"Very nice summary, Wngr, but I don't think the union is confused at all."
I would agree with you if you're talking about the union leadership. It has been explained to them endlessly. They don't pass that on to the plant rank and file because it doesn't fit their story.
Even lower level management in the plant doesn't understand it because the plant are measured on their own value added content, i.e., labor and burden.
"((As I recall, GM even avoided buying parts from Delphi sometimes because they were way too expensive. ))"
"You don't recall any such thing. You're making stuff up again."
When Delphi split from GM, GM agree to a 10 year supply agreement to help Delphi establish itself. During these 10 years, Delphi knew that they needed to diversify their customer base if they were going to be a bona fide auto supplier which they did with some success.
In addition, during the Delphi bankruptcy, they outsourced nearly all of their NA production to Mexico and reduced their cost base.
Now Delphi is making good margins and is one of the largest auto suppliers in the world.
I can tell you this though, during those 10 years with guaranteed orders, Delphi was not a good supplier....high cost and low quality. That's all changed now.
"Perhaps a few people on this board should consider thanking this President for navigating this country through this"
I wasn't trying to make this a political issue.
It's a cause for national concern and I don't care what party you side with. I have to say this though, the precipitating event for this was the collapse of the housing market along with the banking industry.
I think the biggest part of the blame goes to the big Wall Street banks for getting reckless as well as them 109th and 110th Congress leadership for ignoring the issue.
"Wngr, I hope it gives you some pause to be on the receiving end of unqualified praise from Bunky and Webby for this post"
It is a little scary.
" I have tremendous respect for you, but I have a hard time seeing the problems in Greece as "a whopper of a macro issue."
I'm worried about it.
IF (not yet known) Greece decides it won't or can't pay back the loans the "Troika" (other European countries plus the ECB and IMF),writes off half a trillion Euros in one fell swoop, pfffft. That's going to leave a mark.
The lending institutions will be put in dire straights with capital retention issues, the other countries will have billions disappear off their balance sheets. Sounds like the US in 2008. I just think it would be a big deal if Greece and its creditors can't come to an agreement.
"I doubt if wngr would agree that labor costs are only 10% of the cost of a car. "
No I wouldn't agree. The unions are constantly confused by this. Some well meaning management guy probably reviewed his plant report with the union in an attempt to be transparent. Unfortunately, neither he or the union guy understood what they were looking at.
GM's, and most cost accounting systems, divide costs into direct material, direct labor, and burden.
You can think of direct labor as the cost of all people that work in production and have a direct role in making the product. In many instances, this line item is confused with all labor.
Burden, also called overhead, includes operating supplies, tooling, utilities, maintenance labor such as inspectors, maintenance people, supervision, tool room people, power house people, etc., maintenance material (mostly spare parts), fixed costs (like taxes, depreciation, amortization), scrap, freight, and miscellaneous expenses.
Direct material is all purchased material that is in the final product, i.e, sheet steel, aluminum, plastic parts, tires, headlights, etc. This is another source of confusion. It's only called direct material because has no value add within the walls of GM Assembly plants, it's just pass through cost. However, clearly the supplier or supplying divisions like metal fab, power train, or casting has labor content in that number as do outside suppliers.
If you consider ALL labor in GM's cost and all 25,000 parts or so, I would estimate that roughly 80-90% is labor. The only thing NOT is the material taken out of the earth like iron ore, bauxite for aluminum, latex from trees to make rubber, silica for glass, etc. Plus don't forget that there is labor required to remove these things from their natural home.
".It was the highest in US history on 1/20/09 (consumer plus government debt). That is why it was necessary for government spending,the consumer was done."
Can you tell me where you're finding your data? I haven't been successful finding anything that speaks to it.
So to make sure I understand....when consumer and government debt is the highest in history, you're advocating that the government goes further in debt. Am I reading you right?
"Would you tell everyone where we was at debt to GNP for all consumer and government debt at the end of 2008. I tried to explain this to bunky."
Not sure what your point is bob_sap_here.
I don't have data for NET government debt for the US, but US gross government debt vs GDP in 2008 it was 64.8% and in 2014 it is 101.5%, a pretty significant deterioration.
There's a pretty good explanation of all this from Reuters today titled "Greek leftist leader Tsipras claims victory over austerity".
As some of you may know, the left wing Greek party Syriza has won enough seats in the Greek parliament to control the government. They ran on a promise to renegotiate the terms of the agreements that keep Greece solvent in 2010 (we all remember the nervousness in the stock market in those times) and to end the austerity measures required by the agreements.
Here’s the current situation in Greece:
-Net government debt to GDP was reported by the IMF in 2012 as 155%. This is the highest in the world. Second is Japan at 134%. The US (with nearly $18 trillion in debt) is 88% for comparison.
-The other Eurozone countries, the European Central Bank (ECB), and the International Monetary Fund (IMF) loaned Greece €110 billion in 2010, €130 billion in 2012, and another €8.2 billion later in 2012 in order that they not default on their obligations. That’s a total of €248 billion ($287 billion).
-As part of this agreement, the Greek government made certain commitments. Among those are more aggressive collection of taxes (Greeks are notorious for not paying taxes), anticorruption measures, and privatization of government assets. Unemployment has grown to 28%.
The new government has promised to roll back these austerity measures and renegotiate the terms of the loan agreements, and of course they were elected by a population that didn’t want to pay back all the benefits they had received that put the country in such enormous debt.
I can’t imagine that the loaners will bail them out….again.
So what does that mean? Greece will probably be thrown out of the European Community organization, will have to form their own currency, and default on their obligations.
As we all know, an individual stock is valued based on company issues as well as macro issues, and this is a whopper of a macro issue. Be aware.
Is this crisis a glimpse to the future for this country?
"Doing a "walk-around" remains a pleasure as Cadillac does such a nice job with details. "
Glad to hear you like your ATS. I sold my XTS last year because I wanted an Escalade, but none were available in dealerships (I checked three....they were all ordered prior to release and it would have been a few months to get one).
I decided to go with a GMC Denali but same story. None available for sale. I finally wound up with a loaded, pearl white Yukon SLT which I'm happy with. Has nearly all the creature comforts that my XTS had.
"Have you thought about it, the sales price of a new Silverado is $40,000 and GM must pay a 35% business tax the truck actually costs only $26,000 which includes material, labor and profit , but you the customer must pay the $14,000 GM must pay the gov't,"
Yes, 35% is the nominal tax rate, but almost no company pays that much. In 2010, the average effective tax rate for corporations was 12.6% according to the GAO.
It is titled "Michigan union membership falls sharply in '14" by David Shepardson.
"get the point?"
Sure, and it's a valid point. A couple of counter points however:
-The claim was made regarding a timeline of 2025 with no visible source of funding. If he were going to do it in 10 years, we should be able to see the beginnings of a funding plan and there isn't one. Don't forget that Musk has also said he is going to build a $5 billion battery plant. I would be surprised to see that plant materialize even with the $1.4 billion in tax breaks and free land in Harry Reid's state.
-The transcontinental railroad was funded with government money. It took the Civil War to get congress to approve it because the southern Democrats seceded and took their opposition with them. I only bring this up to make the point that if government were the funding source, political considerations need to be considered particularly since the prevailing winds are starting to blow in a more conservative direction. Even with his fight for unfettered distribution channels, he has failed to convince state legislatures to allow him to market his product in his own model.
" now don't go accounting 101 on this."
Unfortunately for dreamers, inconvenient financial issues must be considered for an undertaking like this to get off the ground. For every game changing entrepreneur like Steve Jobs, there are thousands of dreamers lying at the side of the road because they didn't have proper funding. Plus there will be many man made obstacles like competition, big oil, etc. that he will have to contend with.
I like the guy. I hope he succeeds, in time, with what he's attempting to do. But he won't be making millions of cars in 2025. That you can take to the bank. If one believes otherwise, you should be mortgaging everything you own and buying this $200 stock. Not for me.
" That is about 10 full fledged assembly plants, not to mention motors, battery, and stamping plants."
Yep, I agree with that. You can find documentation on the web that says each assembly plant will cost roughly $1 billion. For instance the VW plant in Chattanooga, TN cost VW about $1 billion and will only produce 150,000 cars per year. If we use that as a guideline, that works out to about $6,667 of investment per car, so 2,000,000 would equate to $13.3 billion of investment just for the assembly plants.
Tesla's cash flow from operations for the firs9 months of this year were $29 million. At that rate, the annual for 2014 would be $39 million. Given $13.3 Billion in required investment (just for assembly plants) it would take Tesla 350 years to raise $13.3 billion.
Want to raise $13.3 billion in debt? The company currently has $5.4 billion in total assets, $958 million in stockholders equity, and $2.3 billion in debt to give us some perspective.
This ignores driveline and supplier tooling as well as R&D costs. Not going to happen.
You should read an article written by Micheline Maynard last November in Forbes titled "Tesla Shows Signs It's Struggling With Manufacturing".
"Then we're there already. Tesla has already sold it's entire 2015 production of the Model X. "
What do they make annually? 35,000? They deserve credit for cornering 0.2% of the US market but I was thinking a tad more than that.
"You LIE very badly - no one saw returns as your suggesting last year..."
Ask whoever said that what those stocks were (must be somebody I have on ignore). Should be easy to verify.