Bashing the Big 3
Living in Metro Detroit gives you a different perspective on life. Right now the executives of the Ford, GM, and Chrysler, plus the head of UAW, are in Washington lobbying for help. They're not getting a very friendly reception. For the most part their hearing Congresspersons from both parties preen for the folks at home by lashing out at the decision to fly on separate corporate jets to Washington. Apparently they asked if the CEOs would work for a dollar a year (would they?). Now, there is much in all of this that is probably bad PR, but I think the congressional behavior is also a bit immature.
The facts are these, the American auto industry, which all together probably employs between 3-5 million people is in trouble. It's not just the Big 3, it's all automakers and their suppliers. If they go under, in fact, if just one goes under there could be catastrophic effects. But, interestingly enough GOP and Democrats seem to be coming together for different reasons to bash the Big 3.
The GOP want to bust the unions. The Dems want to attack CEO salaries. At the end of the day, neither of these tactics will solve anything. Right now, the automakers are in a bind, not because they produce poor products or that they're producing products that no one wants to buy, they're in a bind because no one can buy anything. When you're worried about having a job tomorrow you're not going to put down 15,000 or more on a car. Then there's the credit crunch. I have really good credit, but even I might have difficulty qualifying. We've also purchased three cars in the last few years, so, we're not in the market.
Finally, I need to speak out on quality. I regularly hear that Toyota and Honda make better cars than the US automakers. That has been true, but the US companies, especially Ford have closed that gap. Ford--I drive Fords has a number of new vehicles in the pipeline that are both more fuel efficient and high in quality. What they're asking for is simply some money to buy them time to weather a storm. Why is this such a bad thing? We pumped money into AIG -- 140 billion or so, what's 25 billion to rescue the auto industry?
The facts are these, the American auto industry, which all together probably employs between 3-5 million people is in trouble. It's not just the Big 3, it's all automakers and their suppliers. If they go under, in fact, if just one goes under there could be catastrophic effects. But, interestingly enough GOP and Democrats seem to be coming together for different reasons to bash the Big 3.
The GOP want to bust the unions. The Dems want to attack CEO salaries. At the end of the day, neither of these tactics will solve anything. Right now, the automakers are in a bind, not because they produce poor products or that they're producing products that no one wants to buy, they're in a bind because no one can buy anything. When you're worried about having a job tomorrow you're not going to put down 15,000 or more on a car. Then there's the credit crunch. I have really good credit, but even I might have difficulty qualifying. We've also purchased three cars in the last few years, so, we're not in the market.
Finally, I need to speak out on quality. I regularly hear that Toyota and Honda make better cars than the US automakers. That has been true, but the US companies, especially Ford have closed that gap. Ford--I drive Fords has a number of new vehicles in the pipeline that are both more fuel efficient and high in quality. What they're asking for is simply some money to buy them time to weather a storm. Why is this such a bad thing? We pumped money into AIG -- 140 billion or so, what's 25 billion to rescue the auto industry?
Comments
CP
Whether they need to be disciplined or not, Michigan already leads the nation in unemployment. If they go under we could be talking 20-30% unemployment. The cost will be much larger than any bailout -- simply in unemployment insurance claims.
I noted the other day that a congressmen asked the CEO's whether they would be willing to take a pay cut down to a buck as a consequence for their mismanagement of their companies. I was stunned by the arrogance. The country is in a mess, is congress willing to take a pay cut down to a buck for their mismanagement of the country?
Are they asking officers of the banks and AIG which they are bailing out to take a cut?
John
Shooting the American economy in the foot is not appropriate.
The ripple effect through the economy is incalculable. Don't think this is all about beating the unions out of a few bucks. When the woodchipping machinery starts it won't stop with the UAW, it will eat up and spit out suppliers, health insurance providers, the financial sector, advertising, local municipalities who rely on tax dollars, service suppliers of all sorts, dealerships, retailers, the housing market will take another major blow, churches and charities, politcal action committees, etc, etc., etc.
And who will benefit? Not those who want to punish - they get nothing but short term pleasure of winning a game. Not the US economy and all of us who thrive only when it thrives.
The only beneficiaries will be the foreign manufacturers (all of whom are government subsidized to a greater or lesser extent) who will start by picking up the customer base and finish by picking off the most efficient manufacturing components from the bankruptcy trash pile - for a song.
The consequences of a GM bankruptcy stagger the imagination.
And those who think we will end up after the dust settles with cleaner, more fuel efficient cars are simply wrong. In the Bankruptcy reorganization one of the first things to be cut will be research and development. After that the court will stay the imposition of government sanctions for non-compliance with clean air and fuel economy requirements.
People have no idea of what will happen in a bankruptcy because they have no concept of the extent of the bankruptcy court powers.
This woodshed notion is horrible misguided.
John
The issue is so much bigger than a blog, but the reasons are simple. The american manufactures were arrogant (Chyrsler was bailed out and it set a precedent), the unions have enjoyed lavish pay and benefits which killed the golden goose, and frankly there was some plain bad luck too.
The SUV craze helped the US when gas was cheap, wives hated minivans, and the housing boom created HUGE demand for trucks. The foreign makers were wise enough to make hybrids and crossovers to eat into the SUV market.
The huge lie is to say we are bailing out "american car manufacturing" b/c the foreign guys have been highly successful and their cars are more "american" than most domestic cars. (parts made in the US) Domestics have tons of Chinese parts in their car to cut cost. Foreign makers don't have unions and are even shipping cars overseas made in the US.
So what do we do.. let them fail? $25B is basically what they burned last QUARTER.. the true cost is much much higher. To give them money is like putting more water in a bucket with a huge hole. It just buys time. One or two manufacturers need to be killed off and let just one be successful!