The American Auto Industry gets a bullet to the head
Looks to me like they’re about to put a bullet in the head of the American auto industry.
For what seems like the longest there’s been this major debate in Washington which essentially boils down to whether or not the auto industry is worth saving, particularly if the price tag of said salvation is $25 billion. After all, they (Congress) just signed off on a $700 billion bailout of Wall Street, so at the very least I’d say these guys are a little cranky. It’s kind of like how your parents might have felt when they just emptied the bank trying to save you from some dumb shit you just did, and then a couple weeks later you show up at the door again asking if maybe they can rustle around for a few more dollars to help your good buddy Bob down the street.
“You know Bob, right Mom? Dad? The kid that sold me that first joint in high school and got me suspended that one time? Yeah. That Bob. So anyway, he’s in kind of a fix and I was like wondering, you know, if maybe…”
So anyway, the point here is that the guys on the Hill aren’t really in much of a giving – or a forgiving- mood. Because those banks and other Wall Street ex-slicksters they’re now in the process of bailing out are essentially nothing more than white-collar gangsters. But the difference between white collar gangsters and gangsters on the corner is that white collar gangsters – provided they have the proper connects – can get a “go home free” card, which comes equipped with a “vacation in the Bahamas” card and lots of other really neat perks. Whereas your garden variety gangster on the corner is either gonna get shot up or sent up. One of the two.
So. Back to the auto industry, because seeing as how I live in Detroit, and how the auto industry is pretty much the lifeblood of Detroit – and Michigan – I’m what you might say invested in how all this plays out. Because even though I don’t work in any business even vaguely connected to the auto industry, I am still likely to get smacked once those dominoes come tumbling down because I’m still swimming upstream without a paddle in this shit stream of a Michigan economy.
But even though Michigan could really take it in the teeth if something isn’t done to rectify this situation, I can’t say as I have a whole lot of sympathy for the so-called Big Three. Because while the Big Three have been busy being the Big Three they’ve been getting their asses handed to them on a regular basis for nearly 10-15-20 years by the non-Big Three car companies from across the Big Water. For some strange, mysterious reason those guys have figured out how to make cars that Americans really like, but yet we still insist on calling Ford, GM, and Chrysler the Big Three.
Seeing as how these non-Big Three are not American companies, and seeing as how most of their non-American engineers and designers probably received their training over on THIS side of the Big Water at the same damned AMERICAN institutions where the Big Three crew supposedly learned their “skills”, I find it curious as to how these non-Big Three guys are so much more in tune with American tastes than the American companies. Exactly how does this happen? How did they manage to get a better education at American institutions than the Americans got?
How does this work?
And how is it that the new guys apparently know more about balancing their books than the Big Fucking Three? How does that work? Because unless there’s a story I missed somewhere – and that’s entirely possible – it’s only the Big Three that are crying about how they need to be rescued. Haven’t heard a thing about Toyota needing a bailout from Japan. Hyundai either. Not a peep from Honda. Far as I know, they’re apparently tooling along just fine without a cent of save-me-I’m-drowning money.
How does that work?
I mean sure, I’m well aware of the ramifications to our entire economy if these guys go under because of all the jobs attached and all the auto-related industries that depend on the health of the American auto industry to survive. I get that. But if we write these guys a rescue check – the same guys who are plummeting to Earth faster than Icarus on a supersonic – then are we really supposed to believe that the parachute is gonna open in time to keep them from crashing? I mean aren’t these guys losing altitude a little too fast? And aren’t they a little too close to the ground?
Isn’t there a better way?
Detroit Free Press Columnist Mark Phelan makes a pretty strong case for why the auto industry needs to be rescued. Any decision that’s made should factor in the points he raises in my opinion. The column, in its entirety, is included below:
General Motors and Ford can and should survive as independent automakers.
Chrysler, not so much. We’ll get to it in a minute.
The companies’ differing situations should shape any government assistance package.
Ignore the macroeconomics if you want: the millions of jobs and billions of taxpayer dollars at stake.
The simple fact is that GM and Ford have crafted a path to competitiveness. They’ve overcome years of mismanagement to create high-quality, fuel-efficient vehicles like the Chevrolet Malibu, Ford Fusion and Cadillac CTS — as good or better than anything Toyota, Honda, Lexus and BMW build.
This is not the time to punish them for the lousy cars they built in the 1980s and ’90s. Nor is it the time to enable automakers from around the world to jack up prices because native companies shut down.
The crisis GM and Ford face today is not of their making. They’re on the brink because of an economic disaster created when government abdicated its responsibility to regulate markets.
There’s enough misinformation about Detroit’s automakers to choke a horse. “They don’t build cars people buy,” talking heads repeat endlessly on TV, blissfully ignorant of the fact that GM and Ford sold 6.4 million new vehicles in the United States last year. Chrysler another 2.1 million.
Cars and trucks are selling at desperately low rates because the economy is circling the drain. People are afraid to buy. The evidence is in the data: Toyota, Honda and Nissan sales plummeted 26% to 34% last month. Automakers from Korea to Germany are cutting production and offering buyouts to stem the bleeding.
GM and Ford have marksman’s badges from shooting themselves in the foot, but they’re innocent bystanders this time.
Government should help, but with strict conditions. Offer the money in exchange for stock or repayment with interest so the taxpayer comes out ahead, as with the 1980s Chrysler bailout. Require deep pay cuts for top executives. Eliminate all executive bonuses and stock options until the debt is paid. Make each company show it has a plan to return to health.
Those requirements may exclude Chrysler. The bosses at Cerberus Capital Management — and their anonymous big-bucks investors — didn’t buy Chrysler to reduce their income, and there’s every indication they intend to sell the company. They own it, so that’s their right, but an aid package for Chrysler should not line their pockets any more than mortgage assistance should enrich real estate speculators.
The best hope is to make Chrysler an attractive acquisition for a foreign automaker. It lacks the resources to exist as a free-standing company, thanks to dreadful decisions by its owners at Cerberus and Daimler. It can become a valuable, American-based pillar of a global automaker, however.
Chrysler will be smaller, but it need not disappear.
The cash to see the automakers through wouldn’t merit an asterisk in the bailout packages already approved. The tab for AIG is now over $150 billion because the insurance company bet its existence on financial deals so arcane not even Warren Buffett understands them.
One-third that much lent to the automakers will protect millions of jobs and put a fleet of fuel-efficient new cars on the road.
It would be money well spent, directed to companies that have earned the right to survive and fight another day.
Contact MARK PHELAN at 313-222-6731 or firstname.lastname@example.org.