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The auto (company) graveyard

November 28, 2008

Peter Klein: “The proposed bailout of GM, Ford, and Chrysler overlooks an important fact. The US has one of the most vibrant, dynamic, and efficient automobile industries in the world. It produces several million cars, trucks, and SUVs per year, employing (in 2006) 402,800 Americans at an average salary of $63,358. That’s vehicle assembly alone; the rest of the supply chain employs even more people and generates more income. It’s an industry to be proud of. Its products are among the best in the world. Their names are Toyota, Honda, Nissan, BMW, Mercedes, Hyundai, Mazda, Mitsubishi, and Subaru…”

The thought of the government rescuing a failed company makes a sound in my head like throwing bolts into spinning gears.  As long as the cars are built here, I don’t give a damn what nameplate is on them.

And yet, thanks to the mismanagement of the so-called ‘fiscal conservatives’ we can’t afford to lose a major domestic company right now, let alone three.  Not for the company’s sake – good riddance – but for that of their workers and suppliers.

I believe firmly that if Jimmy Carter had let Chrysler fail, GM and Ford would be in fine shape today.  They would have seen the reaper and learned to fear it.  But now?  I don’t know what to do.

And no, I don’t believe a syllable of those jet-riding auto executives’ protests blaming the unions or CAFE or clean-air standards or any of that.  The native instinct of a Japanese car company when faced with a new requirement is to pick up the phone and call their engineers.  American car companies?  They call their lawyers and lobbyists.

  • The desolation of Detroit gives some clue to the human cost of resting on corporate laurels.  No wonder the big three executives need such tight security.

  • And bailing out the big three costs a fraction of bailing out the finance industry, with the same kind of high-riding, smirking executives.
  • (Cartoon segment from old Charles Addams collection.)
Categories: Uncategorized
  1. November 28, 2008 at 08:59 | #1

    Yesterday I was talking at a Thanksgiving get-together to a gentleman I’d never met. We got to talking about cars and I mentioned that as between 3 reasonably comparable cars (Prius, Civic Hybrid, Saturn Aura Hybrid), it puzzled me why the Aura did so much worse on gas mileage. He opined this was because of CAFE standards. WTF? GM builds a car which should compete with the Toyota and Honda, but doesn’t, because of CAFE standards? This was an educated man!

    He also opined that the Govt. should not be involved with dictating gas mileage standards, that the “free market” should take care of all that. Yeah, he said that. He did not, however, opine that the “free market” should take care of whether the “Big 3” survive or not.

    I told him that an unregulated marketplace was such a thing of the past (if it ever existed) that even talking about it made no sense to me. I did that gently, of course, it was Thanksgiving.

    The American taxpayers and their future progeny cannot afford to bail out the Big 3. No ifs, ands, or buts. It is sad that so many might lose their jobs, but, in essence, they are asking for welfare.

  2. November 29, 2008 at 01:42 | #2

    People that are for the bailout still have yet to explain to me how a bankruptcy means complete meltdown and disaster? Companies from time to time declare bankruptcy, they trim the fat (usually this includes some labor yes), sell unneeded assets, and will either get bought out by a company that can be more efficient or continue on with business. It can be an opportunity for re-incarnation.

    Now about the labor point; jobs have been lost, are being lost, and will continue to be lost in the auto industry whether or not there is a bailout. How is the bailout going to stop this? Even if we bail them out the economy is going to be down for awhile. Meaning it will be harder for people to buy cars, and so on and so forth.

    I say give them an opportunity to fire some terrible management and be more efficient. Then take that money you were going to give to the auto industry and use it to re-train employees, give incentives to hire layed-off workers, and help people get back on their feet. In the meantime keep pushing for green initiatives which will continue to create new markets and jobs.

    There needs to be a point where the auto industry is forced to be competitive and make a profit. The question is when?

  3. November 29, 2008 at 06:32 | #3

    The government actually played a role in the downfall of US auto companies with (unsurprisingly) a big fat subsidy.  Remember the SUV tax credit, also known as the “Hummer loophole”?  Played as “helping the small businessman”, it was also a bit of a gift to the oil companies. 

    Despite that attraction Honda didn’t buy it, never got into the giant SUV market.  Toyota bought it hook/line/sinker but the rest of their product line (the sane part) will carry them through. 

    “When” to force the auto companies to be competitive and make a profit?  I don’t know – this is simply beyond me.  If I could see the executives in sackcloth and ashes it would help.

    It would be an interesting social experiment to endow the UAW to buy the auto companies, and see how they handle innovation and worker compensation after that.  But that’s just my evil side talking.

  4. November 30, 2008 at 09:06 | #4

    While I cannot disagree with much said here, another very large factor is the stubborn reluctance of the American people to demand universal, public health care.  As the Big Three were saddled with corporate funding of health care, carrying through retirement, they required inordinate focus on managing labour relations, drawing resources from the core business.

    I have driven “Japanese” cars for many, many years now.  My current vehicle is a 2004 Honda built in the UK; the same model is now built in the US.  My wife also has a 2004 Honda, built in Alliston, Ontario.

    When purchasing my vehicle, I seriously considered a comparable Saturn product.  Aside from the Saturn salesman making a couple of curious but forgiveable mistakes during the sales process, the Honda clearly was the better choice.  It is interesting that the mileage for the two vehicles was effectively equal.  But the Honda was more appealing in most aspects and had a better record of reliability and resale value.  I think this tells something.

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