Detroit files for Bankruptcy

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The U.S. government needs to avoid trying to bail out Detroit. I have heard some conversations about that subject.

Stockton went bankrupt last year. Several other California cities have gone bankrupt. Fresno, Oakland, and San Jose, all pretty large cities (San Jose is the 10th largest city in the U.S., which no one outside of CA seems to realize), are all poised for bankruptcy as well. My understanding is that, besides Chicago (like Blades mentioned, above), Philadelphia is in similar straits. I've read similar commentary indicating that Cincinnati, Honolulu, and Camden, NJ, could be next. I think its almost certain that several of the above cities will go bankrupt in the next 5 years.

Both LA and NYC have serious financial issues, too, from what I understand.

The U.S. government has enough financial issues of its own making to attempt to deal with without taking on responsibility for bailing out municipalities across the country.

 

Outsourcing goes on in every industry and that Detroit may have been union strong had little to do with it. There are all kinds of jobs that have gone away to China regardless of unions. The loss of manufacturing jobs across the Northeast is well documented. American corporations have sought to exploit third world countries with vast labor pools that have been willing to work for next to nothing and consumers have enjoyed the temporary savings on consumer products -- until its rheir jobs that are on the line.

 

It does go on in every industry and the US is trying to minimize it through tariffs (kind of late to the party though). The places that are hit worse are where labor is high (i.e., strong union influence, high cost of living, etc.). The auto industry has been pulling out of Detroit for decades because of the high cost of labor -- and it's not just hourly wages but also goes to productivity and benefits. There's a huge waiting list of people that want to work at every auto manufacturing facility I know of -- they are literally the best jobs around and pay 'professional' wages and benefits for 'unskilled' labor. The limits on productivity are probably the biggest killer, I've known people working in the auto industry and they have productivity quotas, most notably limiting production, to ensure the 'lowest common denominator' is the norm -- at least in Michigan. New facilities get to start with higher quotas for the same wages -- outside of Michigan.

For Detroit every auto industry job that went away meant probably four jobs total when you consider all the supporting jobs. I saw the same thing in Seattle in the 80's when Boeing had huge layoffs and the SeaTac area nearly collapsed financially. The layoffs had a huge rippling effect in the area.

Ultimately, it's a lot of people who are at fault. We're going to go through the same thing in Illinois with the state pension plans (especially education) -- it's all about greed and the willingness of groups of people to take everything they can from the coffers.

 

Of course the CEOs want to use the cheap labor overseas. The labor costs here are out of this world. My neighbor's grandson has been working for Chrysler here in Illinois. He got hired in as a custodian 2 years ago. With overtime, he made over 70k last year. That is insane. 70k for mopping and vacuuming. That is a major drain on any company. I know another assembly line worker there who was hired in last year. He was hired in at 27.00/hr. He gets overtime out the wazoo. He tightens bolts. Ya don't need a PHD for that... I know warehouse workers that work 3 times as hard for half that pay. Sorry, but it's not the ownerships fault entirely. ALL parties are to blame for the auto nightmare that was created and the jobs going overseas.

 

The cost of labor had little to do with the Auto industry's problems. In the 1960's, when the unions were in their heydays, you could still buy a car for less than 2000.00 dollars and most middle class Americans bought a new one every two to three years. How often does that happen now?

In the 1970's, when Nixon was still prez, the auto industry got caught between two things: The big insurance campany demands for safety and government demands for cleaner environment. Plus it was the first Mid-East oil embargo as well, which scared the crap out of the American car buyer. It's been all downhill ever since.

 

The 60s heyday is what "started" the issues. Now all the benefits that were granted have caught up. High labor and incredible amounts of benefits/retirement wages doomed the industry. Ultimately, it was the cost of labor as future benefits for the workers are part of that cost. Safety and cleaner running vehiicle demands surely didn't help either. But safety and cleaner running engines has nothing to do with the rise in pay for unskilled labor compared in union held jobs. The unions were the first domino.

 

Unions were around before the 1960's, and cars doubled in price in the 1970's, for the reasons I listed. Safety features and cleaner, unleaded gas engines added more to cars than the unions did.

 

The argument isn't what added the most pricing to the cars, it's why the labor itself moved overseas. Cars doubling in the 70s from 2k to 4k is a drop in the hat compared to the billions in benefits that the industry had and still has to pay. That is why they outsourced. The jobs moved after the 70s. The loss of the paying jobs is what killed Detroit.

 

It's not just the auto industry here though ... we have extremely poor management and governing practices that helped to sink the city.

Also remember than an automobile today is a much different animal than it was in the 1960s/70s. A friend of mine in the industry told me that round about 2003, vehicles reached a point of general reliability that put a serious pinch on service and repairs - they don't really need to be routinely repaired anymore (just maintained), and they run for 200,000 miles and last 15 years.

 

The car is going to be made where its overall cost is lowest. That includes labor (and benefits), parts, shipping, taxes, and tariffs. The average purchaser in the US does not care if their choices cost jobs -- they're only interested in saving a few bucks for themselves. If the "Made in the USA" symbol meant anything in buying power the cars would be made here. Sure, a significant portion of buyers are willing to spend an extra $20 on the "Made in the USA" symbol -- but the portion willing to spend an extra $1,000 (at least) is too small to make it worthwhile.

People can yell and scream all they want about the evil corporate executives that moved jobs overseas -- those people are simply either unwilling to accept their part in this or are ignorant. So many others claim "it's so the companies could pay off their investors" -- but those investors are everyone who has a retirement plan and money market fund. Every time someone shifts their retirement fund, college fund, or money market account they are making a decision to pull investments from one company to another -- every company will do what it has to do to keep itself going.

It comes back to greed.

 

Gee, if the rules of the system we have set up inevitably create a clash between worker and producer, is driven towards creating the worst conditions possible for workers whenever possible, does not share equitably in it's gains, and (though this is irrelevant to the subject) creates an overuse of resources with no internal mechanism to stop it's consumption needs, don't you think it's time to admit that the whole damn system is messed up and needs to be thoroughly examined?

Worker uprisings in slave labor condition countries are inevitable. History has seen this story before. The evils of unchecked corporate power were made evident in the time before unions, as they are in the third world today, and it is only through those people experiencing the worst of it now fighting back that the balance of power will ever shift. Once that shift occurs and corporations have nowhere to hide from worker demands, I wonder if there will be a fundamental change in worker/producer relations or if this struggle will always go on.

 

Yes in the USA. Many conutries protect their industries. Remember what Janpense steel did to the American steel industry? The Japs protect their national interest. That is what is really so funny about Snook's little piece of silliness. We rebuilt Japan and then they screwed us. In the end the Chinese will own us. And most of AMerica will look like Detroit, while the corporations move their operations to China. One day America will be just cheap labor for the wealthy Chinese and then every Republican will be screaming for the return of the unions.

http://www.washingtonpost.com/blogs...nto-the-future-of-american-business-in-china/

 

That makes sense and no sense at exactly the same time. Well done.

Please explain how on earth the "rise of the unions" will restore manufacturing to the US.

I do agree with you that the US needs to take an aggressive approach to import/export rules. The problem with this is the US is tied up with too many international treaties that regulate international commerce.

While I think he is more than a little crazy, Donald Trump said something very interesting about a week ago. It was something along the lines of "We need a President and a Congress that will get serious with China."

 

I work in the Import/Export field. The tariffs are not the issue. Monty is right, we raise, they raise. That is a given. It is the gross amount of government regulation, like licensing, exemptions, etc.. that cause American business to spend a ton of money where the foreign competition does not face such regulations. It kills us in the Aerospace industry. It killed us in the Apparel world as well when I was working in that field a decade ago, a.k.a. "Quota". The governmant puts out incredible amounts of Regulation, then audits the American businesses and hammers them with fines. It's idiotic. The fines serve the Fed with a revenue source, but one that hurts Businesses, both big and small.

 

Industry isn't regulated in Europe? That's news to me...

 

Not saying Europe doesn't regulate. It's the amount of needless regulation out there that is the telling factor. There are many practices that are just archaic.

Example. A DSP-73 license. A State department license that requires manual signatures from CBP when importing and exporting. It holds your goods up for days and weeks. In the Aerospace industry, when you have an AOG(Airplane on ground) it a) raises your storage costs while waiting for them to manually decrement the license, which happens at their whim b) pisses your customers off, which has obvious implications and c) most importantly, if a military plane somewhere around the world is down, it possibly puts defense at risk. That's what happens when you have multiple government agencies involved with neither overseeing the process but both willing to audit you later and fine the hell out of you for the most simple of clerical typos or errors. Big businesses are cash cows and I would gather that 99 % of big business is in the Export business in today's Global Economy. They are targets for the Fed. And don't get me started on the Harmonized Tariff Schedule, which most duty payments are derived from on Imports to the US. The ridiculousness of their interpretations that vary from port to port simply show the failures across the board with CBP.

 

Is regulation significantly worse in the US than in the rest of the Western world?

 

Does the rest of the world have their CBP-type agents tour factories in other countries to make sure they meet their requirements? It's a standard in the Apparel business world here in the US.