A VC - Latest Comments in You Can't Get Different Results Doing The Same Thing

Re: You Can't Get Different Results Doing The Same Thing

rfreeborn — Mon, 22 Dec 2008 15:29:45 -0000

Fred -

I think it would be well worth your time to read this brief article from the NY Times -
http://www.nytimes.com/2008...

In short, I don't think you really responded to "example" and his point re: wages.

I didn't do my own independent analysis of the math but the article states that getting UAW costs roughly in line with the non-union costs @ Toyota and Honda will save ~ $800 / car....hardly the windfall that the Big 3 need to survive and become competitive again.

This is much more than that in play here - in particular one point made in this article
*********************
And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.

The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.
*********************
In my family we have a saying - "if money can solve it, it's hardly the world's largest problem"....this looks like it could be a problem that money alone can't solve.

Re: You Can't Get Different Results Doing The Same Thing

Pierre Henri Clouin — Sun, 14 Dec 2008 18:23:01 -0000

Any decent turn around plan should aim at cutting costs by shutting down unnecessary distribution points. Hopefully, removing unnecessarily protective state regulations could bring back enough competition into the system and allow more efficient distribution models to emerge.

Re: You Can't Get Different Results Doing The Same Thing

Dick Carlson — Sun, 14 Dec 2008 16:39:16 -0000

Never said it was a gift. But any agreement to "Pay You Later" can be canceled by Bankruptcy. That's the risk that is taken by agreeing to take low wages now and a big retirement payoff later. The union members may not think of it as a risk, but it's always there.

I may see this more clearly, because my generation thinks it is more possible that UFOs exist than that we will actually get a meaningful return on the money we've put in to Social Security...

Re: You Can't Get Different Results Doing The Same Thing

Jeremy Weiland — Sun, 14 Dec 2008 13:11:55 -0000

It's one thing to be pro-union (I am at times) but it's another thing completely to be using taxpayer money to protect an unsustainable cost structure that is partially based on above market labor costs.

Well, by the same token, it's one thing to be pro-banking, but another thing completely to be using taxpayer money to protect an unsustainable securities scheme that is partially based on outright fraud.

You tried to draw a distinction between your position on TARP and the auto bailout in your responses to Nick Davis, but you didn't make clear how you were going about this. Why is it different? Why is it important to get commitments from auto makers, but not from banks?

I think it's kind of besides the point to try and apply investment thinking to government, anyway, but

Re: You Can't Get Different Results Doing The Same Thing

fredwilson — Sun, 14 Dec 2008 12:52:09 -0000

I do think we should be extracting significant reforms from banking and
brokerage in return for tarp funds

Re: You Can't Get Different Results Doing The Same Thing

Aruni S. Gunasegaram — Sun, 14 Dec 2008 12:40:49 -0000

This is a messed up situation. It's hard for us to know everything that is going on but I agree that everyone has to buy in to the 'bailout' which means executives and workers. It's a tough time right now and now is when a true leader needs to stand up and get them through. They (and we) are in the same ship and we need to all 'cut into muscle a bit' as an investor friend of mine recently said to make it through. Those who aren't willing to do that, need to go do something else or be fine with not having a job at all.

Re: You Can't Get Different Results Doing The Same Thing

Democratic Strategist — Sun, 14 Dec 2008 10:42:02 -0000

Fred:

Because I get your posts a day late on FeedBlitz, I can read all the comments for interesting and topical items with the back and forth and thrashing work pretty much done by someone else. FWIW they shd bridge the car companies for 3months, 3 quarters, heck maybe even 3 years. We shd have learned our lesson from LEH that no matter how stupid and self-interested jerks like Waggoner, Fuld or Gittelfinger are, they run companies that are central to large parts of our economy. When LEH went down it took a lot of good people with it. The same will happen if GM goes to liquidation. (DIP bankruptcy is a dream).

But that's not what I want to talk about. It's Bernie Madoff. Everyone wonders where the money went? Bad trades? Personal shoppers? Houses in Palm Beach? UJA donations? Sure, but not $50B. In the best traditions of Ponzi schemes, most of the money went from the latecomers to the oldtimers -- from the yinge pischers to the alte kakkers. It was a massive generational transfer. And guess what? The UAW and Big 3 made the same kind of deal back in the 70s and 80s. So now there's nothing left for the heirs. That's what Reagan did back in 1981 with his tax cuts. The Greatest Generation got theirs.

If you can think up a fix for the auto industry, keep it. It should work for the families that were ripped off by Bernie Madoff and our kids who have to pay down the enormous national deficit.

Re: You Can't Get Different Results Doing The Same Thing

fredwilson — Sun, 14 Dec 2008 07:40:06 -0000

Ah, that's a very good insight

They need to be able to shutter a large number of them

Or do they simply need to change the whole distribution model?

Re: You Can't Get Different Results Doing The Same Thing

adamsmith1 — Sun, 14 Dec 2008 07:31:15 -0000

Here is a copy of a 2,200 page UAW contract agreement (Ford, 2007): http://laborpains.org/2008/...

A random page:

Subject: Computer Systems Access for UAW
Representatives

During the course of these negotiations, the parties discussed
the importance of certain International Union representatives
having access to certain Corporate databases
containing information pertinent to the accomplishment of
their responsibilities.

The Company recognizes the potential for efficiencies that
may be gained by expanding certain access to different
Corporate data systems. At the same time, it must be
recognized that the widespread availability of e-mail and the
public Internet, increases the possibilities for the misuse or
improper control of the Company’s proprietary information.
As such, the Company must ensure that access is limited to
those individuals with a demonstrated business need related
to primary job functions. Furthermore, to protect the Company’s
intellectual properties, the handling of such data must
comply with security policies and procedures, and regulations
governing the public disclosure of this information. To
meet these standards it is essential that the Company
database business owner has reviewed and approved any
access. Inappropriate access or misuse of data related to the
Ford Motor Company can lead to potential unauthorized
disclosure of data, which could cause reputational damage,
compromise the competitive position of the Ford Motor
Company, create potential violations of consumer privacy
protection, and could result in financial harm to the Company.
Consistent with the guidelines listed above, and within 30
days following the Effective Date of this Agreement, UAW
and Company representatives from the Joint Programs,

COMPUTER SYSTEMS ACCESS FOR UAW REPRESENTATIVES
428

Re: You Can't Get Different Results Doing The Same Thing

Guest — Sun, 14 Dec 2008 07:08:22 -0000

Welcom to A VC, Mr. Mike Moore!
(just kidding, but there are similaritie: http://www.dailykos.com/sto...

Re: You Can't Get Different Results Doing The Same Thing

Guest — Sun, 14 Dec 2008 07:04:03 -0000

Another story about union workers, hapless management and political support:
http://www.dailykos.com/sto...

Re: You Can't Get Different Results Doing The Same Thing

Use my Fed taxes in my state — Sun, 14 Dec 2008 02:36:26 -0000

It should not go unnoticed that Corker, as mayor of Chattanooga, probably played a significant role in marshalling over $0.5 Billion Dollars in incentives to have a foreign automaker, VW, build a plant in Chattanooga – all in the name of 2000 plus automaker jobs in Tennessee.

Re: You Can't Get Different Results Doing The Same Thing

Use my Fed taxes in my state — Sun, 14 Dec 2008 02:31:39 -0000

One step in the right direction is to stop giving Michigan's Federal Tax dollars to Alabama, Mississppi, and Tennessee. Return them to Michigan. According to http://www.nemw.org/taxburd..., MICH Return on Federal Tax Dollars is 0.94. TN is 1.29, AL is 1.63, and MS is 2.02. Why should Michigan federal taxes subsidize building more automotive manufacturing capacity in the South, when this nation already has enough capacity? Give Michigan its money back.

Re: You Can't Get Different Results Doing The Same Thing

Someone — Sun, 14 Dec 2008 01:16:31 -0000

Here their expected result is "improvement". Which is consistant throughout each round. Now insanity will be, when they perform some form of "practice", find that it actually decreased their performance, but continued repeating it expecing a different result the next time.

Re: You Can't Get Different Results Doing The Same Thing

mike — Sun, 14 Dec 2008 01:08:48 -0000

Let me see: The US give billions away annually in foreign aid yet the same Senators who vote for foreign aid won't give auto makers a cent; Natural disaster victims get billions of dollars in US government aid to Southern states; Southern states give hundreds of millions of dollars in tax breaks to foreign car companies to build plants in their states providing foreign care companies with a competitive advantage; yet when one of industries woven to the fabric of our country is going down the tubes the Senate Republicans lead by the Southern Senators basically tell the auto industry unless they immediately lower costs including wages that the auto industry can go to hell.
I say the next time those Southern States need aid they should go to Japan and Korea for help.

Understand this. It is legacy costs (pension and healthcare benefits) that are making them uncompetitive. So basically what many Senators are saying is file bankruptcy and eliminate those legacy costs. Do any of these "WISE" people understand that those costs won't go away those cost will simply be transferred to the federal government thru the Pension Guaranty Board where pensioners get about 50% of their pension) and Medicare/ Medicaid. WOW, transferring those costs to government will save US taxpayers tons of money. Give me a break!

If the Congress believes there should be no bridge loan until significant wage concessions I say all federal government employees should take the same reductions because the deficit is much more severe than anything happening at the automotives.

In closing let me say that the auto industry has been idiots for years. That said in the last few they have delivered on things that customers and the government are asking for. They are getting their costs in line; quality is equal to or exceeds many of the foreign car companies (See JD Power). and they have more fuel-efficient cars in their fleet than foreign auto companies.

The biggest problem with US auto industry is perception. Since their reputations stunk so bad for years people are not even looking at their new cars. The US Auto companies need to get people in the show room to change the perception. The bridge loan will help keep the autos afloat but the auto companies still need to do their part.

Re: You Can't Get Different Results Doing The Same Thing

Dan Cornish — Sun, 14 Dec 2008 00:08:23 -0000

The flaw in your argument is the supposition that there IS an imbalance between workers and management. Your kind of outdated thinking is the reason why Unions can not move past the ossified practices of the past. The car companies should go out of business and will because of the incompetence of agreeing to this document. http://laborpains.org/2008/...

Re: You Can't Get Different Results Doing The Same Thing

jrh — Sat, 13 Dec 2008 21:11:59 -0000

If there are two investors in the deal, and you know that investor A will do the bridge on good terms, then you can happily ignore investor B's harsh demands. It seems pretty obvious that Obama has the UAW's back, operating through Bush and the TARP. That's why the UAW can turn down a deal that seems pretty reasonable to most people. The big loser from Corker's deal would have been the Union itself -- after all, why would the rank and file pay dues if their union doesn't get them higher pay?

If you were a manager of a pension fund, would you put your money into GM right now? Surely you'd be fired if you did. Take a look at the US budget and interpret the government as a business. It is basically a highly armed pension fund with a scary long-term balance sheet. Now look at the deals this fund has done the last few months. Does it make you feel better about the fund's future?

The sooner we get the focus on saving, working hard, investing, and innovating, the better off this country will be. Relics like GM are just in the way. Break it up and put it in the hands of people who will make something valuable out of the pieces. A bad bridge just prolongs the inevitable, and squanders more resources that could be put into productive investment. It might look scary and uncertain for the moment, but we have to have faith in the US, and believe that we will all be better off if we put resources in the hands of people who build value, not people who destroy it.

Re: You Can't Get Different Results Doing The Same Thing

example — Sat, 13 Dec 2008 19:34:18 -0000

The problem is an imbalance between shareholders and non-unionized employees. Shareholders get to bargain collectively through management, but workers have to bargain as individuals.

Obviously, you would workers in a capitalist society to try get as much money for their work as they can, and they'll get more if they unionize. Whining about it isn't very productive.

Re: You Can't Get Different Results Doing The Same Thing

Guest — Sat, 13 Dec 2008 19:23:32 -0000

It's a muddy situation. To continue Fred's analogy: the VC should offer a bridge loan, but only on condition that the company cuts salaries for the software development team, so that the company can survive long term. Which sounds reasonable, until you find out that one of the software engineers had slept with the wife of one of the VCs, another one had called another partner an "ignorant hick" in public, and a third one's son had bloodied the nose of the kid of yet another partner. So you just don't know what is reasonable and what is personal. Or in the case of the GOP vs. the unions, how much is rational and how much is ideological.

That's the unfortunate legacy of the Bush years. After they told us that Iraq was a legit threat, only to find out later that it was a pure lie and posturing, we don't trust that party anymore. Consider, "drill, baby, drill", too. Sure, getting more domestic oil sounds like a legitimate goal, but then you remember Bush and the GOP's relationship with the environmental movement and you don't know anymore what is behind it, concern for the energy supply or desire to stick it to the tree-huggers...

Re: You Can't Get Different Results Doing The Same Thing

bob — Sat, 13 Dec 2008 19:02:47 -0000

A clever statement, frequently made in many contexts. However, some people, in some situations (athletics and music, to pick two examples) call it "practice."

Re: You Can't Get Different Results Doing The Same Thing

Guest — Sat, 13 Dec 2008 18:58:01 -0000

funny, this is exactly what I was thinking before I even opened my laptop... It sure smells like W is working hard for his pardon from Obama.

Re: You Can't Get Different Results Doing The Same Thing

Pierre Henri Clouin — Sat, 13 Dec 2008 18:46:19 -0000

According to the New York Times, "Industry experts note that Chevrolet, G.M.’s flagship brand, has about three times as many dealerships as Toyota but sells about the same number of cars. That network is a legacy of the era when G.M. controlled 60 percent of the domestic market, instead of 20 percent or so today." The article goes on to detailing why the dealership networks have become an unsustainable burden for the Big Three. In any case, restructuring Detroit amidst the toughest recession since WWII will have deep social costs.

Re: You Can't Get Different Results Doing The Same Thing

lebousquet — Sat, 13 Dec 2008 18:21:32 -0000

True, Ford Motor paid well in its day. I was referring more generally to Henry's longstanding resistance to unionization. If memory serves, Ford was the last big car maker to recognize unions as workers' official representative in collective bargaining. And of course Hank had this unfortunate habit of using thugs, or the local cops, to beat up (or mow down, in the case of the Hunger Massacre) striking workers.

Re: You Can't Get Different Results Doing The Same Thing

infoarbitrage — Sat, 13 Dec 2008 18:15:56 -0000

I appreciate that, Fred. I do, however, perceive that we (you, me and many other popular bloggers who aren't recognized as "political bloggers") are operating in a large echo-chamber that is firmly outside the Beltway. I've been thinking of ways of getting more active in the dialogue by commenting on posts in more traditional political blogging venues, e.g., Politico, etc., because I feel as if the blogging world is a giant Venn diagram with multi-topic blogs (like ours) in one sphere and Politics in another, with no overlap. Concerning Seeking Alpha, you know where I stand. I was very clear with them about my unhappiness with parallel conversations and wanting to merge them via my Disqus feed. They have not seen clear to do this, or to adapt in the way Silicon Alley Insider has by accomodating your Disqus comment thread. I don't like managing multiple threads which I feel I have to do because of the intensity of the SA community, and I don't have the time. So if and until they make this change, I will forgo the readership in order to maintain my sanity.

Re: You Can't Get Different Results Doing The Same Thing

Pierre Henri Clouin — Sat, 13 Dec 2008 18:12:30 -0000

There is an awful lot more focus on union contracts than there is on Detroit's utterly outdated and bloated networks of car dealership, which they could have shed a long time ago, save for crippling state regulations. In all fairness, any Detroit bailout package should allow the big three to free themselves from their distribution networks.