people might realize that when times get good, don't get greedy, but I don't think that will happen. A new generation of people will be on this planet... a generation that never experienced anything like this before. That's how myself, and many in my generation got caught up in this mess. I'm just young enough where I didn't see the last major American recession. I entered the workforce as the bubble was growing exponentially. I had no idea how even the most basic economics worked. I thought that with time it would get even better and better. So, like many others who had never seen how bad things could be, I made decisions based on the silly assumption that things would continue to get better.
Thankfully, I didn't make such poor decisions that I am losing my home out of the deal. Even if, God/Allah/Darwin forbid, I lose my job, my family can cut back on enough extraneous spending to offset that loss of income. It certainly wouldn't be easy, but I didn't get myself so horribly buried that I could not make it otherwise.
And in truth, some of that probably comes from my local credit union. In the last ten years, at the very least, they have lent responsibly. They certainly allowed me to accrue enough debt where it's not always easy to pay the bills and still live a comfortable lifestyle, but they were responsible enough to not over-lend to me. Had they done with me like many banks did with others, I too would be foreclosing on my home.
I guess nobody has a crystal ball, but if looking back at history has taught me anything, everything happens in cycles. History is not considered by most to be an important subject. Math perhaps, or maybe English (although that's a debate for another day, given the terrible literacy rate in this country), but it seems history gets neglected. I think it's a shame. If more history was taught to the children of this world, they might... possibly, not make the mistakes of those who came before them.
I guess only time will tell. All I know is this... I intend to be prepared for the next great recession to not only survive it but be able to take full advantage of it and prosper as a result. I can only hope. :)
Mr Allen
There has not been a recession the likes of today's since the depression. Are you telling me you witnessed the depression from '29-'40 ? Some important differences has much to do with globalization and jobs being exported. This is a newer twist that is catching up with America.This is the new world order and you younger folks will suffer more because of it. You can only have so many computer jobs and they don't produce durable goods.
Computer jobs... heh...
I learned that one in 2001. I was naive enough to think I could take my first computer related job, use the company to get me training, then advance properly when I earned the proper certifications. It was a field I really wanted to be in, then the bubble popped and hundreds of people in my area (a small town) were out of a job. Then I realized just how unstable that field was, and never went back.
And no, I was not around during the depression, and I wasn't even around during the recession around 1980 (born in 82), but I have so many people around me who were there telling me that as bad as this has been, that one was worse. Of course, geography probably plays a certain role when it comes to the severity of these sorts of things. While our economy in my neck of the woods isn't great, it never really was anyhow, so it hasn't been as sharp a decline for us as other locations. For reference, I'm in Maine, if that helps as a reference.
As for us younger ones suffering, I'm not overly concerned about that. Perhaps I should be, and perhaps I'm overconfident, but I am not worried in the least. At the risk of sounding arrogant, I'm very creative, and quite brilliant in certain respects (and in other respects, I'm a complete moron, but... another arguement for another day). I am also excellent when it comes to adaptation. In truth, as a worker, and as a person in general, I stagnate if the environment stays the same too long (no wonder I've stayed in this field for five years when I never held a job longer than a year prior). Thankfully, I've been blessed with what is currently termed a type of illness (which is, again, another argument for another day), which causes me to thrive in these kinds of environment. I'm prone to taking risks, but I never take a risk so big that I can't afford the loss.
Things will go up and down. Things will be tough, and sometimes they will be easier. I am fully confident that I have and will learn a great deal from this recession and be able to use those lessons to my full advantage. I find that every year, I am exponentially more intelligent than the year before, and I feel that I am better for that. Of course, in a simple word, that's what we call "experience." Unfortunately, you can't get experience without time. It amazes me how much more I know than I did ten years ago. I can't even imagine how much I will have gained in another ten years.
It's mind boggling!
Mr Allen Part 2
Many bright people are suffering from the exportation of durable goods jobs. A real problem. The recession/depression of today is country wide the worst since '29. I agree that regionality can affect the economy status and some areas suffer more than others. However ,this is the worst and the worst is yet to come.One thing to learn , if we do not produce durable products in this country the standard of living will drop ,the tax base will drop and we will become a third world country. Low paying jobs will overtake the thrust for education and schools will dry up for lack of funding. Think this through.
Yup ... Yup ... Yup !!!
Stallion, you are absolutely, positively, without-a-shadow-of-a-doubt, right !!! This recession is nothing like anything we have ever experienced before ... simply because of the global dominance the American economy portrays, however, the real reason is primarily because the government is doing everything to perpetuate commerce (AKA Big Business) because the members of Congress are beholding to them ... which means "Joe Lunch Bucket" gets screwed !!! Stay tuned everyone ... it's going to get more and more interesting, but also more and more detrimental to the common man ... Woe be to us !!!
Depression
This one will hit the working man and more. We have never as a country seen anything like this. Even Geinther ( not sure of spelling) has indicated that jobs will lag far behind recovery. I can only think that is true because products will be made out of country first. My friends , no matter what anyone does we are failing..badly. This is because of uncontrolled spending ,irresponsible behavior and not following the ethical standards set for many years.This is because we have developed a level of "soft" executives that cannot get their hands dirty to reduce cost but look like geniuses by exporting to China , India ,etc and then bragging how smart they were. Most of them never worked hard a day in their lives. Then we have the mirror image on Wall Street,banking and the likes of AIG who use classroom techniques to develop short term profits with no good long term effects. This is no longer my grandparents country where hard work and honesty meant something , where law was treated with respect ,where people had respect for almost everyone. We are in a bad way. I truly hope I am only half right.
Never again ...
I honestly believe that we will never see another time of "faux prosperity" as we experienced and caused the recession ...
Manufacturers became over-confident and took risks which were not justified by well thought out market research ... just look @ some of the decadent products they introduced, instead of using tried-and-true products as the anchors for their new additions to the product lines !!!
Why else would Home Depot and Sears foolishly create their high-end "uber-showrooms" like EXPO and GREAT INDOORS ???
A simple review of the retail survivors thus far in this recession are those who kept their eye-on-the-ball and stayed the course by doing what they do best for their individual demographics ... just look @ PC Richards ... now purchasing six (6) ex-Circuit City locations and opening them as new PC Richards stores ... and in the metropolitan area no less !!! Who expands in a recession except those who, as they say in the military "maintained an even strain" ???
Any manufacturer or retailer who comes out the other end of this mess will do so because they were circumspect enough to realize what their customers want, need, and expect ... not some pie-in-the-sky disconnection with their customer base !!!
People
Good cartoon !! The point is that people see what they want to see. This day and age is void of pragmatism for sure. That is caused by the lucky bubble of the 1990's. Some of those companies that flourished , especially in California would not survive given today's environment if they had the same situation as they did then. The biggest problem is that some of the organizations are having trouble reducing fixed costs and other overhead costs to match current sales. Ones that will survive are the low debt or debt free companies.Cuts come tough for sure. I do not like to see anyone lose their job.
Business buuble
Stallion .... you're spot on. Making money between 1995 - 2005 was a no-brainer. The problem was that too many companies (manufacturers, distributors and dealers) spent money like there was no tomorrow. In some cases it was just plain foolish spending. In other cases there was capital invested to boost capacity or to remodel showrooms that became an anchor around the neck of the people trying to reduce expenses when the bottom began to fall out. A lesson to be learned by the survivors of this mess ... when the economy does finally turn around, don't expect it to boom forever. Sometimes, what goes up comes down.
Cohiba....
If one can reduce debt through a purchase of an existing business this is the best time to buy since the purchase price will be reflected in current performance which usually equals lower asking prices. Since some of these guys are losing so much they will decide that they cannot ride out the recession. You and I certainly have seen how this developed for sure.