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Does America Even Need Its Own Automakers?
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Last year (May 2007) some of us were predicting dire consequences for the Big Three and the accuracy of the prophecy sort of leaves a bad taste in my mouth. I wish we had been wrong about it. :sick: I hadn't expected things to get this bad this fast. I was figuring 2-3 years to get to this point of desperation and only if the Big Three stayed on the same course. I even used the words to describe this topic as a "longterm exercise" in post #1.
But again, it goes to show that there are always unpredictable events within any "futurist" scenario. Nobody figured gas prices to run up this fast. Most of us were expecting a creep, not leaps of 10 cents a week. Nor did we expect quite the depth and breadth of the financial screw-ups in home mortgages. (Although Wall Street was giving guarded warnings as early as 2005).
It's like a "perfect storm" of disaster for the Big Three right now.
The "yes" argument might go something like this: For a great country to remain great it must have a good balance of manufacturing and service industries. It must remain innovative, and it has to make things. It must know how to innovate in manufacturing. Automotive has been and is still the largest manufacturing industry in the U.S. A country cannot retain manufacturing leadership by only manufacturing and assembling the products of foreign companies. It's been said that "if you can build a car, you can build anything." Some, of course, would say that's just not true, or is no longer true. It's very important to the future of our country to save the domestic auto companies.
The "no" argument could go something like this: Even if we lose our domestic auto companies, the U.S., and domestic companies, still retain leadership in computers, software, the Internet, financial services, marketing, the media, retailing, medical science, drugs/pharmaceuticals, biotechnology, entertainment, defense and space, and agriculture. We can and will survive and prosper with fewer or even no domestic auto companies, and by manufacturing, assembling, and servicing foreign vehicles.
Where do you stand on this?
At this point, given that some sort of federal intervention is inevitable, I'd have the government demand the immediate resignation of GM's management team, and the give the company to Toyota to run, along with some funds to keep it afloat until Toyota rights the ship.
Chrysler is also basically finished. It's just a matter of who will pick up the parts that still have value - Jeep, the Dodge Ram pickup and maybe the minivans.
I was looking at reviews and write-ups for the new Cobalt SS.
It sounds like a terrific car. It whupped the competition in and OUT of its price class.
And what is GM doing?
Promoting the car like crazy? Tooting their horns about it?
no.
Improving the styling so it doesn't look like a rental car?
no.
Setting up perhaps Cobalt Spec Racing?
no.
They're putting tons of cash into a retro Camaro.
GM did change the grille and taillights of the Cobalt to create the Pontiac G5, for those 100 or so people who said, "I'd buy a Cobalt if it had a Pontiac badge on it."
It is hard to turn a mindset around that was successful as a muscle car, SUV & PU builder. The Cobalt may be their best shot. I would imagine it is being built at a loss. The Big 3 has not been able to make a profit on small cars like Honda and Toyota.
I don't think it will be that big of a deal if the names change on the dealerships. Most own both domestic and foreign nameplates now. Depending on the economy only so many vehicles will be sold. If there are less choices, it will not change that overall number. The Feds and the States need to encourage expansion by the automakers that are building what people want. Not throw good money at a bad idea.
Look at how VW captured the youth market with a marginally reliable car, the Jetta?
I just don't understand how these Big Three execs think. I just don't get it.
Toyota can afford to make that kind of mistake. The Tundra factory in San Antonio. I don't think GM has the deep pockets anymore. I am wondering if the populace will make the same mistakes they made after the last gas crisis. When gas got cheap in the 1990s. They bought the big rigs without any concern that gas prices fluctuate. If you can afford a Suburban with gas at $4-$6 a gallon that is fine. Many that bought into the gas guzzlers ended up losing their vehicle, home and shorts. I am more concerned with being made in America than the name plate. Japan, Germany and Korea are all building factories here. And making money. Big 3 needs a plan that does not include US bailing them out.
Only problem is that the Camaro seems to be more expensive, and the styling seems much more "aggressive" and masculine than that of the Mustang, which will limit its appeal. In other words, GM is replicating the mistakes it made with the last-generation Camaro/Firebird.
How about, instead, we just let them go through bankruptcy. The likely result being the current bond holders become the new owners of the companies assets and they fire the management.
GM needs to declare bankruptcy ASAP! They could prove to the court that they have a workable plan going forward, once they are released from all the obligations that are encumbering them now. They need to right-size and bankruptcy is the only possible route to that goal that will reach it in time.
As for Chrysler, Cerberus needs to sell Jeep and anything else it can and liquidate the rest of it.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
That's ~two years of trying to sell customers cars from a bankrupt company. How would they guarantee that tne warranty is going to last for example? How could you be assured you'd even be able to get parts in a year or two if you purchased a new GM vehicle while they were in bankruptcy? Just because you file Ch. 11 doesn't mean you won't wind up converting it to a Ch. 7 liquidation, and something like 9 out of 10 bankrupt companies wind up liquidating.
You wouldn't. GM is history. I bought my last GM vehicle in 2005. It was a tinny PU compared to the previous 4 GM trucks. I can think of no reason to give them another shot at my money. Maybe Ford if they had anything I liked. Right today I would only buy a German Diesel or some used vehicle for a fraction of the cost of a new one. This coming depression will probably kill about half the automakers in the World.
Buying from any of the weak ones is a real gamble.
BTW, if GM does go down, it will pretty much assure Ford's future for the next 50 years. Not because all GM buyers will switch to Ford, but because enough will to pull it out of the red. Ford only needs 15-20% of them.....
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
If you're saying that the Corvette is GM's most desirable and exciting car, which is how I interpret your statement, I agree with you.
I've flown a few hundred thousand miles on bankrupt airlines in the last several years; I didn't notice the difference as a customer. None of the parties involved would let warranties lapse (it would be economic suicide, which isn't what Ch. 11 is for). Even if the company liquidated, parts would be available for years (and supplying them would be a profitable business).
It's not going to liquidate, though. With half the plants, half the brands, 1/3 of the dealers, minimal debt, a viable union relationship and the current (and near future) product line, GM would be a very decent business. The existing corporate entity unfortunately contains contractual and balance sheet residue of 40 years of bad decisions. Flush that out, and you've got a nice asset there.
But I agree that GM can still be a nice asset. I think they just need to be able to ride out the economic storm for a while and I think they can do that without Ch. 11 if they get some access to liquidity. (er, they need some cheap cash - jeeze, I've been listening to the talking heads too much lately). Here's Michelle's take:
lGM Loses $4.2 Billion in 3Q; Running Near Empty Cashwise (AutoObserver)
The union stuff is encouraging but I think the recent contract concessions are still trickling down to GM's bottom line.
The recession could encourage a bunch of marginal dealers to fold too, and that could help.
Here's one way GM is going to raise some cash:
GM Returns to the Red Tag Way of Selling Cars
LS3 6.2L CrateEngine 19201992
Information: Warranty info
Click+here+for+: Start Up Instructions
SKU: 19201992
RETAIL: $8,627.14
YOUR PRICE: $6,184.00
That should give you a great custom car so you won't need a new anything for quite some time and have a great custom car that exemplifies the glory days of U.S. Auto.
I don't think the gas mileage would be acceptable, however!
Regards,
OW
If we plot the market share of the Big Three over the past 50 years, it looks like a ski run. Downhill all the way with a few little bumps.
We can't very well blame all that on unions.
Isn't that like saying "Well, if I didn't have to pay my employees, my business would be profitable".
If GM execs made a bad deal with unions, that's just one more thing to pin on them as bad judgment.
Free market was supposed to mean The Quick and the Dead, right?
If America is, in fact, going to embark on various 5-Year Plans, that is, Planned Government Control of the Economy, then let's all admit to what we are doing so that our thinking remains clear as to goals and effects of those decisions.
Let's not pretend this is 19th century capitalism anymore is my point.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Like Larry Kudlow said, "GM is in the health care business and occasionally makes cars." I would add: They forgot about cars and decided instead on trucks, upon which strategy derailed as the cost of fuel spiked. Like we all should believe the price of oil will be stable forever!
That model just has been proven to fail right in front of our eyes.
Isn't it all really about greed and imbalance in the end?
Regards,
OW
I'd like to see two of them fail completely (probably Chrysler and GM, since I believe Ford is in better shape AND is producing better products at the current time) so that the domestic capacity is greatly reduced, then bail out the survivor with some really strong requirements for major restructuring and quality improvements. The survivor(s) needs to cut costs and get competitive.
The biggest problem of the domestic auto industry to survive in a downsized and competitive market is that they have to break the UAW stranglehold, and I doubt the new Democratic administration is going to require that to happen.
The worst thing that could happen is that us taxpayers pay a fortune to bail out these miserable failures and then the auto companies don't really take the tough steps necessary to become competitive. If that happens we've really wasted our tax dollars and the outcome will only be delayed.
I think they are also in the pension business, but anyway...one thing the government could do to help them (as well as Ford) would be to take over those health care costs, as most other governments have done.
Besides, it was the US government that shoved healthcare onto corporations. Our own government is directly and totally responsible for the healthcare burden--there is no other culprit whatsoever.
In other countries that are doing very well making automobiles, the government takes care of the workers.
Whether this just means the governments there will go broke before the automakers I don't know :P
Americans want a perfect world but they won't pay any taxes to get it. And this is how you get to October 2008.
We are such short-termers, especiallly our automakers. The mantra at the Big Three is, or seems to be (hindsight is great!)
"If things are prosperous, we don't need to plan for any future. Just keep making the same thing---nothing will ever change".
supposedly there up to 3 retired uaw workers to every one still working.
it may even be higher now.
the big 3 povides jobs and good retirements for a lot of people. many of those retired workers were able to provide better opportunities for their kids than working in the factories that they spent their years in. those retiries are living a lot longer than anyone expected, helped by the good health benefits they have been getting.
a lot of them are going to pass on in the next few years as the boomer bubble works its way through the population.
at some point it wasn't just about gm/ford/chryco anymore, but i guess neither the manufacturers or the union could figure that out.
Hope you decide to give it a go.
Regards,
OW
The union is embedded in the companies that are in danger of going bust. I don't believe that is a coincidence. The union isn't completey responsible for the mess at GM and Ford (I hold Daimler responsible for the mess at Chrysler), but it isn't completely innocent, either.
Unions may be weaker in the economy as a whole, but the one that concerns us - the UAW - is still strong at GM and Ford.
The UAW is plagued by "Detroit think" as much as GM and Ford management.
Mr. Shiftright: Besides, it was the US government that shoved healthcare onto corporations. Our own government is directly and totally responsible for the healthcare burden--there is no other culprit whatsoever.
The government didn't require the companies to offer gold-plated health care benefits. Those benefits were negotiated by the company and the union. There is no federal or state law saying that those companies must offer lavish health care benefits to workers.
There is nationalized health care available to retired union workers - Medicare. But the UAW doesn't want to require its retirees to rely solely on Medicare for health benefits. Why? Because the benefits provided by Medicare aren't nearly as generous as the benefits enjoyed under the current company plan.
The UAW knows this - otherwise, it could simply agree to shift retired UAW members over to Medicare coverage, and save the automakers billions.
The fact that it won't makes its call for nationalized healthcare disingenuous. Unless union leadership really believes that a full nationalized plan will be able to provide the level of coverage enjoyed by UAW members.
Mr. Shiftright: In other countries that are doing very well making automobiles, the government takes care of the workers.
Many of those companies based in other countries are doing well because of their North American sales. Note that even Toyota and Honda have been hit hard by the collapse of the U.S. market, and the head of Damiler said that his company faces a "crisis" because of the sales decline in both America and Europe.
Daimler certainly didn't cover itself with glory by running Chrysler into the ground. It bought a healthy company and proceeded to drain it of its cash and leave it in ruins. Chrysler's current condition can be laid squarely at the feet of Daimler's (mis)management.
Also note that VW, Mercedes and BMW have been rushing to set up production bases away from Germany. Many VWs sold in North America are imported from Mexico, not Germany, while Mercedes and BMW have set up plants in the U.S. to build products.
You have hit on a point I tried to make about a year ago. The UAW retirees need to go on Medicare with a little supplemental paid by the retiree. Our Union in AK being much wiser than the leaders of the UAW did just that 20 years ago. It did not take a rocket scientist to see the handwriting on the wall. I can guarantee a government run plan will not even come close to what the UAW members are currently receiving.
Also note that VW, Mercedes and BMW have been rushing to set up production bases away from Germany. Many VWs sold in North America are imported from Mexico, not Germany, while Mercedes and BMW have set up plants in the U.S. to build products.
I am sure it is to get away from the repressive taxation in Germany. My only German friend says the personal income tax is horrible. And the services do not compare to what most companies provide for their employees in the USA.
Toyota, Honda, Nissan and Hyundai are building cars here and paying health care. It is probably not as gold plated as that offered to UAW workers.
When the UAW takes over the health care you will see big cuts in the level of services provided.
"shoved"? How so? Wasn't it the companies/corporations themselves that offered health care benefits to induce people to come work for them? Was this back in the 40's, 50's after WWII and a competition for workers?
What I have heard from older relatives is that they had to buy health insurance by themselves for the family. This is where we need to get back to. Of course, it has to be affordable.
I kind of remember going to a doctor with my mother years ago as a little kid and sitting in a waiting room. No receptionist or other staff. The doctor called patients one after the other and then after seeing him, he quoted a dollar amount and whatever medical direction needed, mother gave cash and he gave a receipt. End of process.
Going to a doctor today, in a multi-doctored office, you see many clerical non-medical people at desks near the front. They are overhead costs to process insurance, do all paperwork, etc. Seems like some of these multi-doctor offices have more clerks than amount of doctors.
Medicare? You can take it from me...a dog can't live very well on Medicare. It's sustenance at best. As a "safety net" it has really big holes in it. You don't know until you get there, then you'll see.
And can you imagine the catastrophe today had SS been privatized into IRA accounts?
Hey, I know there are no easy solutions and no one person to blame, but perhaps we can all agree that both management and union have embraced a "culture of mediocrity" that seems unbreakable.
I'm with the bankruptcy people. Clear the decks, get lean and mean. I am very ambivalent about giving the Big Three government money at this stage. I don't see how their performance justifies it.
The UAW has been in the forefront of the demands for nationalized health care. But the simple truth is that any nationalized plan will look more like Medicare in its coverage than the plans enjoyed by the auto workers. The country simply can't afford to give EVERYONE the coverage that the UAW has negotiated for its members over the years.
I wish it were possible, but it isn't. Countries with socialized medicine do not provide their citizens with the level of coverage that UAW members enjoy. In those countries, virtually everyone who can supplements their state-provided coverage with private insurance.
If people want that, then fine - but let's be honest about what type of coverage a nationalized plan will provide. UAW members enjoy the Mercedes of health plans; if we enact nationalized health care, it will be Hyundai Accents for everyone, and if you want Mercedes-level coverage (or even Honda-level coverage), you'll pay for it yourself. Too many proponents of nationalized health care think that everyone will be getting the Mercedes-level coverage. That is not what will happen.
Mr. Shiftright: Hey, I know there are no easy solutions and no one person to blame, but perhaps we can all agree that both management and union have embraced a "culture of mediocrity" that seems unbreakable.
On that we can definitely agree. In retrospect, one of the most important moves for Detroit over the past few years has been Ford bringing in Alan Mullaly. At least he is not contaminated by the pervasive "Detroit think" that plagues GM, Ford, Chrysler and the UAW. He has brought desperately needed new perspective to Ford. Now if the company can only last long enough to implement its turnaround plan...
I don't think one man can change a car company any more than one politician can change a government.
For example, the World Health Organization (WHO) measurements that supposedly show that a U.S. infant mortality rate worse than many other countries fails to take into account how those figures are tabulated. (Each country tabulates its own results.)
In the U.S., more attempts are made to save seriously ill, premature babies who live only a day or so. These are counted as live births, and thus HURT the infant mortality rates. The European countries are much less likely to take these measures to save infants, which lowers their infant mortality rates.
When the effectiveness of health care after diagnosis of a serious condition (diabetes, heart disease, kidney failure, etc.) is measured, the U.S. is at or near the top. That is a better measurement of a health care system's effectiveness, as it doesn't take much to mend a broken limb or treat the flu.
Our system has problems, no doubt, but most of the people I know who want to completely nationalize U.S. health care have no clue as to how it really works in Europe or Canada, and the struggles that those countries face in paying for health care costs, which are soaring there, too.
As for changing a corporate culture - yes, it's difficult, but in Ford's case, Mr. Mullaly is moving specifically to do just that. Before, a new CEO would simply work within the old structure and culture, hoping that some hot new sheetmetal or some new names would turn around the ship. He has his work cut out for him, but at least he is trying to get the root of the problem.
"everything is connected to everything else".
The same MidWest that have sold US sub standard cars the last 30 years have caused the obesity and type 2 diabetes. They grow all that corn and make all the high fructose corn syrup along with the other processed foods that are killing US.
We don't need their processed food or their cars :sick:
I don't mean to sound like where's mine, but how do you justify not doing it when you just gave AIG a total of $170 BILLION to bail them out.
The mortgage crisis is just the begining though. The cover story in USA Today talks about the looming credit card crisis. It seems as if the Banks have been packaging credit card debt into- you guessed it-SECURITIES!!!!!! This allows them to double your interest rates and charge you $39 late fees because your bill arrived at 5 pm instead of 3 pm on the due date. If you default on it, the bank has less risk because the securities have the bulk of the debt.
This $700 billion seems to get cut up into smaller and smaller pieces of pie every day on the news. The automakers weren't originally included in this deal.
Besides, there are some sobering facts that need looking at:
1. GM won't last until February and a new administration
2. The Big Three are going to have to instigate big, big layoffs, bailout OR NOT. There will be suffering no matter what, in other words.
3. Nobody has pressurized GM to sell off Saturn and Saab to raise cash.
4. The automakers will never get well if buyers can't have access to credit. You can't fix one without the other.
I'm not sure of the exact figures, but it looks like we're going to go from an annual sale of about 16 million vehicles last year to around 12 million this year. That's a pretty big hit.
For which company would it make sense to buy Saturn and/or Saab, and what could they be worth in this depressed market?
Of course neither do Pontiac and Buick.