Hopefully I’ll make some sense as I write this sleep deprived, in pain, and just a little cranky. Well today was a day filled with bad business news at least according to my sources at Fox Business News both on Cable and XM-Radio. The Dow fell into the low 8200’s because Secretary of the Treasury Paulson came out and said that big bail out I sold you on, it ain’t working the way we need it to , so I have to change the rules. Also for the 3rd day in a row Representatives from the remaining big 3 auto makers have been meeting with Nancy Pellosi, Harry Reed, and others playing their sad violins and holding out their green tambourines for their shot at the great American bailout palooza of 2008. Everyone who is feeling the pinch due to poor planning or short sighted thinking has their hand out for Billions, yes Billions with a B from the government. But the government is for and by the people so guess what, the money to bail out Detroit Rock City will come from you and me, and our kids, our grand kids, and the favors we now owe to China, Aubu Dubai, and others we don’t really want to be tied in to like a loan shark for the next 30 years. And if they get our help, will they really recognize you and give you a special deal when you go down to buy your shiny new semi-hybrid quickly slapped together world box on wheels.
I got a question, when they couldn’t build mini-vans fast enough, then SUV’s, Then Eddi Bauer SUV’s, Then P-Diddy Escalades, Then I want to play soldier HUMMERS (but I’m not volunteering for anything) Each one bigger than the other. Did they put a little extra in the bank for a rainy day, or start doing R&D for the inevitable day that oil / gas would be expensive. Did they forgot the Gas crisis’s of the 70’s and 80’s. The promise of we will build cars as good or better than the Japanese and VW. The no more Big V8’s. It will be world of V6, V4’s Diesels, Turbos, and then the sneaky Honda and Toyota built the Hybrids. Couldn’t make them fast enough so they dare to even build plants in the USA to build them. And when we were embarrassed that we the Americans, the smartest country on the planet didn’t have a hybrid, Toyota was kind enough to sell the basics to Ford so we could claim to have a hybrid also. So in the 2 years leading up to the current crises what happened. Toyota & Honda worked on their second generation Hybrid cars, and moved production here. They built up a great campaign and following and people cheerfully got in long cues, paying a premium over list to get one. What did Detroit do. We brought back the biggest of heavy metal engines of the past, The Chrysler Hemi a 300 HP plus Big V8 was put into everything from Monster Trucks, to Power Sedans the Dodge 300, to incredible rebirths of the best Muscle Cars of the 70’s The Charger, Challenger R/T, The Cuda. Ford brought back ever faster Mustangs, and Pickup Trucks that could pull Freight Trains or Tractor Trailers your Wish. And GMC Just made the biggest SUV , Truck, Combination’s, 3 variations of the Hummer H I H 2 H 3, Escalades, and Rocket Propelled Cadillac. Oh and during the 90’s when they could have been re-tooling for the future, maybe downsizing they went on a buying spree. I’m sure I won’t remember all of these, but Ford bought Volvo, Jaguar, pieces of Mazda, and possibly Land Rover. GM bought Saab, Hummer and maybe they bought Land Rover who knows. Chrysler bought the creme off the bones of AMC, the JEEP then merged with Daimler Benz, They also bought Masseratti. After a few years Daimler Benz saw the writing on the wall and sold off Chrysler at a great loss.
Right now due to the credit crises no one, including #1 Toyota are selling cars. People are too nervous, and only the triple AAA rated credit risks with a nice down payment can buy a car. Car dealers are going out of business at an alarming rate. Thank God those Vultures who sold a car to anyone “No Credit, Bad Credit, your Job is your Credit” Those guys were the first to go, because there is no more sub prime credit.
I think that the Government has to help the auto industry because it is so intertwined with all of the small businesses that supply it and help to deliver the car. You are talking 3 major corporations with hundreds of plants, hundreds of thousands of workers, and hundreds of thousands of downstream business from upholstery shops, to machine shops, to corner diners and bars will be effected. But the manufacturing model doesn’t work anymore. You can’t build hundreds to thousands of cars ahead of time to sit on dealers lots, and you can’t carry the overhead of hard won union promises going back 30-40 years. Things will have to change for many. The auto worker can’t be one of the highest pain workers in the world for what is mainly a semi skilled boring job. They can’t have the grandfathered benefits that their parents and grandparents fought for. That makes us totally non competitive in the world. To the point where we need to build massive SUVS to make a profitable car. GM, Ford, Chrysler aren’t interested in building the cars we need for the future because the profit margin isn’t there for them. But Fuel efficient, safe, sustainable cars need not be Yugo’s. While now dated the Chrysler PT Cruiser was a retro’d econobox that was fun to drive, fun to look at, and got decent millage. Chrysler sold a ton of them, and it leaked out later after they were so popular they were priced too low. They could have easily tacked another 2 grand on the price and got it. The whole next generation of drivers coming up has been brought up on tuners, slicked up Honda’s, Toyotas, and Mitsubishi’s. They won’t be looking for condos on wheels.
Well it’s late, this is probably too long to be read by most but I’ll try to wrap it up. If we do bail out the Auto industry the money has to come with many hooks. It can’t be business as usual. I think it can’t be done fast, that will just throw the money away. They need meetings of the best minds in the business, and in business and places like the MIT Think tanks to come up with out of the box ideas. The one I’ve heard that seems really plausible is Just in Time building, not building thousands ahead. Reduce the number of lines. We lost Oldsmobile, and the world still turned. Chrysler dropped Plymouth. We don’t need Chevy & GMC Trucks. We don’t need Similar sedans marketed as Chevy, Buick, and Pontiac. Same for Ford / and Mercury, though the Mercury girl is hot!. What do you think ? America has lost probably over a hundred car manufacturers in the past 100 years. Companies go out of business all the time. But this is big. It’s one of the few things we do still make in America. We can’t all be paper pushers. Countries excell when they employ people making things, that other people need. If not cars, then what? Thanks for taking your time. Please do respond, Spiney
I am responding because you asked so nicely. However, I don’t have a clue. I don’t know anything about business, and little about economics. It seems to me that the real problem is all the people out of work, not the actual auto industry (but again I don’t know much about the subject.)
It seems (from other blogs, so I don’t know how reliable the info is) that if they do the bail out it will be under the condition of making “green” vehicles. Which honestly would kill a few birds with one stone. (I remember when Obama was promising that he would make sure that this was explored, I kept thinking, how is he going to get the people at GMC and FORD to agree to that…)
Just a thought, and admittedly not one that is educated in the subject.
If America bails out GM and/or Ford we should demand a change in the leadership and management teams. Until someone Disrupts these companies and changes their management approach these companies will not be viable competitors. Read more at http://www.thephoenixprinciple.com
Terra, I apologize for taking so long to respond. I’m thrilled anyone reads my blog and then takes the time to comment. I really appreciate your feedback. Your probably right, there will be a condition to the bailout to make more green vehicles. And that’s not a bad thing. Detroit needs a kick in the butt. GM had an electric car in 1996!. They made it only because California required it. Then even though people who had them really liked them and wanted to buy them they couldn’t. Chevy would only lease them and when the lease was up they took them all back and destroyed all but one. So we could have had electric vehicles from Detroit in time for this last gas crises. Now they have to redo what they already did. Serves them right. Dave
See more about the GM EV1 here: http://en.wikipedia.org/wiki/General_Motors_EV1
ABSOLUTELY NOT!