What to do with Detroit?
Reading the news it's not clear if we're going to give Detroit the money to keep them going for a while longer. Pretty sure we can't afford not to, and of course they'll be coming back for more next year, and that's probably a good thing, cause it's time to make some changes. We need to own them for a while so they start working for us -- not continuing to feed our oil habit and keeping their buddies at Exxon-Mobil's profits high.
And they have to retire their fleet of corporate jets. And all their execs take pay cuts down to less than $1 million per year. If they choose to quit, so be it and good riddance. And since we're going to own them, a new rule -- no more commuting from Seattle to work in Detroit for the CEOs. We're bailing them out not because we think they've done anything remotely like a good job, we're doing it so that we don't have to feed and house their remaining employees and bail out their suppliers when they go bankrupt. We're doing it to save our country, not to save the auto industry as its currently configured, which is rotten and dangerously short-sighted.
I just got a briefing from Frontline, a show that aired just before the election called Heat, about global warming. Lots of interesting stuff in there, all of which must be taken, of course, with a grain of salt. But if you believe them, Detroit had a Prius before Toyota, funded by the government, but it never went into production. The Prius was a response by Toyota to a US initiative to increase gas mileage. Detroit took our money but never shipped the damn car. Now they're rebooting their effort to produce a hybrid, and get this -- they're starting from scratch. The bastards threw away the R&D we paid for. So much for trusting them with our money. Can't do it.
But we also can't jump off the cliff. We'll have Hoovervilles in every shopping mall. When you go to the supermarket the shelves will be empty. It's already happening at some local retailers. When the economy fails, distributors go out of business, then the manufacturers the distributors stiffed, and all of a sudden even if you have money in the bank you can't find food to buy. You turn up the thermostat and there's no heat. Old people and children and people with chronic diseases die when we get there. Perhaps you have some people like that in your family. Perhaps you're one of those people?
If you've ever been to the Third World, or parts of the US that are the Third World like the South Bronx and New Orleans and (I'm told) parts of Detroit -- you owe it to yourself to find out what that's like. Because if you're stupid enough to think that letting Detroit fall off the cliff somehow won't take you and your family with it, you need to get educated, fast.
I'd start with watching the Frontline episode about global warming and see if that doesn't get you thinking. Then, after we give them the $25 billion, when they come back in (say) February, we'll be ready with a plan for them to execute. And they won't be coming to Washington on their corporate jets next time. We need to cut our oil consumption, fast, and they need to cut the fat.
Some people say they should go into bankruptcy, and I'd be willing to make that a condition for the companies to receive government loans. If they can get by without the loan, fantastic. If they can get a bank to give them a loan without going bankrupt, even better. I might also add the requirement that while the companies are receiving our money, their CEOs take the pay cuts outlined above. You don't like it? Quit. We'll keep taking resignations until one of your execs is willing to roll up his or her sleeves for the cause. Taking government money should be a painful process. They've gotten accustomed to our bailouts and keeping their corporate jets -- it must be factored in their planning that we're soft touches. That's got to stop.
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I think it's interesting that Socialism is now coming to the rescue of Capitalism.
Let's see... the government will take control of the banks, the financial industry, the mortage industry, the automobile manufacturing industry.... on so on...
Americans are so afraid of socialism but never stop to ask themselves, who runs the post office, who runs the schools, who runs the fire departments...?
This is the end of capitalism as we know it. We're making history now....
I don't understand why the leaders of industries that are so connected to greenhouse gases and global warming, in trying to endear themselves to the American taxpayer for a bail out which will come out of their taxes, would fly to D.C. in private jets to ask for this bail out.
Can't they at least afford to hire good PR people?
Can't at least one of them stand up and say, damn, I'm driving to the meeting in our most environmentally-friendly prototype? Would that at least be good advertising? How come none of them know how to LEAD?
This is definately a North vs. South thing. Please remember that there are many auto plants in the South as well. And, in the case of Spring Hill TN, the home of GM's Saturn plant, Southerners fought keep the plant out of Tennessee. They wanted no part of the auto industry in the South. Suddenly, now they're interested, but seem to be only in favor of foreign auto makers....
Union Bashing in spite of what Winer is saying here is "Objection 21's" answer and it is the answer we will hear from those Bubba Republicans from "Right to Work" states, the ones that make it impossible to organize. The UAW made a deal the last crisis to self-fund retirements, so the excuse that this is all the union worker's fault is bull. There are extraordinary figures being tossed about for union wages. Sure there are some specialists that make money, but nothing near the kind of dough the losers on Wall Street make for crashing the entire world banking system. We need reform, from the custodian to the CEO and that is true. But bashing the union while the CEO's are making a much higher multiple of the average worker's pay than in our entire history is putting the shoe on the wrong foot. Let us renegotiate all the contracts. I'm sure the average line worker will be willing to take a cut of some percentage of their pay. I am also certain the CEO's will sacrifice considerably less.
While I don't condone the actions of the auto CEOs in the least bit - I believe they should be held accountable for a large portion of the auto industry's woes - I am saddened to see that my state (in particular "Detroit") has become the whipping boy of the Congress and of the Nation. It's almost as if the anger over the economic situation and the previous bailout of financial institutions has been shifted wholeheartedly onto "Detroit" and the city (and Michigan for that matter) has become a four-letter word. Not everyone who lives in Michigan works for the auto industry, but our state's economy is entwined so tightly with it that should even one of the Big 3 fold, it will be the death knell for the rest of us. It's easy to dismiss the auto industry and say "let them die" if you don't live in this geographical area. I will tell you that the demise of the industry would be the death of Michigan - and probably Ohio as well - and will domino out to the rest of the country. If you want to see an example of what Michigan will look like if the Big 3 fold, take a look at Michael Moore's "Bowling for Columbine" and see what happened to Flint, Michigan, when GM pulled its stakes and left town. Flint is still a dead city after 20 years - never recovered.
Michigan could have and should have, for it's own self-interest, de-emphasized the automobile industry and it could have invested in a more diversified industrial portfolio.
Now, American politics is set up for positive, not negative feedback and hindsight is 20/20, so it's not particularly amazing that things are as they are.
I think you are taking the blame too personally. If the problem happened to have been in Texas, the reaction would have been exactly the same. But I would ask you to consider the possibility that the demise of one or even several of these companies will not result in the feared domino effect. Cars are way to important in the US and the total demand for spare parts, service, tires etc. will not decrease significantly just because GM, Chrysler and/or Ford change hands, downsize or vanish. We could lose any one of these brands or all of them and people would still buy a car next year. It would just not be made in Michigan. Well, many of them are already not made in Michigan... so this is just a slightly larger step towards the final endpoint of the industry: complete globalization.
You may hot hard times, for sure, but we, collectively, we will survive.
This is what we must remember:
But we also can't jump off the cliff. We'll have Hoovervilles in every shopping mall. When you go to the supermarket the shelves will be empty. It's already happening at some local retailers. When the economy fails, distributors go out of business, then the manufacturers the distributors stiffed, and all of a sudden even if you have money in the bank you can't find food to buy. You turn up the thermostat and there's no heat. Old people and children and people with chronic diseases die when we get there. Perhaps you have some people like that in your family. Perhaps you're one of those people?
If you've ever been to the Third World, or parts of the US that are the Third World like the South Bronx and New Orleans and (I'm told) parts of Detroit -- you owe it to yourself to find out what that's like. Because if you're stupid enough to think that letting Detroit fall off the cliff somehow won't take you and your family with it, you need to get educated, fast.
Lauren, whatever happens in Detroit will not take me and my family with it. Not even close. I won't even feel a slight breeze blowing around here while you will be weathering that financial hurricane.
You have to learn to understand that you are not the center of the world and that threatening the rest of us is not a good way to get us to help you.
Ask nicely and we may just come and help you. Threaten us and we will hate you.
Fair?
American auto makers have had this coming for a long time. Good riddance to them and their crappy cars.
Volvo, Porsche, BMW, Saab, Audi, Mecedes Benz, even Toyota, Nissan and Honda have run circles around their clunky American counterparts for years. Any true innovation must just get crushed in committee in favor of churning out the same lame facsimile of something done better by Germany or Japan 5 years before. Sure, there are a few exceptions, but generally speaking Detroit has produced inferior products for far too long. For every decent American car produced for the last 30 years there have been multiple foreign options that blow it out of the water either in terms of design, performance or maintenance.
And yes, I know that Saab is owned by GM and Volvo is owned by Ford. Owned by Detroit but still DESIGNED in Europe. Even if they weren't, these companies had a pedigree well before they were bought out.
Here's a free idea, Detroit: make a fuel-efficient replica (and I mean replica, not some modernized version) of a '68 Mustang or a '63 Stingray. And make it affordable to a middle-class income. There would be a waiting list a mile long.
Ruled by short-sighted stockholders and forever playing catch-up, the American auto industry has become a national disgrace.
I'm thinking the problem might become MIDDLE CLASS INCOMES
Good point...
'68 Mustang??? Bwahhhaaaaaahaahahhhhhahahahhhh...
OK... you are kidding, right?
Nope:
http://images.mustangmonthly.com/featuredvehicles/p86677_large+1968_Ford_Mustang_Shelby_GT500+Front_Driver_Side.jpg
(OK, I should have stipulated "Shelby")...
"We need to own them for a while so they start working for us"
EXACTLY.
Lets not forget that if the BIG 3 go out of business, the UAW has it set up so they get somewhere in the area of 80% of their current salary for the next 4 years. So even if they do lose their jobs, they have a four year cushion that many other AMericans just don't have.
Don't confuse your rant with reality. If they go out of business who will PAY them?
This post had me nodding in agreement until I read the last paragraph. If you make the big 3 go into bankruptcy that IS having them go over a cliff. BK would be as disastrous.
I totally agree with you, EngineerBill....and completely disagree with Mitt Romney (again).
In the case of the Big 3 bankrupt is not a good option. Excusing debt - payments owed to suppliers - would trigger much of the downfall we want to avoid. How willing would you be to buy a car from a company in bankruptcy, compared to a company that just got a Government loan?
"Because if you're stupid enough to think that letting Detroit fall off the cliff somehow won't take you and your family with it, you need to get educated, fast."
I find writers like this really obnoxious. Calling people who disagree with him stupid is not the way to win friends and influence people, especially when he is not particularly right on a lot of things in his article. He sounds a bit like Bush and Rice with their hyperbolic warnings of a "mushroom cloud" with his stuff about Hoovervilles (err, that should be Bushvilles) in every shopping mall. If the US economic conditions are that bad, throwing money at Detroit won't stop it.
I agree with much of what was written. However - "They've gotten accustomed to our bailouts..".
When was the last time the Big 3 got a bailout? Chrysler? That was a loan.
There's a piling-on mentality playing in the press when we need a clear perspective. The financial bailout was $700 billion - no problem - but we can't even give Detroit a loan when 3 million jobs (in the first year) are in the balance?
That said, I do support public ownership (voting stock) in exchange and hard conditions to re-tool not only the factories but the executive leadership. Detroit has the capability to be the manufacturing engine for a green economy and not only for cars. We should demand nothing less - carrots and sticks.
Your point is well taken, about shaving exec perks, although that seems more of a side issue (as for corporate jets, I cant imagine a CEO with such immense responsibilities, and upon whom so much depends, wasting valuable time at Laguardia because his plane is delayed several hours). But the labor costs, and legacy expenses (pensions, health care for around 100,000 union retirees) has contributed to the Big Three’s downfall. Their wage rate has simply been uncompetitive. No matter what kind of “green”car they build, they still have to be competitive with wages. The latter has been around $28 hour compared to the $14 hour for Toyota, Nissan plants down South. Wisely, the UAW agreed last year to a two tier salary, with starting workers averaging about $14 an hour. It doesn’t help either that the Southern States have heavily subsidized the foreign auto transplants.
The bottom line is that the U.S. needs some semblance of an indigenous auto industry. The lost of all three would be catastrophic, as they sustain ten percent of our entire manufacturing base, and our trade deficits would fly through the roof, causing the U.S. to borrow more money abroad. The emerging markets –Brazil, India,China, and Russia – are alone buying around 17 million units this year. Not to be a player in these markets would be a disaster, especially as GM is already well entrenched in Brazil and China. Also, it would close off research and development on future auto technology.
Where is $14/hr a living wage? At a standard 40hr week, that employee would make just over $29,000.00 a year - and we are also suggesting that they should have their health benefits and pensions eliminated or trimmed down.
Then we give more tax breaks to companies who are supposed to create jobs but who have already been shipping them out of the country for years when US corporations effectively pay one of the LOWEST tax rates of industrialized nations. So the guy that makes 29k a year now has to figure out how to pay for the increased cost of his heath benefits, some how put away more $ for retirement because we have just slashed his pension - and do so at a time when the stock market is unsafe for retirement savings, and pay a higher share of taxes because the company that just scaled down his pay, health benefits, and pension is getting a nice big tax break.
How about we implement FAIR trade agreements and universal health care to allow American companies to be competative here in the US?
Annie - don't believe everything you read here. Honda and Toyota pay significantly more than $14 per hour -- they have to in order to KEEP THE UAW OUT. When there is no UAW , then look out!
Don't forget to emphasize that this is a sweetheart loan not a give away.
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