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From: C. E. White on 8 Apr 2010 07:31

"jim beam" <me(a)privacy.net> wrote in message
news:85ednU_Hvo8DFSHWnZ2dnUVZ_jKdnZ2d(a)speakeasy.net...
> On 04/07/2010 03:34 AM, dr_jeff wrote:
>> Ed Pawlowski wrote:
>>>
>>> "dr_jeff" <utz(a)msu.edu> wrote in message
>>> news:MNmdnSGTtc7tdibWnZ2dnUVZ_vOdnZ2d(a)giganews.com...
>>>> Ed Pawlowski wrote:
>>>>>
>>>>> "jim beam" <me(a)privacy.net> wrote
>>>>>
>>>>>>
>>>>>> that doesn't explain it. g.m. have been making profits on their
>>>>>> well managed and well run european operations, and european
>>>>>> pension/health care costs [along with virtually every other
>>>>>> cost
>>>>>> too] are /way/ higher than here.
>>>>>
>>>>> Costs have little affect on profitability. Selling price does.
>>>>> You
>>>>> have to know both to do a comparison between US and Europe
>>>>
>>>> So a car that costs $100,000 to build will be real profitable at
>>>> $25,000?
>>>
>>> No, I didn't say that, you are just using a dumb analogy. A car
>>> that
>>> costs $100,000 to build is profitable at $100,001 though.
>>>
>>>
>>>> Both costs and selling price are part of profitability. In fact,
>>>> profit = selling price - costs.
>>>>
>>>> Jeff
>>>
>>> But if you can get the right selling price, it does not matter
>>> what
>>> the cost is. If the marketplace in Europe allows for a higher
>>> selling
>>> price, GM can make a profit even with higher cost.
>>
>> Yet, GM is not making a ton of money in Europe, either. IIRC,
>> around
>> 2006, they were making a bit of a profit in Europe to help offset
>> their
>> losses in the US, but not any more.
>
> accounting practices for things like this are somewhat "elastic".
> i.e. you can load a foreign operation with a bunch of your domestic
> expenses to "help" the reported profits and tax burden, etc. bottom
> line, g.m.'s [better managed - better product, more competitive]
> foreign operations have been carrying the company for years, the
> european one particularly, even though the european is a very high
> [real] cost environment.

I don't agree that GM's European operation have been carrying the
company for years. In fact, I suspect the opposite is true recently.
Opel has been struggling for decades. Saab is gone. GM does actually
sell a significant number of "Chevrolets" (mostly rebadged Daewoos)
and Cadillacs in Europe which is surprsing (at least to me). As you
say, interantional companies can and do manipulate earning transfers
between countries mostly to try and minimize taxes.

Your comment about Europe being a very high cost environement is true
but you ignore the fact that the playing field is much more level in
Europe. European countries all have government run health care
programs, so GM is not saddled with paying for deluxe health care for
workers while some competitors with younger non-union work forces
don't have the same high health care benefit costs. Western European
countries all have strict pension rules, so while GM may have high
pension costs in Europe, so do all the competitors.

Ed


From: jim beam on 8 Apr 2010 09:57
On 04/08/2010 04:31 AM, C. E. White wrote:
> "jim beam"<me(a)privacy.net> wrote in message
> news:85ednU_Hvo8DFSHWnZ2dnUVZ_jKdnZ2d(a)speakeasy.net...
>> On 04/07/2010 03:34 AM, dr_jeff wrote:
>>> Ed Pawlowski wrote:
>>>>
>>>> "dr_jeff"<utz(a)msu.edu> wrote in message
>>>> news:MNmdnSGTtc7tdibWnZ2dnUVZ_vOdnZ2d(a)giganews.com...
>>>>> Ed Pawlowski wrote:
>>>>>>
>>>>>> "jim beam"<me(a)privacy.net> wrote
>>>>>>
>>>>>>>
>>>>>>> that doesn't explain it. g.m. have been making profits on their
>>>>>>> well managed and well run european operations, and european
>>>>>>> pension/health care costs [along with virtually every other
>>>>>>> cost
>>>>>>> too] are /way/ higher than here.
>>>>>>
>>>>>> Costs have little affect on profitability. Selling price does.
>>>>>> You
>>>>>> have to know both to do a comparison between US and Europe
>>>>>
>>>>> So a car that costs $100,000 to build will be real profitable at
>>>>> $25,000?
>>>>
>>>> No, I didn't say that, you are just using a dumb analogy. A car
>>>> that
>>>> costs $100,000 to build is profitable at $100,001 though.
>>>>
>>>>
>>>>> Both costs and selling price are part of profitability. In fact,
>>>>> profit = selling price - costs.
>>>>>
>>>>> Jeff
>>>>
>>>> But if you can get the right selling price, it does not matter
>>>> what
>>>> the cost is. If the marketplace in Europe allows for a higher
>>>> selling
>>>> price, GM can make a profit even with higher cost.
>>>
>>> Yet, GM is not making a ton of money in Europe, either. IIRC,
>>> around
>>> 2006, they were making a bit of a profit in Europe to help offset
>>> their
>>> losses in the US, but not any more.
>>
>> accounting practices for things like this are somewhat "elastic".
>> i.e. you can load a foreign operation with a bunch of your domestic
>> expenses to "help" the reported profits and tax burden, etc. bottom
>> line, g.m.'s [better managed - better product, more competitive]
>> foreign operations have been carrying the company for years, the
>> european one particularly, even though the european is a very high
>> [real] cost environment.
>
> I don't agree that GM's European operation have been carrying the
> company for years. In fact, I suspect the opposite is true recently.

"recently" being the last couple of years. prior to that, it was solid
blackline. and don't forget the accounting flexibility - internationals
have considerable latitude in how they report these days and right now,
to attract more of the bailout €'s the germans have been throwing about,
you can bet that g.m.'s euro ops are "losing money".


> Opel has been struggling for decades.

not true. they have enjoyed significant profits, and have been ranked #
1or 2 in the euro sales leagues for ages. see above.


> Saab is gone.

saab was already gone. g.m. should never have bought it. but they sure
did hasten saab's demise.


> GM does actually
> sell a significant number of "Chevrolets" (mostly rebadged Daewoos)
> and Cadillacs in Europe which is surprsing (at least to me). As you
> say, interantional companies can and do manipulate earning transfers
> between countries mostly to try and minimize taxes.

and whine for subsidy €'s.


>
> Your comment about Europe being a very high cost environement is true
> but you ignore the fact that the playing field is much more level in
> Europe. European countries all have government run health care
> programs, so GM is not saddled with paying for deluxe health care for
> workers while some competitors with younger non-union work forces
> don't have the same high health care benefit costs.

you've been suckered in by too much propaganda. european employers get
charged directly by the state for health care. as do employees. when i
was last there, it was ~10% employee, with an additional ~10% employer.
that's a 20% total wage burden, which of course is effectively all
paid by the employer. [this is in addition to income tax of course. it
all amounts to the same thing, but i guess differentiation is one of
those deceits that makes it more acceptable to an electorate.] then
there are all the other local and state taxes they pay, which also have
public health components. the only thing that keeps this whole thing
manageable is that through their centralized systems, inefficient though
it may appear, their percentage of gdp spent on health care is roughly
half that of what we spend.


> Western European
> countries all have strict pension rules,

and massive union burdens too. you cannot fire underperformers in germany.


> so while GM may have high
> pension costs in Europe, so do all the competitors.

indeed, they have significantly higher costs, but can still make a
profit. whereas they say they can't here. what is wrong with this picture?


>
> Ed
>
>


--
nomina rutrum rutrum
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