What Detroit Needs
I do not like corporate bailouts. I realize that some may be necessary, but for government to clean up after the private sector, when for years the private sector has been trying to convince us that they can run things so much better than the government, is tremendously infuriating. That being said, right now, with the economy in the state that it is, we cannot afford to lose the U.S. auto-industry. There are too many jobs that would be lost or seriously affected by the destruction of the Big 3; it could turn a deep recession into a depression. With all the bailing out that is being done for the financial sector, to not help the working families that are employed by the American auto companies is simply unacceptable. Does this mean we should hand Detroit a $25 billion dollar bailout? Hell no. Detroit automakers don't need a bailout, what they really need right now is a government funded restructuring, one with strict guidelines and accountability, and only congress can make that happen.
We all make a lot of jokes about how lazy, ineffective, and lobby driven congress is, and as sad as the truths behind those jokes are, when times are relatively good we can, in a way, afford to have government operate like that. But times are not good, times have not been good in quite a while, in fact times are devastatingly bad. In times like these the country needs congress to step up to the plate. I was encouraged when Pelosi sent the heads of the Big 3 home, telling them to come back with a plan before they ask for any cash, but that is not nearly enough. The problem is that if they come back with a plan, and the first step is anything but "fire us," then chances are the rest of it won't address the real problems these automakers are having. The time of giving in to corporations needs to come to an end. Congress has to do what is best for America and Americans, and it is not letting these incompetent executives keep their jobs. Doing that would turn the money into another corporate bailout instead of something productive and positive.
What congress needs to do is make certain that the plan for the Big 3 is a comprehensive one that addresses the main issues that have been plaguing Detroit. To do this, I believe, congress needs to reject any plan that does not deal with the following issues.
Current Leadership: It's clear that most of the current leadership in these companies needs to be replaced; these people have proven themselves to be extremely inept. If they were assembly line factory workers and did their jobs as badly, they would have been fired on their first day. New people need to be brought in, along with government oversight, to make sure that the necessary steps are being taken to resurrect these giants.
Executive Pay: What the people who hold these jobs have done is nothing short of thievery. They have taken millions upon millions of dollars for themselves while they set fire to the companies they were heading. Government oversight is needed to put an end to the golden parachutes and exorbitant pay that these despicable executives have used to pillage their respective companies. Their pay should be dictated by the growth of the company, not how much money is in the coffers to steal.
Market Trends: Detroit has been ignoring market trends for years, but now they need a plan that recognizes where the markets are going; towards cleaner, greener cars. For Detroit to be able to regain its former glory it will not only need to catch up to other companies in this respect, but become leaders in next generation technologies: hybrid sports cars, smooth running clean diesels, and ultra-high mpg plug-in hybrids. By being on the cutting edge of these technologies the Big 3 will be able to gain back some of the market share it has been so generously giving the Japanese.
Fleet Reduction: Detroit has been spending an incredible amount of resources developing money pits, this need to end and the residual fat needs to be cut. This means no further projects like the billion dollar development of the Hummer H3, a car that was destined to fail. Any plan the Big 3 comes up with needs to involve a reduction in their SUV and truck fleets in favor of small, efficient vehicles that will meet today's needs. I am not advocating a removal of the Big 3 from the segment, but there is no reason Ford needs to have 11 SUV and truck models but not a single vehicle that gets over 35 mpg.
Product Quality: This may be the single most important thing for Detroit to change if they want to continue doing business in the long term. American cars have become synonymous with unreliability; they have been the poster child for planned obsolescence. This created a tarnished brand image for each of the Big 3, and has led to diminished sales numbers. It just doesn't make sense for the consumer to buy a product from Ford, GM, or Chrysler when they could spend the same money for a much better product made by Honda or Toyota. Detroit needs to look at how much better the Japanese make their cars and begin to emulate it. This means more reliable engines, better interior materials, tighter body panels, sturdier construction, more intuitive interior design, smoother rides, quieter interiors, and an overall attention to every little detail that leads to a product which possesses a much higher level quality.
Congress needs to make sure any money that goes to Detroit is spent wisely, and that means moving forward with a plan that addresses these issues and more. There will be resistance, especially from the automakers themselves who have proven over and over again that they would rather cut corners and squander cash instead of fixing their long-term problems, but Congress must realize that the ball is in their court and they have the power to make this money something truly beneficial to our country instead of just corporate welfare. It will take more will and determination from Congress than we have seen in quite a while, but if there is a time that they must come through, it is now.
Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
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I agree with you on every issue except quality. Quality must be continuously improved, but I think the American car companies have generally caught up on quality.
I have been driving foreign cars my entire life because of the quality issue. My last car was a Saab. I loved it, but and when the warranty went out, so did just about every expensive and bizarre part (one at a time). After that ordeal, we were going to downsize the car anyway to save money and gas. My husband is a car guy so he did the research and he had been impressed with recent Chevy's. It took a little work to convince me, but the test drive was surprisingly pleasant.
We ended up with a Cobalt. I miss the bells and whistles of the Saab, but I have been very impressed at the quality of the car. American car manufacturers have learned to get past the cheap plastic and rattly feel that American cars had throughout the 80s and 90s. It took more than 20 years, but I think they get it now.
We have since purchased a Chevy truck for my husband's work vehicle and relatives and friends have followed suit with a Malibu and a couple of Cobalts. They are equally as happy. GM has increased it's warranty as well.
Most of the problems Mr. Khayatpour has outlined are based on myths. For example, he states "American cars have become synonymous with unreliability". While many consumers have this perception based on the cars of thirty years ago, but the facts today are otherwise. This year of the top ten brands in the J.D. Power Dependability ratings five are Japanese, four are American and one is British. Of the bottom ten, three are Japanese, two American, two Swedish, and one each from Germany, Britain and Korea.
The Japanese and European companies have judged US market trends and expanded their fleets the same way as the Americans. Toyota sells fourteen different models of SUVs here. Mercedes-Benz sells four. My daughter lives in an upscale area, where the parking lots are full of Acura, Lexus and Mercedes SUVs. They get somewhat lower gas mileage than their American cousins and require premium fuel.
If the problem is really the inferiority of American management, why did Spiegel Online report yesterday "VW, Daimler and BMW have also submitted their requests. They want Berlin to issue government loan guarantees on the loans taken out by the carmakers' financing divisions. They are also asking the German government to pay a premium to anyone who replaces a car more than 10 years old with a new one. ." Spiegel also quotes Toyota "Executive Vice President Mitsuo Kinoshita, "the current situation is an emergency, of a magnitude we have never seen before."
The Big Three need help. Period. "Detroit is a city, not a corporation.
What about union contracts? Should lower and middle class tax payers be required to pay for over-generous pay and benefits packages received by union workers? Aren't we supposed to spread the wealth down, not up?
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The taxpayer shouldn't have to pay for any of it, that's why it is so necessary for these steps to be taken to ensure that the Big 3 will become competitive and profitable. If this is accomplished, then the money can be loaned to the auto-manufacturers and payed back in due time.
Union contracts will most likely be renegotiated, and the head of the UAW has said that they are ready to do so. However, the problem that Detroit is having is not because of the unions, and the unions are necessary to protect the workers, rather the Big 3's many mistakes have created a situation where the union contracts became a problem.
Union contracts have already been renegotiated. According to testimony from GM and the UAW their current contract will bring total labor cost down to the level of Toyota's cost in the US (far less than their Japanese costs). The US companies have more than four retired employees receiving pension and medical benefits for every active worker. These charges are included in there current labor cost calculations.
Union workers are paid well. But it is very much a myth as to the amount they are paid. It is difficult to discern truth from fact out there because all the numbers seem to compare apples to oranges. From the best I can tell, the average union auto worker is paid $28/hr. The average non-union worker at a foreign auto plant in the US is $23/hr. I can't find reliable figures to compare the burdened hourly rate (i.e. the hourly rate which includes the average employer payment for benefits, employer paid taxes, etc.).
That $70/hr figure that is floated around in the media is a super burdened (my term) rate which includes in the average worker's pay the amount paid to retirees for pension and health insurance contracts. Current employees will not receive the benefits that current retirees have and the salary for new-hires has been cut in half. In a couple of years, when the current employees retire and new-hires are hired in at a lower salary the big 3's super burdened rates will drop dramatically.
The capitalist model has been destroyed by its own corrupting persuasiveness. There have never been 'free markets', as capitalists have always sought an influence over government, from the dawn of industrialism to the present day, and with that influence have created protectionist economic policies while their industries were young, and free trade policies when later they decided to export jobs overseas. They have further worked to destroy unionism from the inception of the movement, and to fix prices, and to exempt themselves from prosecution for same.
Having stuffed the chambers of both House and Senate with their willing servants, the capitalists got the laws they wanted, and the practical freedom to do whatever they wished. And with that freedom, they eventually destroyed themselves and their companies in a wild season of heedless gambling with the world economy, which is now in ruin. Capitalism is dead, a corpse animated by maggots only. Fear of the unknown will cause most to cling to the corpse until the stench is overpowering, but it's still a corpse, the remainsdof a suicide.
Better to bail out the people. With all their personal debt obligation, whatever money they would be given would go to paying it down, so that foreclosures would plummet, credit card debt would shrink, and we'd all be better off.
What Detroit needs are two bankruptcies (GM and Chrysler). After that they would be able to rebuild and become eventually competitive.
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The problem with bankruptcy is that it will annihilate many families jobs and benefits. It'll be another chance for big corporations to destroy the unions that protect workers. It's true that the contracts may need to be renegotiated, and the UAW has said it is ready to do so, but letting them go bankrupt would be devastating.
The whole point here is to save as many jobs as possible, something we should all be in favor of, especially in this economic environment.
Why should factory workers have to suffer for the failures of the executives? The employees did their jobs just fine, it was the executives that were driving these companies down.
It may also annihilate retirees. While pensions are usually protected there are exceptions. I would hate to see the burden come down on people who have worked for the companies their whole lives, were promised certain benefits and they relied on those promises.
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