So.....what should happen? Let them burn? Bail them out? Somewhere in between?
Your thoughts and opinions?
10 minutes ago
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6 comments:
While I find Detroit's big 3 arrogant and myopic in their decision to continue building gas guzzling tricks and SUVs which the average person really doesn't need while the rest of the world was looking at improving fuel economy on their vehicles, I think that to let them fail like this at this time would be disastrous for all the other workers and downstream industries related to the industry. Nevertheless any plans for a bailout should include a mandate to replace the almost out-dated internal combustion engine within the next 10-15 years.
Hawaii, Sweden & Israel are already laying down the infrastructure for nationwidewide electric recharge stations to be in place by 2012. These are all small states/countries but they are being progressive; the USA needs to take up leadership in this and obvioulsy cannot afford to continue this alliance between Detroit and the oil companies any more.
The auto industry has been very slow to change and only seems to react to legislation. Seat belts and airbags are good examples. I think the bailouts and legislation for cleaner cars are 2 separate issues. The US government can legislate clean cars anytime they want but they have to be strong enough to enforce it. According to California legislation, we were to have a percentage electric cars by now but we know how that tuened out (watch: who killed the electric car). While it’s true that the auto companies are weak now so legislation could be easier to enforce, what about the technology? What about batteries that, when fully charged, are at 55% of capacity in Toronto's winter? What about the power to run heaters in Toronto's winter? I am convinced that battery technology is not mature enough for a world car...so do you spend billions to design, mass produce and market a car for pockets of the world (and in some cases pockets of a country) but leave the rest out? I dunno....
Electrics and plug in hybrids have to get their energy from somewhere. Dirty coal power plants? There is more on that subject but back to bailouts…..
So lets bail them out BUT they should be subject to the Car Czar and the CEOs should work on bonus structures ONLY - no salaries, just bonuses based on sales and profit. Union contracts to be renegotiated NOW!! Although it’s really nice to drive a forklift for 90,000/yr, it is doing a disservice to the company.
So lets not bail them out. If the BIG 3 file for chapter 11, I believe they have capacity to re-negotiate union contracts. I think they will be forced to either disappear or restructure leaner and meaner – with a vision of selling cars beyond the US borders. Here’s an example (and there are similar stories to this althogh I am most familiar with this) Suzuki sells 100,000 cars in the US. They sell more than 300,000 cars in India. I think the big 3 don’t realize the world outside their borders. You can sell a Honda Civic around the world. You can only sell a Ford F-150 in Texas.
The drama unfolds before our very eyes....
I agree with most of what you guys have said. The running joke amongst most of my freinds back in Detroit was that an American fullsize/luxury SUV was the biggest rip-off. Each one was just a prettied up pick-up truck with leather covered seats and a couple of electro-gizmos....sold for an extra $20,000 profit per vehicle.
The Big 3 got greedy. These vehicles raked in the most profits of any class of vehicle. And at the time, the Big 3 had no competition. There was no such thing as a Sequoia, Armada, Veracruz, XL-7, Pilot, etc. So on one hand, you can't blame them for maximizing profits. Why? Because American consumers are partly to blame as well! We bought them up as fast as they could be built. And they got bigger and bigger. With GM it was the Blazer, Trailblazer, Tahoe, Escalade, Escalade ESV, Denali & Yukon XL. With Ford it was the Bronco, Explorer, Expedition, Navigator, Excursion. To give Chrysler some credit, a Durango didn't come along for some time and that was as big as it got due to Jeep's needing to be mid-sized for decent off-road maneuverability.
But in the end, if we're going to blame the Big 3, we should also blame ourselves (American consumers) because if nobody buys a product, it will not be built. For every Neon that was sold, who knows how many Jeeps were sold. For every Escort and Focus that was sold, they sold a gazillion Explorers, Expeditions and F-150's. And the ratio of Cavaliers to Tahoes and Suburbans is laughable.
Nevertheless, the Big 3 should not be allowed to fail. The effects would be felt throughout the entire WOLRD economy! With foreign car companies building more and more factories here in the USA, they rely more and more on US suppliers for parts (rather then ship everything in from overseas). These suppliers now rely on both US and foreign car companies both. So if GM were to go down, taking 1/4 to 1/3 of a suppliers overall business with it, how would that supplier make up the difference in lost income? It would fail as well.
You can extrapolate the ripple effect from the BIg 3... to the supplier industry... to foreign car companies and the auto industry as a whole... to the supporting hotel, restaurant and businesses that rely on these industries and their factories.... to the massive layoffs of American workers... to the lost American car market as Americans buy less and less cars overall (happening right now as even import sales are down)... to the massive increase in unemployment benefits being paid out by the government to all those union workers who are now unemployed... to the massive lost tax revenue because these millions of people are no longer paying taxes.... need I go on?
The problem with filing for bankruptcy is the stigma that goes with it. When the airlines filed for bankruptcy back in the day, there wasn't much of a stigma attached because you could still get your cheap flight, go and return on a trip and cut ties with the airlines until your next trip. But if you buy a car from an auto company that is filing for bankruptcy, you will own that car for years and years. You will need service and warranty repair. You will need parts. To invest what is a families second biggest purchase into a car for which you have no idea how the future will pan out for, that is too much of a big risk for many. As it is, with Chrysler being sold off by Mercedes, it's not surprising that it's sales are off 50% from a year ago. Imagine what formal bankruptcy proceedings would do to it's sales. The Big 3 wouldn't recover.
I think what is needed is a combination of long term, low-interest financial loans from the governemnt (as Chrysler got in the 80's) and mandatory fundamental change with how each company is managed... with the two being tied together and monitored with an oversight board beyond a single Car Czar figure. (Look at what happened when Paulson got so much power with the $700 billion bail out package. He just hooked up his buddies). Tied to all this should be concessions from the the unions. If everybody is going to take a hit, that includes CEO's, salaried employees AND union workers. It should be made clear that the alternative for unions refusing concessions will be the unemployment line, strike or no strike.
A plan should be devised, an agreement brokered by all parties involved, and a committment should be made to move the Big 3 from big failing albatrosses to effecient, modern and industry leading American institutions. Because believe it or not, the entire world economy has a stake in the Big 3 not failing.
In the 80's, Chyrsler had an idea for a minivan. The original minvan concept in the US was actually a brainchild from a few Ford engineers who, along with Lee Iacocca, moved to Chysler. That market was left unchecked and owned by Chyrsler until the mid 90's!! So Chysler could not keep minivans in stock. That company was able to repay the loan from the US government in 7 years. The first MAJOR contender was the Windstar which came in only one configuration and with no left side sliding door and left Chrysler to be the minivan champ again. Regardless of that, Chysler was in finiacial trouble in the mid 90's as well - saved by a major restructuring and the 3rd generation minivan.
My point here is that Chrysler seems to be in finiacial trouble once per decade. It seems to be a company that falls haphazzardly in to money. It is the worst of the 3. The Japanese are leaner and meaner. Efficient and with a focus on making a quality product that in turn makes a profit - not the other way around.
I also would like to revamp my previous CEO salary policy. One of the 3 (I forget which one) had a salary of 2 million dollars but made over 21 million. His salary was a drop in the bucket but the rest were performance bonuses and stock options. That's obscene.
SUV's? The market dictates what the car companies build - not the other way around. SUVs won't sell if there is not a market. Here's another example (that I am familiar with). In 2002, American Suzuki Motor Corporation (ASMC) was given the option to market and sell a small car call the Suzuki Swift. ASMC, thinking that there was no market for a small hatchback, turned down the offer. That said, the Swift was not spec'd for North America and was not available for sale. (Suzuki Canada wanted the car but Suzuki Japan was unwilling to build a car for North American specs just for the Canadian market.) Dey wuz wroooong. But, they gambled on the American market wanting a larger car or SUV. Short sightedness on that company's behalf was their fault - same as the big 3.
There will always be a auto industry in the US. It's a matter of national security. You won't be able to buy a Toyota tank in the US should a huge war break out. The industry, however, may look different from what we see today. I boldly predict that Chrysler will not exist. Ford seems to be in the best spot of the three and GM - if it goes down - will affect the most jobs so I doubt it will go under. Cerebus owns Chrysler and by bailing them out will just be lining the pockets of a corporation that just wanted to buy Chrysler, shine it up, and sell it to another investor.
The drama continues to unfold....
I say we leave the cars behind and move into the future:
Horses.
Imagine the industry that could be built on the back of the horse (pun intended).
Saddles reins, stirrups, hay, grain, tack,grooms, jockeys, gear for jockeys and grooms, carts, wheels for carts, engineers to design lighter and more durable carts, shows, education, horse maintenance, breeding, breaking, cleaning etc etc
The list of horse related commercial products and services is infinite and could be our next big industry.
How many people think I'm being facetious?
Sounds good Janine....For the HDM (Honduras Domestic Market)
Please come home and back to (cough cough) modern times (wheeez)
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