The American Auto Industry gets a bullet to the head

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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.

Once upon a time we put the world on wheels...

Once upon a time we put the world on wheels...

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 then we fell asleep on the job...

But then we fell asleep on the job...

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.

Go figure.

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.

And then the future bit us in the ass...

And then the future bit us in the ass...

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:

freep.com


November 16, 2008

Assistance deserved, but with conditions

BY MARK PHELAN
FREE PRESS COLUMNIST

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 phelan@freepress.com.

SHAMELESS PLUG: Read my wife’s blogs @ The “D” Spot Redeux and BlackLIberalBoomer.

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~ by Keith A. Owens on November 17, 2008.

6 Responses to “The American Auto Industry gets a bullet to the head”

  1. The bail out money is coming but they damn sure dont deserve it at least not with out strings attach say “get your act together dummies or your on your own”.

    The problem with the auto makers is that there in bed with to many monsters and are worried about progit over quality as opposed to profit from quality.

    there basically going to take a bullit for the oil companies with out a second thought because they wont make a decent car that doesnt drink gas like we breath air.

    Than the pieces of junk are basically slapped together so they will break down, that way you have to keep buy cars to replace clunkers as opposed to buying one because of new technology.

    And than there is no thought in practical design.

    Why the hell do I have to turn the engine sideways on it’s hinges to change the f$%# spark plugs!?

    Why would you put engine that big in a car that it has to go in sideways?!

    You have no choice but to take it to a mechanic.

    That industry deserves to die.

  2. At this point, I think that the decision to bail out of the “Big Three” will come down (or at least be portrayed as such) the effect their bankruptcies will have on the entire American financial system, rather than the industry or the individual companies themselves. But I also have a feeling that hidden and unspoken factor will also be the automotive labor union support for Obama in the recently concluded election. But that’s just my opinion.

  3. Mike,I hear you and I think there are a lot of people who feel the same way which is why this thing is having such a hard time getting support on the Hill. Even though the auto industries have made improvements over the years, as Phelan points out, it may be too late.

    Revvy Rev,

    The huge amount of labor support given to Obama is certainly a factor to be considered. But also remember that back when Obama was still a candidate fighting for the nomination he had the stones to come right here to Detroit and tell the auto execs to their face that they had to change their game. He didn’t tell them what they wanted to hear but what they needed to hear. And the unions still backed Obama overwhelmingly.

    I think Obama is going to push for a plan that will obviously save as many jobs as possible but that will also dramatically overhaul and retool the entire industry. They have already made some changes, some fairly dramatic, but it’s going to require much more.

  4. I wake up every morning thinking “what next?”. Frankly, I’m just plain scared!

  5. Even if you give the big three money, they’ll end up falling over again. It’s not just a case of the end of the auto industry as we know it, but the end of the auto industry for the next 2-3 years

  6. Great post, very balanced. Anon sums up my sentiment.

    As a 20-year veteran of the Japanese “transplant” auto industry and former plant manager of an American parts supplier, I’ve worked intimately with all the major players. My first observation is that the US automakers HAVE improved their quality, particularly Ford. Unfortunately quality is just a prerequisite to get in the game now. So much more is involved in being successful in this competitive market. Sadly, I believe it IS too little too late. The Big Three leaders are elitist snobs, and the UAW has made our workforce uncompetitive with their unreasonable demands and unwillingness to negotiate in good faith.

    Bottom line? The industry is doomed. Really. So why throw 17 billion at a lost cause? Either we take our beating now and get it over with, or we blow another bubble to stall for time. I’d rather get the beating over with. It’s time to bite the bullet.

    For a cross-cultural perspective on this issue check out my blog, specifically: “Japanese Automakers More Patriotic Than the Big Three”, and “Can American Executives Manage Without Their Corporate Jets?

    http://japaninsight.wordpress.com/

    Oh yeah, aloha from Hawaii!

    Tim

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