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Why AIG Gets Billions While GM Gets Scorn???


  • Category: Odd
  • Posted: December 14, 2008


Let me see if I'm getting this right: AIG (AIG), the huge insurance company, has so far gotten $173 billion worth of federal aid, because traders at one small division made bets on exotic securities that were so calamitous they threatened to bring down the whole company. So far, the amount of money the feds have pledged to this one firm equals nearly one-third of the nation's defense budget.

Read Full Story: http://seekingalpha.com/article/110496-why-aig-get...

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Mr_Spann
Mr_Spann

Male, 34, Detroit, MI

Posted December 14, 2008


General Motors (GM), America?s biggest automaker, has asked for a $10 billion federal loan, equal to one-seventeenth of what AIG has gotten ? and Congress has said no. There were no rogue traders at GM, and the company?s problems have intensified in plain view, over several months, instead of coming from out of nowhere in a single, cataclysmic episode.

Make sense? Doesn?t to me. So maybe if we look at each company a bit more closely, it will be clearer why the government favors companies like AIG over ones like GM.

Is AIG bigger? No. AIG doesn?t break out its U.S. employment numbers, but it has 116,000 workers worldwide. Perhaps half of those are U.S. jobs.

GM employs 96,000 Americans. Total worldwide employment is 252,000, more than twice AIG?s.

Are AIG executives humbler? Not really. Here?s how CEO pay stacks up:

Former AIG CEO Martin Sullivan earned about $14 million in 2007. Total pay over the last three years: About $53 million (including only 9 months in 2005, the year he became CEO).

GM CEO Rick Wagoner earned $14.4 million in 2007. Total pay over the last three years: About $30 million.

AIG is also offering controversial ?retention bonuses,? ranging from $92,500 to $4,000,000, to a select group of execs deemed essential to the company?s turnaround. Congress has asked questions - but so far shown little outrage.

Has AIG had a regime change? Yes. Former Allstate CEO Ed Liddy took over the company in September, replacing Sullivan, who presided over a wipeout in credit-default swaps and other exotic investments. The fresh blood pacified critics somewhat.

GM has had no regime change, although key members of Congress have called for that. Wagoner has been running the company since 2000, and the company continues to aggressively defend him.

[Read a defense of Rick Wagoner.]

Has AIG presented its turnaround plan to Congress? Not formally. There?s only been one Congressional hearing on AIG, and that focused mostly on past practices. No current AIG officials have testified before Congress since the feds got involved.

Wagoner has testified before Congress four times since November. And GM has presented a 38-page ?viability plan,? that?s publicly available, showing how it would use government money.

[See how the automakers' bailout plans stack up.]

Does have AIG have friends in high places? You could say that. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both support the AIG bailout, and they?ve steered money to the company without Congressional approval.

GM?s most important friends in Washington have been the Michigan Congressional delegation, which obviously doesn?t have the clout it used to. Paulson has actually argued against using part of the huge $700 billion financial bailout fund to help the automakers, because they can?t pass a ?viability? test proving they?ll stay in business long enough to pay back the loans. But AIG hasn?t passed a viability test either, and without federal help there?s little doubt it would be in bankruptcy.

[Read about better ways to handle a multibillion-dollar bailout.]

Does AIG have unionized workers? Few, if any.

GM has a bunch: 64,000. Ah ha! Maybe that explains it. In fact, Senate Republicans who blocked a $10 billion emergency loan for GM and a $4 billion loan for Chrysler said they wouldn?t approve a Detroit bailout unless the United Auto Workers made much deeper concessions than they?ve already offered, essentially giving up any advantages they have over non-unionized workers in other states.

So here?s one lesson: If you want a government bailout, try to have problems that are too complicated for most people to understand. And make sure your employees are the kind who wear a suit to work every day. Once you?ve satisfied those two requirements, ask for as much as you want: The coffers are open.

Disclosure: No positions.


Tall_Dark_Aries
Tall_Dar...

Male, 43, Chicago, IL

Posted December 14, 2008


@Mr Spann
@Forum

I am absolutely, completely and unequivocally against a bailout in any shape or form for the Big Three automakers in Detroit....for numerous reasons....some that I promulgated in this very space recently against the Wall Street Bailout....but no one would listen then...and most people still refuse to wake up and see the fallacy and irrationality against a bailout.

The Senate has it right: NO!

I just hope the White House has the audacity of strength and foresight to say "NO" also.

SAY NO TO ANY BAILOUT FOR THE BIG 3 AUTOMAKERS OF DETROIT.

If the Big 3 Automakers are given a bailout, the collateral damage will be unprecedented......and again, humbly, I will be back to this space saying "I TOLD YOU SO" just like I did regarding the Wall Street Bailout.


Tall_Dark_Aries
Tall_Dar...

Male, 43, Chicago, IL

Posted December 14, 2008


...and before any crazed UAW member or Detroit Big 3 sympathizer or syncopath comes to Chicago and breaks the windows and slashes the tires of my foreign-made VW Jetta, may I tell you: IT IS NOTHING PERSONAL....just simple, basic logic that most Americans do not seem to be able to grasp.

FU!CK THE DETROIT BIG 3 AUTOMAKERS and the UAW and every employee and business downstream.

Say "NO" to any and every bailout to the Detroit Big 3.

The Senate has it right.....Dear President Bush and President-elect Barack Obama:

SAY NO TO THE DETROIT BIG 3 AUOTMAKERS for any Bailout!

Unfortunately, I will be back to the very same space in a short amount of WEEKS saying "I TOLD YOU SO" if the automakers are giving a bailout.

PLEASE WAKE UP PEOPLE!


Tall_Dark_Aries
Tall_Dar...

Male, 43, Chicago, IL

Posted December 14, 2008


Why are Americans so damn SHORT-SIGHTED?!!

I will be back to this very same space in a short matter of time saying "I TOLD YOU SO", but it will give me no pleasure or satisfaction, just more shaking of my head in disbelief.


Tall_Dark_Aries
Tall_Dar...

Male, 43, Chicago, IL

Posted December 14, 2008


@Mr Spann
Please, my brotha, go back and read Adam Smith's "Wealth of Nations"....play close attention to the "invisible hand" metaphors.

Peace

Again, why are (most) American so SHORT-SIGHTED? Throwing money to the Detroit Big 3 will solve absolutely NOTHING and actually excerbate the problem.

@Mr Spann, I can GUARANTEE you that I will be back in this same space in a matter of weeks or months saying "I TOLD YOU SO".

If you would like for me to elucidate the myriads reasons why I vehemently AGAINST any bailout of the Detroit Big 3 automakers, just let me know and I will give a treatise here.

Peace

PS: For the record, I was absolutely, unequivocally AGAINST the Wall Street Bailout also, and you can already see how that is sturning out. I can copy and paste my previous posts if you'd like.

No one listened then, and no one is listening now.

YOU REAP WHAT YOU SOW.

Memo to president-elect Barack Obama, standing president George W. Bush, White House, U.S. Senate:

PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!



PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!



PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!


PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!


PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!

PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!

PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!

H!ELL NO!


PLEASE SAY "NO" TO ANY BAILOUT FOR THE DETROIT BIG 3 AUTOMAKERS!


mr_rightnowww
mr_right...

Male, Age Private, Austin, TX

Posted December 16, 2008


the automobile industry has done more to lift african-americans out of poverty & into the middle class than any other private sector industry in the country. my uncles (6 of them) grew up on a share-cropper plantation in arkansas & migrated together to flint, michigan in the 50's. they got on at buick, bought homes, sent children to college, retired. the southern conservatives hated that black people were leaving their cotton fields for a better life, & they still hate it today. thats why they are the main ones against saving the industry. the uaw shouldnt give anything back that workers have fought for over generations. why any black person would side with the southern conservatives against the auto workers leaves me amazed & dumbfounded.


Mr_Spann
Mr_Spann

Male, 34, Detroit, MI

Posted December 16, 2008


Just goes to show you how little folks have actually been paying attention to the Big 3 until this whole thing showed up. And to think that some are actually cool with an area that is already economically depressed to be saddled with even more unemployment is crazy, but I guess that's one of those if it's not me I don't really care attitudes.

We can talk about GM making the Hummer all we want, but before gas hit over $4.00 a gallon they were selling like nobodies business, and now all of a sudden it's GM's fault for giving the consumers what they wanted. Everybody is so environmentally friendly all of a sudden, but for over 15 years the roads were full of SUV's.

Does the Big 3 deserve some of the flack they are getting, yes of course they do, no one is denying that, but the arguments made that they don't make quality cars. That they pay their workers too much have all been debunked many times over.

According to Car and Driver Magazine of the Top 3 cars for the model year 2009, were made by GM. The Cadillac CTS, and the Chevy Corvette. The CTS was also Motor Trends Car of the Year just this Year. The 2009 Truck of the Year was the Ford F-150, in 2007 it was the Chevy Silverado. Buick has just tied Lexus at number one on the JD Power List Ranking Vehicle Dependability.

Two contentions - that foreign automakers in the U.S. have received no government help, and that union workers are grossly overpaid-are either misleading or completely untrue.

First, let's start with government assistance. It's easy to forget that there are government subsidies other than the ones asked for in Congressional hearings. For foreign automakers such as Toyota, Nissan, Honda, Hyundai, Mercedes, and BMW, the better way of wringing out public subsidies is to get Southern states to battle for your plants by offering a bevy of tax abatements, infrastructure projects, and even employee recruitment, screening and training. According to the Center for Automotive Research at the University of Michigan, between 1998 and 2003, the Southern states paid out an average of $87,700 in "government help" per nonunion auto job created-an average of $143 million per facility-compared to $50,180 per job created in the haplessly unionized North.

The second contention - that the unionized autoworkers of the north are grossly overpaid - is misleading. In fact, Sen. Bob Corker (R-Tennessee), one of the opponents of the bailout, encouraged the deception. The Chattanooga Times Free Press reported the Senator "said the automakers pay their rank-and-file employees an average of $70 to $74 an hour, including benefits, while foreign automakers pay an average of $42 to $44 an hour." The quote, repeated nearly everywhere in the news media over the past few weeks, obscures the situation.

Only a very few news organizations - Jonathan Cohn at the New Republic and David Leonhardt at the New York Times, among the few-bothered to break it down. As it turns out, the base wages are fairly close - about $29 an hour for Detroit's three automakers, and about $26 for the foreign automakers in the U.S. What nearly every Republican politician and news report fails to mention, though, is that wages in Detroit are already dropping. The UAW gave major concessions to GM, Ford, and Chrysler in 2005 and 2007, setting a new second tier starting wage at $14. This lower wage will continue to decrease the base wage cost going into the future.

Another difference in North vs. South autoworker wages is benefits. Adding in things like healthcare, training, vacation, and overtime, Big Three autoworkers make about $55 compared to about $46 for nonunion workers. True enough, unionized workers do better here. But a big part of this expense is healthcare.

Healthcare also is part of the largest difference between North and South: what the industry calls "legacy costs" - the pensions and health care of retirees. The foreign auto companies currently don't have these costs, since they've been operating in the U.S. for only about 25 years or less, and have few retirees. But, the Big Three have more than a million retirees and their families to cover. Corker and others unfairly lump this into average wage costs and arrive at something over $70 an hour.

So, when the Senate Republicans are talking about equalizing wages, what they are really talking about is taking pensions and healthcare away from retirees. That doesn't sound as nice as "equalizing" the wage of current workers, so they never say it that way.

The UAW has made a number of concessions over the years, but that's where they said no. They wouldn't sell out the dignity and well being of their retirees.
Back in 2006, GM vice president Bob Lutz famously said, "Sometimes it feels like we're a health-care company that tries to sell enough cars to pay the bills."
Exactly. Hello Washington? This is a primarily a health care problem, not an auto problem.


Mr_Spann
Mr_Spann

Male, 34, Detroit, MI

Posted December 16, 2008


Corker and his colleagues might begin with a better comparison for the Big Three's unionized autoworkers -- their union colleagues in Canada. Their work and wages are similar, except that Canada has a public healthcare system that evens the playing field for all companies. According to the Canadian Labour Congress in 2006, health benefits for unionized autoworkers in Canada cost $120 per car. In the same year, health benefits for Big Three autoworkers cost $1,500, and they're still rising.

If Corker and his colleagues are truly serious about changing the structure of the auto industry, they should start by working to give people health care, not take it away. And if the news media wants to get to the bottom of Detroit's problems, health care is what they should be writing about.






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