Detroit must die

[Don Strausburg]

Auto Bust

It's sad to say, but he is right on the money. It can all be blamed on the execs and the unions, noone else.

 

[Hexmate]

Auto Executives At Fault?

My response to this would be:

No epithet these days seems too contemptuous in referring to the American auto industry's managerial competence, and no policy proposal too heartless in addressing the industry's high labor costs.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-comfficeffice" /><o></o>
Yes, some of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-comffice:smarttags" /><st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City>'s injuries are self-inflicted. But no industry is perfect. Not in the <st1:country-region w:st="on"><st1lace w:st="on">United States</st1lace></st1:country-region> and not anywhere else. Even the American financial services industry -- so recently held up as a poster child of supposedly world-class management -- is now seen to be less than infallible.<o></o>
There was once a time -- some of us remember it well -- when <st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City> led the world in both labor productivity and research and development.<o></o>
What went wrong? The most important reason for <st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City>'s downfall has not been incompetent management -- the executives running the industry now are hewn from much the same timber as their predecessors of the 1960s. As for "greedy unions," labor seemed far more powerful in the 1960s than it does today (after all <st1:City w:st="on">Detroit</st1:City>'s wage rates in those days ran nearly four times those in <st1:country-region w:st="on"><st1lace w:st="on">Japan</st1lace></st1:country-region>). The elephant in the room is unfair foreign trade practices.<o></o>
Though you never would know it from recent reporting, for 40 years the <st1:City w:st="on">Detroit</st1:City> companies have been systematically undermined by foreign competitors' predatory pricing in the <st1:country-region w:st="on"><st1lace w:st="on">U.S.</st1lace></st1:country-region> market. They thereby have been starved of the adequate returns necessary to invest in new, more efficient production technologies. The Japanese, in particular, have used unfair trade practices to devastating effect. They have kept their home market as a protected sanctuary, where, operating in cartel fashion and free from effective foreign competition, they generally have garnered super-rich profits. These profits have been the ultimate source of the massive investments in both manufacturing technology and R & D that have enabled the Japanese to pull far ahead of the <st1:country-region w:st="on"><st1lace w:st="on">U.S.</st1lace></st1:country-region> industry.<o></o>
Meanwhile, the Japanese have kept the American competition pinned down in the American market -- at times, particularly in years past, at little more than marginal cost.<o></o>
Even Korean carmakers are shut out of <st1:country-region w:st="on">Japan</st1:country-region> -- although <st1:country-region w:st="on">Korea</st1:country-region> and <st1:country-region w:st="on"><st1lace w:st="on">Japan</st1lace></st1:country-region> do huge trade in other areas. <st1:country-region w:st="on">Korea</st1:country-region> is <st1:country-region w:st="on">Japan</st1:country-region>'s third-largest trading partner and <st1:country-region w:st="on">Japan</st1:country-region> is <st1:country-region w:st="on"><st1lace w:st="on">Korea</st1lace></st1:country-region>'s second. As a matter of so-called administrative convenience, industrial planners on both sides have outlawed trade in cars.<o></o>
For students of Japanese protectionism, perhaps the most telling point is that while <st1:country-region w:st="on">France</st1:country-region>'s Renault company, through its stake in Nissan, nominally controls <st1:country-region w:st="on">Japan</st1:country-region>'s second-biggest showroom network, Renault has never been allowed to sell more than token numbers of its French-made products in <st1:country-region w:st="on"><st1lace w:st="on">Japan</st1lace></st1:country-region>.<o></o>
Of course, the American news media generally have sided with <st1:City w:st="on"><st1lace w:st="on">Tokyo</st1lace></st1:City> authorities in presenting the Japanese market as basically open. Supposedly the only thing that has ever stopped the <st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City> companies is their alleged perennial incompetence. In the view of some commentators, to even suggest that the Japanese market is protected is politically incorrect, if not downright racist.<o></o>
Another factor that has worn <st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City> down is an unrealistically high dollar. Again, the problems go back decades.<o></o>
Ever since the late 1960s, when <st1:country-region w:st="on"><st1lace w:st="on">U.S.</st1lace></st1:country-region> trade first showed signs of weakness, American policymakers have consistently resisted dollar devaluation until it has been too late. As far back as the early 1980s, the American car industry lost its so-called incumbent's advantage -- its historic position of productivity leadership based on being first into the business. This development resulted largely from being worn down by years of unfair trade. Thereafter the only way <st1:City w:st="on"><st1lace w:st="on">Detroit</st1lace></st1:City> could hope to fight back was with lower wages than the Japanese competition (as well as, of course, a fair world market).<o></o>
And the only realistic way to lower its wage costs -- and those of other deeply troubled <st1:country-region w:st="on"><st1lace w:st="on">U.S.</st1lace></st1:country-region> manufacturers in everything from electronics to steel -- was through a drastic dollar devaluation. American manufacturers' pleas for a lower dollar have gone unheard, however, in part because the prevailing wisdom among American opinion makers was that manufacturing did not matter (and, even more absurdly, trade deficits did not matter).<o></o>
A high dollar reduced the <st1:country-region w:st="on"><st1lace w:st="on">United States</st1lace></st1:country-region>' trade deficits in the short term, because it lowered the cost of essential imports. It also pleased those in the American elite who wanted to travel abroad. The result in the long term, however, has been the desperately weakened manufacturing sector we see today.<o></o>
So, yes, the <st1:country-region w:st="on">U.S.</st1:country-region> car industry's fate reflects in large measure American incompetence -- but the main source of this incompetence has not been the engineers of <st1:City w:st="on">Detroit</st1:City> but the opinion makers of <st1:State w:st="on">New York</st1:State> and <st1:State w:st="on"><st1lace w:st="on">Washington</st1lace></st1:State>.<o></o>

 

[killain]

Those who can't do, teach. Those who can't teach, teach gym. Those who can't teach gym go into journalism.

That said, he's sort-of right. The big 3 need to declare bankruptcy. That's the only way they can escape the deadweight UAW contracts and other obligations. They simply can't compete with their employees making nearly twice what the competition makes and paying some of those to sit in a room all day.

If the American automotive industry is to survive it has to first lean down substantially and then figure out how to make cars that people want at a quality level that people are willing to pay for.

A bailout will not help them do that. It will only delay the inevitable.

This article is clearly written by someone who doesn't drive an american vehicle and has little knowledge of and extremely limited contact with their products. Having said that, I hope the big 3 are able to come out of this negitive economic tital wave, but I am just as sure that the UAW and Gettelfinger will ultimately force the American auto industry into Bankruptcy. It's only how long now !

 

[cbidwell]

I currently own 4 GM cars including a GMC truck, and have purchased about 20 other GM's (and 1 Chrysler - no Fords) over the past 25 years or so - I have never experienced major problems with any of them. Most vehicles have not required any major repairs. The only downside I've seen was resale or trade-in values (with exception of my trucks which have resold well in the past).

I have also owned imports including BMW, Nissan, and 2 Hondas which I also currently own and I have had the same (or worse) experience with them than I've had with my GM cars.

So, IMO, this guy is full of s***.

 

[njlouc]

The Bailout!

Here is a question that no one has asked or answered.
Why is there so much magic about the volt??? They first showed a car of the future that would be electric and would get much MPG and would cost ~ $30K. Then they show us a Malibu with batteries for $40K.
The Govt has given(sorry - Loaned) Gm $25Billion, to develop a car that cannot be any better than the the Toyo Prius. You could buy a million Prius for $25B and give them away for free. Are my concepts/numbers off???? Then GM wants another $25B to do business!! WOW are we crazy??

 

[killain]

Here is a question that no one has asked or answered.
Why is there so much magic about the volt??? They first showed a car of the future that would be electric and would get much MPG and would cost ~ $30K. Then they show us a Malibu with batteries for $40K.
The Govt has given(sorry - Loaned) Gm $25Billion, to develop a car that cannot be any better than the the Toyo Prius. You could buy a million Prius for $25B and give them away for free. Are my concepts/numbers off???? Then GM wants another $25B to do business!! WOW are we crazy??

The government is actively working with the automakers for better fuel milage and less pollution. A good thing considering the ever increasing situation of global warming. But the current crop of electric vehicles (the Volt) are doomed to failure simply because they cost Way too much. The Volt started off at $28K to 30K, but now is cleared the $40K dollar mark which means it is only avalible to someone making somewhere around $60K to 75K a year and that's not the people who drive to work each and every day, so the goal of cutting green house gases and pollution isn't going anywhere.

Plus there was an excellant article about the Toyoto Prius, priced at the current price, when rationed for the number of years of use and actual savings in fuel and pollution it turns out they if you own one, you'd have to drive it for over 300.000 miles to realize any real savings, and how many people drive a car that long and then there's the problem with changing the batteries which cost $6K if I remember it right. So electric cars technology just isn't up to mainstream automotive sales and customer useage. Hybrids seem to be the only realistic answer.

The federal government had a fund called the EAEF ( experimental alternative energy fund) I'm not sure that is the actual name, but that is a fund to look into alterative energy for automotive powerplants. But It's not really finding much in new technology. President Bush used 17.4 billion, the last monies in the TARP funds to loan to GM and Chrysler to keep them in business till March 30th. But I think the real answer to our addition to foreign oil is with hybrids and displacement on demand configured engines. The current Corvette is a lot better on fuel than advertised, my 2003 can easily get 30 MPG on the highway.

The real question is whether the UAW and the management of General Motors can work out a arrangment that keeps the company afloat, ( I have my doubts), but if they can, then they can explore different energy powerplants. Till then we have a few hybrids and high MPG Hondas and Toyotos and of course the GM Aveo and Cobalt? Not much all things considered.

 

[Erik S. Klein]

The government is actively working with the automakers for better fuel milage and less pollution.

Then they are well and truly screwed.

A good thing considering the ever increasing situation of global warming.

Anthropogenic global warming is a hoax. . . and one that is rapidly falling apart as the evidence against it mounts.

But the current crop of electric vehicles (the Volt) are doomed to failure simply because they cost Way too much. The Volt started off at $28K to 30K, but now is cleared the $40K dollar mark which means it is only avalible to someone making somewhere around $60K to 75K a year and that's not the people who drive to work each and every day, so the goal of cutting green house gases and pollution isn't going anywhere.

Nonsense all around.

Most of my neighbors and I earn over $100K and I most certainly do drive to work every day. Well, really I carpool, but same thing.

 

[c4c5specialist]

HI there,
Man, talk about different sides.
Well, here is mine from the automotive REPAIR side.
I am seeing less and LESS repairs on GM vehicles with less than 100,000 miles.
Second, 5 yr/100,000 mile warranty on the powertrain is very good and comprehensive.
Third, lets look at the facts about mileage and vehicles, you can see from ANY of the EPA evalutaitons of new vehicles i the past 5 years, that there are ALOT of GM vehicles getting 27 MPG or BETTER.
Truth is, car making is a business and some are more volatile than others.
You look at people who use trucks and SUVs because its part of their business or work.
MOST are not, they are just because they want them and they are the most profitable of ALL vehicles.
Thats why so many manufacturers focus on them.
But when the bottom fell out of the fuel prices, everyone stopped in their tracks, EXCEPT FOR THOSE WHO NEED THEM FOR WORK>
GM was in process of restructuring for YEARS prior to this need for help.
Its not like they sat down and waited for it to happen.
There is alot more work to be done, but it involves EVERYONE< not just those connected to the special interests.
Not just the automakers, not the just oil companies, not just the Ethanol lovers, not just the alternative fuel supporters.
People, in general, need to take a good hard look at every aspect of the economy.
Not just motor vehicles and what is out there.
Allthebest, c4c5

 

[killain]

HI there,
Man, talk about different sides.
Well, here is mine from the automotive REPAIR side.
I am seeing less and LESS repairs on GM vehicles with less than 100,000 miles.
Second, 5 yr/100,000 mile warranty on the powertrain is very good and comprehensive.
Third, lets look at the facts about mileage and vehicles, you can see from ANY of the EPA evalutaitons of new vehicles i the past 5 years, that there are ALOT of GM vehicles getting 27 MPG or BETTER.
Truth is, car making is a business and some are more volatile than others.
You look at people who use trucks and SUVs because its part of their business or work.
MOST are not, they are just because they want them and they are the most profitable of ALL vehicles.
Thats why so many manufacturers focus on them.
But when the bottom fell out of the fuel prices, everyone stopped in their tracks, EXCEPT FOR THOSE WHO NEED THEM FOR WORK>
GM was in process of restructuring for YEARS prior to this need for help.
Its not like they sat down and waited for it to happen.
There is alot more work to be done, but it involves EVERYONE< not just those connected to the special interests.
Not just the automakers, not the just oil companies, not just the Ethanol lovers, not just the alternative fuel supporters.
People, in general, need to take a good hard look at every aspect of the economy.
Not just motor vehicles and what is out there.
Allthebest, c4c5

This is perfectly clear and concise. Building automobiles is a business and like all businesses, sometimes things don't work out very well. The question is can GM survive till it has something to sell that is both attractive and profitable to the buying public. After so many years depending on SUV's and large vehicles, it's going to take a lot of time and effort to bring about change. The Electric 'Volt' is a good start but one area I think is drasticly under uesd is advertising.

General Motors seems to dedicate it's marketing to Cadallic SUV hybrids and only now are they starting to show off some of the really great new models like the new Malibu and the new crossover vehicles. People really doesn't think of GM when they are looking at buying a new car, If they can afford a new car. GM needs to put it's products Out There So people can see and get interested in what the domestic automaker have to offer. Look at the one minute spot run by Ford, they are engaging and look like a fun vehicle is being shown. GM needs to do likewise. The only way for General Motors to survive is to find stability in it's labor force and start selling cars in large numbers. The BIG question is : How long will it take to have models that the public wants to buy.

And despite having a decent warranty or 5 years or 100.000 miles they need to increase it so it's on par with Hyundia, and while their at it, a program like the Hyundis Assurance Program where they allow the buyer to return the car if they lose their job in the first year. If Hyundia can do it, then GM must do it. They have to be competitive in every area if the company is to survive.:confused

 

[njlouc]

advertising

You have an interesting concept. Although I am not an ad expert, what I have seen is this: Most car companies in the past used a "rewards" concept of ad budgeting. This gives the cars that sell the most ad $$. they charge an ad fee for each car sold. So it becomes a perpetual catch 22. How does a car line get off the dime if it doesnt get get ad $$ ?? I always thought that ad $$ should be stricly by a corporate budget based on the latest sales model criteria OR a gut reaction.
Either way the industry and model lines have evolved slowly over 60 years, and now are to the point where the non- car nut public has no clue who belongs to who. Advertising is often too confusing and off point.

 

[Don Strausburg]

Time to die

I agree 100%. The big three have noone to blame but themselves. Even bigger blame can go to the unions. They have cost hundreds of thousands of jobs by their unrealistic demands and greed. I do not feel the least bit sorry for any autoworker. They dug their own grave over many years. Now they can pay the price. The big three just will never understand it takes great design and engineering to produce a quality car. All they have been giving us is ugly ass lool alike cars. Stop crying and hire designers who can pull it off.

 

[Curtis]

I am in no way an economist, but if my company was losing billions a day, I would shut it down... period. Then if I wanted to continue business I would examine where and when to restart and with what products that make me the most money. Bankruptcy has a way of weeding out the unnecessary and incorporating the necessary. I love GM, and i would work for them if they had a plant in my state. Maybe moving to a lower cost environment would be more economical than trying to survive where it is impossible. Yes I would feel sorry for so many to lose their jobs, but all of us have that risk to some degree. I would hope that Congress will realize the bank bailouts so far have been a waste (the rich got richer and no money freed up for new loans) and that starting new banks with that money would have given better results.... maybe the same applies to the auto industry. Build a plant here. There are thousands of people in this state that would absolutely love a job that paid $12 an hour.

 

[killain]

I am in no way an economist, but if my company was losing billions a day, I would shut it down... period. Then if I wanted to continue business I would examine where and when to restart and with what products that make me the most money. Bankruptcy has a way of weeding out the unnecessary and incorporating the necessary. I love GM, and i would work for them if they had a plant in my state. Maybe moving to a lower cost environment would be more economical than trying to survive where it is impossible. Yes I would feel sorry for so many to lose their jobs, but all of us have that risk to some degree. I would hope that Congress will realize the bank bailouts so far have been a waste (the rich got richer and no money freed up for new loans) and that starting new banks with that money would have given better results.... maybe the same applies to the auto industry. Build a plant here. There are thousands of people in this state that would absolutely love a job that paid $12 an hour.

You make a very good point, And I'm sure if starting over was possible for GM they'd do it in a minute. But they have people and plants and obligations to maintain and despite the fact that if they built a plant in SD it would allow them to hire employees at a competitive wage, but that's not an option. The bigger problem is money is like a drug, once your use to making a certain amount, your not going accept doing the same job for less. But that is exactly the situation that GM employees face. So. . . they either have to recognize that some major changes have to take place, or those precious jobs are not SUSTAINABLE in the current sale atmosphere. The japanese plants throughout the south have a wage and benefits package that is lower than the UAW is used to and finding a place somewhere in between there is the challange of the UAW and the big 3. But if things get too unreasonable then they'll have no choice but seek protection in federal court. It happened before within the US steel industry thirty years ago and the auto industry is none better off. Remember the japanese can simply pack up and go home if things get too unreasonable, the domestics don't have that luxury. And with the economic depression we're in, it's even worse. I really don't know if the government economic resuce plan is going to save the big 3, GM and Chrysler might have to abandon auto production in North America and maybe Ford is the only one company to survive in five years?