Triton going under?

mwhafner said:
The "bailouts"  will be a huge drain on the US for decades to come.  I am hugely disappointed in both the current and incoming administrations.  

The jails should be full of the Wall Street types that packaged the "sub-prime" mortgages as AAA investments.  

Much of the discussion has been around the auto industry, and below are my comments on this sector of our economy.

I live in Tennessee, and Nissan has a huge presence here, as well as the main Saturn (GM) plant.  I don't claim to have all of the answers, but I do think that there are a lot of reasons for the problems of the auto industry.  

#1 - Unions.  Regardless of whose numbers you use, UAW workers earn more than their piers in domestic non-union plants.  The blame for this lies squarely on the shoulders of the management of the "Big Three".  They should have understood the implications of this in the late 80s and early 90s, when the Japanese manufacturers were starting to built plants here.  My biggest problem with the UAW is that they seem to be more than willing to sell out their retirees.  They have made promises to these people, and that should be honored.  

#2 - Product Design - The European and Asian manufacturers have been much more effective in product design than the "Big Three"  I love the aesthetics of the current Ford Mustang and Dodge Challenger, but would never spend my money on either.  The domestic manufacturers were far too accepting of regulations regarding fuel efficiency.  The  American auto industry is based on the truck, SUV, and "Muscle Car" market, and has been for years.  Why would they accept the average MPG requirements that have been increasing for years?  There are also numerous poor management decisions involved.  Ford owns Cummins, probably the best diesel engine manufacturers in the world, and has for years.  Why would they continue to put the clearly inferior Navstar engines in their trucks?

#3 - Basic Common Sense - All of us know that we can't live on more than we make.  GM and Chrysler especially, but the "Big Three" in general, have played the credit game way too long.  The service on their debts is the real issue.  Two of the three have debt obligations that are unsustainable.  I still do not understand the need for credit for a publicly traded company.  If you have a solid expansion plan, you can issue additional stock to raise the needed funds.  Yes, it dilutes the existing shareholders value, but it is a good bet if the business plan is sound.  

It is my opinion that we should not be bailing out anyone.  Look at the result of the AIG bailout as the perfect example.  What do we get, not better run companies, but corporate junkits that cost us all.  

The orphan that we now call an "economic crisis" has no father.  But, there are countless parties responsible.   People that signed mortgages for more than they could pay, banks that where willing to lend that money.  Car companies that got into the mortgage business, etc

My wife and i have kept our lifestyle below our means.  Why should we be cast as the villain for being responsible.  By most modern measures, we should like in an $800k house, have two car payments, and $50K in credit card debt.  Instead, we live in a modest home, have no vehicle or card debt to speak of.  The result of our responsible lifestyle, is a promise of higher taxes.  Only in America. 
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Very well said.  But I will add that being an employee from '83 to '95 I will say that the management and union were well aware of the oncoming problems and like our government today decided to "live and manage profits for the moment" and leave the problems for those who would follow.  We as salary people started seeing cuts in benefits in the easrly and mid 80s as the salaried people are always the easiest to put it to IMHO. And with the computer and internet revolution a lot of good talented salary workers simply went elsewhere to earn their liviing.

Most of these issues were discussed in meeting in the mid and late 80s so clearly management knew they were come.  I think it was a case of both greed on the union and management parts but also a fact that they really have no competative way to deal with the legacy retiree problems...other than to get out from under it by going bankrupt and / or dumping the problem at the feet of the government to pick up the retireee costs.  This was in large part why I got out of the industry directly in 1995...and in the years since things have only gotten worse.

Sorry for derailing the topic for those who feel I did...but sometimes it is just good to vent...

Best,
Todd
 
I agree with much of what MWHafner stated, but also view the situation somewhat differently.  I wholeheartedly agree that our jails should be full of the Wall Street crooks (to which I would likely add some members of Congress).

"Ford owns Cummins?"  I owned Cummins common stock for several years, and sold the last of it last year.  Ford did not own them, although Ford may have been a customer.  I agree they make excellent diesel engines.  They need to, that is their core business unlike Ford, or even Caterpiller who make machines that need diesel engines.

Unions have been and are a mixed bag.  They arose out of abuses of employees by owners of manufacturing companies.  As time progressed, some unions, or at least some union leaders have abused their positions and power, both legitimately and illegitimately.  Legitimately in the sense of obtaining increased wages and benefits for their members, which is fine until competiting manufacturers with a lower cost structure arrive, e.g. in automobiles the Japanese, Koreans, and soon the Chinese and maybe the Indians.  When everything is on an up economic cycle, it is easy to negotiate increases in wages and benefits.  But have you ever heard of a union bargaining agreement in which the wages and benefis will automatically be reduced when the business or economy turns down?  I have not.  Illegitimately in the sense of corruption and dishonesty.  I view the union/management relationship as being somewhat akin to a living organism.  As time progresses, they both grow in size, power and economic strength, then they grow old instead of economically larger and stronger, yet they still have to carry all the financial burdens they agreed to over the decades, including benefits for retired workers and management.  In contrast, a new company entering into competition with an old, established firm, does not have these accumulated burdens and thus can introduce new products with new equipment using lower cost (non-union) employees with lower costs in every category.  I see this as an inevitable fact of economic "lives" of business "organisms."  Similar long term cycles and effects also appear to apply to democracies including our own.

In my opinion, I do not think that union leaders, heads of manufacturing companies are the main culprits in our current financial downward gyrations.  I assign far more blame to bankers, beginning with those stupidly issuing subprime mortgages without common sense backgrround checks anad controls, and even more so to those Wall Street firms who created a giantic upside down financial pyramid of phony money starting with these mortgages, and our federal government, especially Congress for their derilection of duty (they still have not re-enacted prohibitions and controls to mitigate recurrence of the same "off the books" betting and trading in CDOs and CDSs), and instead dare to point their dirty fingers at non-financial industry executives.

I agree regarding the bailouts -- where do they end?  Where is mine, and yours?  I view the combined effects of our federal government and the Wall Street crooks as having stolen ~thirty percent of my lifetime accumulated savings, and being retired, I'll never be able to make that up.  Can we trust any of them to do what is right?  Do any of them even know what is right?  I doubt it.

Sorry for the tirade.  Time to get back to Festool and woodworking!

Dave R.
 
"Ford owns Cummins?"  I owned Cummins common stock for several years, and sold the last of it last year.  Ford did not own them, although Ford may have been a customer.  I agree they make excellent diesel engines.  They need to, that is their core business unlike Ford, or even Caterpiller who make machines that need diesel engines.
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Thank you for the fact check.  Ford did, at one time, own a major stake in Cummins (15% by most counts), but it appears that the shares were repurchased.
 
Dodge uses Cummins diesels in their diesel pick-up trucks and has for many years.  Great engines but a little on the noisey and loud side.  Ford I think makes their own "Powerstroke" line of diesel engines for their trucks and Chevy / GMC use the GM Durimax diesel.

How about the idea that manufacturing has gotten so efficient that products can be produced far faster than people can afford to consume them?  Personally, I think this is part of the problem too, but I have no clue how you solve it if it is part of the problem.

Best,
Todd
 
Well even counting efficiency it really is a basic supply and demand issue that manufacturers have dealt with since the beginning.

No matter how efficient they are its a companies responsibility to match the supply to the demand. A company that just haphazardly makes units just because they can will lose. The efficiency is supposed to allow for less workers or a cut ion overhead not just to pump out more, especially if there is no demand.

Companies need to try to read the market and stay ahead of the trends, something the car companies are notoriously bad at. Either the cars are not available or there are tons of cars no one wants.
 
Notorious T.O.D. said:
Dodge uses Cummins diesels in their diesel pick-up trucks and has for many years.  Great engines but a little on the noisey and loud side.  Ford I think makes their own "Powerstroke" line of diesel engines for their trucks and Chevy / GMC use the GM Durimax diesel.

How about the idea that manufacturing has gotten so efficient that products can be produced far faster than people can afford to consume them?  Personally, I think this is part of the problem too, but I have no clue how you solve it if it is part of the problem.

Best,
Todd
Click to expand...

Ford uses International/Navistar engines, and has for many years. 
 
You nailed a part of the problem, Nick.

It seems to me that a car company could learn from the business model that made Dell grow so fast at their competitors' expense. Namely, don't make anything until somebody buys it and don't buy anything until somebody buys what it's going into.

If people will wait a few days for a  computer to be made and delivered, I would think they would do the same for a car or truck. The concept of having multiple acres of new vehicles sitting around is silly.

Tom
 
I remember the days where you went in an ordered a car the way you wanted it then waited , sometimes for a month or two,. It's how my dad always got his cars and the last I purchased like that was in 1983. I can remember waiting in anticipation for my dads  new Cadillac and even the "millionth" Vega my mom ordered.

Since then they now make the cars with all the options bundled(some you may not want)and colors and just sit them on the lot. Whether anyone wanted them or not.

Personally, I make nothing until it is ordered and paid in full.
 
I think you have grossly over-simplified the logistics it takes to make a car let alone perhaps 25,000 per day. Once you work inside the auto industry you realize that it is a minor miracle that your car starts when you turn the key.  When I worked for Packard Electric, now Delphi Packard, we were making power and signal distribution products for perhaps 50,000-60,000 vehicles per 24hour day and for several hundred different customers worldwide.

PCs are pretty much a commodity product and Dell is what I would call a mass producer with very little in the way of innovation.  Apple is the innovator, just as most innovations appear in the high end automobiles before slowly migrrating toward the more common car models.  Same deal in tools and many other products...

Best,
Todd
 
The logistics are not the point. The point is do not make what has not been spoken for or you will have to much supply on your hands. If they need to make so many cars no one wants because they have to because of logistics, then they need find another way to make them.

It is simple to just slow down. Less workers , shorter shifts etc.
 
I thought you could still special order a GM product like that. I know Toyota won't do it that way though.
 
nickao said:
The logistics are not the point. The point is do not make what has not been spoken for or you will have to much supply on your hands. If they need to make so many cars no one wants because they have to because of logistics, then they need find another way to make them.

It is simple to just slow down. Less workers , shorter shifts etc.
Click to expand...

It is not nearly as simple as you want to make it out to be...  Build to order is a nice dream but to date no one is able to deliver it in a timely manner with the specific options that the customer wants.  Sure you can pick options and wait 4-12 weeks for delivery but that has been around for 60 years...nothing new there, but that is not the dream of build to order.

If your Festool saw broke down today would you be willing to go order a new Festool and stop your production for 2, 3 or 4 weeks while Festool and their suppliers bring together all the things needed to make your new saw and get to you or your dealer.  I rather doubt it.  You would not shut down your business for that wait...you would go buy something else that you could have in a day or two at most; even if it was less in performance than the Festool. 

Most products are not one of a kind. They are products which have to compete in a market of like or similar products based on a wide range of comsumer factors.  Estimating and planning are key to producing anything in quantity for a good price, but plans and estimates are subject to market condiitons and changes.

Best,
Todd
 
We are not going to ever agree on this, which is fine.

I see the car companies are shutting down production for a month and the employees still get paid. They save a billion dollars doing this. It is exactly what I am talking about. Slowing down and they are doing it right now. If they can do that they certainly could have tapered off at a reasonable rate not to require one month shut down at once, but the car companies are bad at watching demand and keep making and making, now look what they have to do.

You know how many other companies are getting screwed over this, companies that can not shut down and need the car companies running. They built up their companies following the auto companies lead, mistakenly expanding their businesses. Now they are totally screwed and are past the point of lay offs and may even have to shut down because they just assumed the car companies would always need more and more.
 
I agree if we don't agree that is fine, however we have to make our cases based on facts and reality, not the way we may think it should be or even how the car companies may ideally want it to be.

To totally blame the car companies for overproductioon or producing the wrong product mix is ignoring the factors that they must take into consideration when doing their planning.  If they had know that US gas was going to go to over $4 a gallon they would have planned diferently I am sure. But the US companies also make a lot of vehicles which the foreign transplants don't try to provide to the US market such as work trucks, work vans, police cars, etc.  If the US makers stopped making these types of vehicles and the transplants had to now meet that market demand it would dramatically change their product mix in the US IMHO.  Bottom line is that IMO the transplants have had the opportunity to pick and choose which markets they competed in with the US makers who have had to offer a broader product line which meets needs that the transplants simply ignore or choose not to compete in at this time. 

So, when the price of gas spikes the domestic big 3 are stuck producing models that the transplants don't even offer. This hurts there sales more than it hurts the sales of the transplants. Naturally, there are a couple ways for the big 3 to deal with this situation. One, they can reduce production which I am sure they did, but that does not mean that plant can start producing mini cars without a total reworking and retooling.  So, while production can be cut it does not help in the production of an alternate product in the short term.  Second, they can have a sale or special offers to try to move inventory and maintain some level of profit, cashflow keep the plant producing enough to hopfully break even on fixed and variable costs. Third, they can shutdown the plant, but that comes as a drain on cashflow as now you have fixed costs for the plant and the costs of idling the workforce while producing no product to sell.  So, that has the most negative effect on the company.  It also hits all the downstream suppliers the hardest as now they may have to take the same or similar actions in there businesses.  Also, many assembly plants shut down for a week or two each year to go theough model year changes, do maintenance or construction and retooling.  Most of those shutdowns come in the summer when many more of the workers are taking vacations though.

Now a few months later as much adjustment and replanning have occurred the price of gas drops to a multi-year low and all of a sudden the demand for small cars drops 65% and people are again wanting the larger and more powerful cars.  And so it goes back to a forcasting and planning issue again and trying to push the markets toward the products that you have and can offer while looking ahead to try to figure out where things are going to go next.  And I have not even touched on the financial situation here of the car companies getting capital to build or change or close plants. Or the issues of people being able to borrow the money to purchase or lease a new car.

The suppliers face the same planning and forcasting issues as the big three and perhaps even more so because they are constantly being beat on to reduce the costs of the components they supply and because they are not usually single source suppliers.  GM can get the same fasteners from a variety of suppliers and uses that fact to their advantage in most cases.  The suppliers in turn try to get long term contracts to supply a specific component to a specific product. 

The japanese are much more likely to work with japanese suppliers by the way but that is to a large part tradition and japanese custom.  I recall a case where Packard Electric was being forced by Toyota to buy a part that Packard made through a japanese supplier for 6 or more times the price that it cost Packard to produce the part. Packard took this information to Toyota and said that they could supply the part directly for a much lower price but Toyota insisted that Packard source it through their japanese partner, so Packard had to pay the japanese partner a profit to use its own part.  These are the kinds of things that go on which the average joe has no clue about.

The bottom line is that the suppliers must do sales, forcasting and planning just as the car makers do...it is no diferent. And when the market conditions change the suppliers must be willing and ready to react to those changes because if they don't they will be out of business forever.

But Nick you didn't comment on my Festool example either....oh well.

Best,
Todd
 
This has become an interesting discussion, straying quite a bit from its root.  Re not making a product until there is a demand/order for it, manufacturing companies have been working toward that goal -- Just-in-Time manufacturing.  But I expect car dealers to continue to carry some inventory once this current economic downturn is past.  I cannot imagine Americans quickly switching from "I want it now" to "I'm willing to wait."  A significant portion of our econmy is based on "buy here, buy now," marketing strategies and tactics, including instant credit to satisfy a craving for instant gratification.  People may not have the money or credit now, but will those old habits return when money becomes available?  Even our government seems to be encouraging a return to spending.

Dave R.
 
I usually find myself agreeing with your perspectives from most other subjects but on this I differ greatly. Following your argument, it will be like trying to live in a pre 9/11 world once again. Remember there once was a time a commercial airline pilot might of asked a passenger if he wanted a view of the cockpit? It's going to be awhile before trust returns and even then it will be tainted and suspect.

This recession was created by our politicians seeking power and popularity. Congress is having ideas of expanding government which means more government employees joining government unions who donate huge sums of cash and unquestioned support to politicians who will continue to feed the pig. If this occurs, eventually nobody will want to invest in this nation, interest rates might rise, taxes might skyrocket, inflation might come to unheard of levels until our greed based desires finally fizzle out.

We let government get too big. Government interferred with our free market with social mandates and regulations. This same government is now looked at to fix the problem, but remember what Ronald Reagan told us? Government is the problem! A receding economy risks corporate bankruptcy, reduced competition, reduced innovation and reduced jobs. What this country needs is an enema to blow out the fat and political excess lodged in the bowels of our freedom and personal responsibility. As families and corporations cut back in order to survive, we need less government and lower taxes. We also need American Universities to get real on costs of higher education so we can develop young minds to come up with new ideas and technologies for a new economic revolution.

I am a realist, I don't see this happening. I hope somehow we become more lucky than good. And another thing, I never really liked Triton routers anyway.

 
I get what you are saying and I do not like big government either, but if the banks and mortgage brokers had to follow stricter rules and the wrath of government(accountability) for making bad(fraudulent) loans this would not have happened.

It was the loans the banks made that caused this. The actual lack of governments overseeing the industry just made it that much easier for banks to give loans to people that could not afford them and lack of proper government regulations that allowed these banks to package up all these loans together.

People in the banking industry and mortgage brokers are not going to do the right thing and this is one place the government needs to take a look at and possibly have some control over. Instead of making the rules for the banks and big business the rules need to be made for the protection of the American consumer and main street as a whole, instead of for wall street.

 
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