At the moment, D.C. and Detroit are brooding on a Morton’s Fork: Watch the American automakers auger in and take hundreds of thousands of jobs with them, or bail out these failed and incorrigible companies whose management so richly deserves whatever hell (flying coach?) awaits them.
Tops on the critics’ list of grievances is Detroit’s failure to anticipate the inevitable. Why didn’t these companies sufficiently invest in next-generation technology — fuel-efficient small cars, high-mileage hybrids, plug-ins and all-electric vehicles — that could help wean the U.S. off foreign oil and take the automobile out of the climate-change equation? As the auto executives again bring their begging bowl to Congress, a consensus is forming: No bailout unless Detroit builds greener cars.
From my perch, as someone who drives all of the Big Three’s North American product offerings, I think a lot of the anger is reflexive and misplaced.
The author also proposes allowing Chrysler to fail and ‘rewarding’ Ford for having done a better job these past few years by leaving it to compete with a government-owned and taxpayer-subsidized GM. What a brilliant idea (not).
RE: “Tops on the critics’ list of grievances is Detroit’s failure to anticipate the inevitable.”
Tops on my list is that they were and are unable to compete — and thus unable to “invest” in building cars with equivalent pricing to the foreign companies out there.
Yesterday, I had lunch with a group of professionals — six of them, of ages ranging from 20s to 70. Of the six, five owned foreign cars — and liked their hybrid cars as well and were watching that carefully. One owned two cars, one American, one foreign.
All agreed. The problem was that even the hybrid cars were not able to compete with the hybrid cars of the other manufacturers. The issue is that the legacy costs inherent in the Big Three simply preclude an ability to compete effectively.
What the government will need to do is simply forbid the buying of foreign-made cars if they bail out the auto industry. That way, the Big Three will be able to “compete” effectively.
RE: “As the auto executives again bring their begging bowl to Congress, a consensus is forming: No bailout unless Detroit builds greener cars.”
Well no. The “consensus” is nothing of the sort. The other automotive manufacturers are doing just fine with that market. The “consensus” among conservatives — and maybe even others, too, I don’t know — is that the Big Three need to go bankrupt if that’s what they need to do.
Of course, we all know that won’t happen. Neither the liberal Republicans nor the Democrats will allow the unions to fail.
God forbid they do nothing and the “Big 3” fail.But does anyone remember the failure of the steel industry of the late 80’s and the devastation that it caused?????? There were no bail outs then. We survived it. Was painful and very difficult, I do not mean to belittle the loss. But, they allowed steel to die, so…………. Besides, I believe it’s the unions that ruined the auto industry over the years anyway. Let the current system go under and then resurrect it WITHOUT the unions. They did it in the steel industry and it has come back, albeit a much smaller enterprise and much more specialized, with much less union influence.
I love the sub-head:
“The federal government should buy GM. We can run it, then sell it at a profit once it recovers.”
Because the government would be really good at making a manufacturer profitable!
For the 10,000th time – Chapter 11 bankruptcy is not failure. It is reorganization.
The fully loaded labor rate paid by the Big Three is just about double that paid by their competitors due to the huge benefit packages they have with the unions. They are simply not competitive auto businesses. What they really are is a combination of health providers and feather bed factories.
Chapter 11 reorganization will give the Big Three the opportunity to correct the excesses that brought them to this point. Who pays?
The stockholders who will lose their investments – should go over well with those who want to soak the ‘rich.’
The unions who extorted the fairy tale benefit packages lose members and power.
Employees will have their compensation brought back to Earth and their numbers reduced to a reasonable level.
Unfortunately, Congress won’t bear any of the pain as they richly should since Congress owns a considerable share of the reason the Big Three are in the tank.
Government should be in the business of bringing the Big Three back to health, not prolonging their corporate illness.
“Nationalize GM?” This gets worse and worse. Whatever would make anyone think the government can run car companies? Do these people have any concept of the history of the twentieth century? Planned economies have been tried. It didn’t work.
[url=http://www.vulcanhammer.org/?p=1421]This is British Leyland all over again.[/url]
Of course the government can run a business; just look at the Post Office and Amtrak!
British Leyland was a nightmare. One could have made the arugument in 1945 that because of WWII the British government could have nationalized the auto industry at fair market value – made the necessary investment in new plants and machinery (ie retooling from tanks and planes back to cars) and then sold the companies at a profit thereby making Britain the leading manufacturer of automobiles in Europe as it recovered from WWII. Instead they merely protected excess jobs and muddled through with old designs and plant.
Here we have too simutaneuous crisis – the recent oil spike and the credit crunch (the credit crunch has occured do to bad government policy at least in part – the oil and gas spike also can be blamed in part on government) – I think loans by the government based upon sound recovery plans and large concessions from the unions is the best way out of this dark hole.
I just watched UAW head Gettelfinger claim that only 10% of the cost of US vehicles is labor. According to this post $2k of each vehicle’s cost is legacy costs alone.
#8 Don R, exactly! 🙂 I know! Let’s put the government in charge of medical care too! They’ve done such a cost-effective and efficient job with Medicare!
Nationalizing industry did not work in Britain and it will not work in the US. It particularly will not work if it is only used to keep autos high priced. Oh yes, and who is going to buy them????