Fly-Over Country

Now THAT is a tough market

The New York Times reports that Toyota expects its first loss in 70 years:

 On Monday, Toyota said it expected an operating loss in its auto operations of 150 billion yen, or $1.7 billion, for the fiscal year ending March 31. That would be the company’s first annual operating loss since 1938, a year after the company was founded, and a huge reversal from the 2.3 trillion yen, or $28 billion, in operating profit earned last year.

Analysts said Toyota’s downward revision, its second in two months, showed that the worst financial crisis since the Depression was threatening not just the Big Three but also even relatively healthy automakers in Japan, South Korea and Europe. Many other companies will also soon be reporting losses.

. . . “It is just a matter of time before all major automakers are losing money,” an auto analyst in Tokyo for Credit Suisse Securities, Koji Endo, said. “And things will just get worse next year, when companies start losing money for the second consecutive year.”

. . . “The change in the world economy is of a magnitude that comes once every hundred years,” Toyota’s president, Katsuaki Watanabe, told a news conference in Nagoya, Japan, near the company’s Toyota City headquarters. “We are facing an unprecedented emergency.”

. . . The biggest drops have come in the United States, traditionally the Japanese companies’ most profitable market. After years of increasing market share at Detroit’s expense, sales at Japanese companies are sharply lower. In November, Toyota’s sales dropped 33.9 percent and Honda Motor’s 31.6 percent, both faring slightly better than G.M., which had a 41 percent decline.

The Big Three are in much worse shape than Toyota, and that's on them, but the current economic crisis is a force majeure.  This is no time to base policy on ideology or antipathy for the UAW.

Going around but not yet coming around . . .

AP reports that "[b]anks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year".

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

This arouses remarkably little concern -- particularly in comparison to the anger at the supposedly excessive compensation of union auto workers.  Unlike the auto workers, the bank executives are precisely the people whose profligate decisions caused the current financial crisis.  They enriched themselves while making trillions of dollars of wealth disappear.  This dKos diarist argues that now would be a good time to bring our executives' compensation into line with their foreign competitors':

In 1950, the average pay of an S&P 500 CEO was less than 30 times that of an average U.S. worker; by 1980, prior to the Reagan Revolution, the average pay of the S&P 500 CEO was approximately 50 times higher than that of an average U.S worker. But by 2007, the average pay of an S&P 500 CEO had soared to more than 350 times as much as that of an average U.S. worker.

This is both immoral and unsustainable in a democracy. By way of comparison, in Europe, an average CEO only makes 22 times as much as an average worker, and in Japan, only 17 times as much.If America wants to be competitive again, we need to reduce CEO pay to a level comparable to CEO pay in Europe and Japan. I know exactly how to accomplish this feat. The UAW should agree to immediately lower U.S. union worker pay to a level equal to the level paid by their non-union, non-American competitors. In return, auto CEO's must agree to permanently lower their compensation to only 20 times that of an average union worker.

Once this has been accomplished, Congress must move to apply the same pay standards to AIG and all of the financial institutions that took one penny of taxpayer money from the TARP fund.

Of course, American businesses would also improve their competitive position if, like their foreign competitors, they didn't have to pay for their employees' health care, but single payer national health care will require another post.