Vociferous southern Senators like Richard Shelby and Bob Corker made it clear during the auto industry hearings yesterday that they would very much like to see Detroit automakers go bankrupt, without mentioning how it would benefit the heavily subsidized foreign automakers in their right-to-work states.
As I watched cable news following the hearings, people appeared preaching Corker's gospel of Chapter 11 as a way to make them "financially viable," including Robert Reich (video). Nobody seemed to think that consumers will have any problem buying cars from a company that has filed for bankruptcy.
MSNBC analyst Chrystia Freeman: "I think the carmakers are using a lot of scare tactics, trying to play chicken with the politicians. We heard it with Phil Lebeau actually -- 'oh, well no one will buy cars from a company that's in bankruptcy.' I don't think that's proven."
A recent study from automotive market research firm CNW surveyed 6000 people intending to buy a new car within six months, and discovered that more than 80 percent of them would switch brands if the vehicle they wanted came from an automaker that went bankrupt. Breaking it down by company, Americans were more likely to abandon domestic automakers than foreign ones, with Chrysler faring the worst -- a full 91 percent of buyers wouldn't take home an Auburn Hills product if the company went bankrupt. Ford and GM didn't do much better, with 80 percent of those surveyed saying they would jump ship if things went south.
Freeman went on to say that foreign automakers are doing quite well in the US, actually, it's only the domestic automakers who can't be competitive because of their "legacy costs." In fact, as Marcy Wheeler notes, sales are down across the board -- and Ford's are holding better than those of Toyota, Honda, Nissan, Hyundai, and Kia. In fact, Ford doesn't require a bridge loan, and isn't asking for one -- they may have enough cash to weather the storm, but are requesting a line of credit as a backstop should things get worse. Common sense would inform most people that if this turns out to be the case, foreign automakers will not be immune, either.
The fact that the Detroit automakers are in a cash flow crunch, and that getting rid of legacy costs would do almost nothing to ameliorate that, doesn't seem to have occurred to her.
Did she pick up Richard Shelby's talking points in the green room by accident?
As former Wall Street GM analyst Ron Glanz said recently, an American made car is already selling for $4000 less than the exact same car made by a Japanese manufacturer would, expressly because of bad product legacy and fear that the manufacturer will go bankrupt. It's a PR problem that can't be overcome simply by waving your arms and shouting "no, no, really, Chapter 11 bankruptcy. . . it's just financial reorganization."
The danger here is, if they're wrong -- and all the evidence is that these "experts" are terribly, terribly wrong -- they're dooming US automakers to a hole they may never be able to dig themselves out of.
One in ten jobs in the US is directly tied to the auto industry. The stakes here are high. It shouldn't be too much to ask that people do a little research before climbing on cable news an making outrageous and demonstrably false claims.
Read More:
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Anyone thinking of buying a new car if they don't need one, is crazy!!! The deep recession is only a month away, and 2009 will be horrible. For anyone to waste their cash is nuts. This will last a very, very long time. Read Vanity Fair's article, "Profiles in Panic". The uber-rich are taking a bath, too.
Recessions don't need government intervention to come out of it. Depressions do!!!
http://eye-on-washington.blogspot.com
How can this "Bankruptcy is certain devastation" DECEPTION be perpetrated? Chrysler has done it, so arguments that it CANT BE DONE seem pointless. One could argue that G.M. should have become Cadillac and Saturn MANY years ago, a strategy used by every SUCCESSFUL automobile manufacturer around the globe.
REORGANIZE the Bad, PAY the Suppliers what they are owed, and start shutting down G.M. DIVISIONS until expected production matches the 50% demand decline that is more likely than the fantasy math presented by Wagner last week. -
Dodd is right, Time for CHANGE in the G.M. Executive Offices...and forget Barney Frank's HAMMOCK for the UAW - We already have a Leaky TARP.
The Big 3 have spent years telling us that we need to buy the biggest, bestest, shiniest cars out there, and have created this "need". Many people feel that they must have that biggest and newest SUV to compete and to look good. Oh boo hoo...what did we do in the old days before we had all that ? OK, I could see someone in Alaska or North Dakota needing a pickup to haul farm stuff. But owning an SUV or a massive pickup in a crowded city is just plain misguided.
Argh ! I'm sorry to vent. I just think (IMO) that a deeper problem needs to be addressed: why can't people be happy with something less conspicuous, less gas-guzzling, something that gets them to work and back, and costs almost nothing to maintain ? What exactly is America's love affair with SUVs all about ??
Regards
Enabled? Yes.
:-)
IMHO, something that will also have to be re-evaluated is many Americans' practice of buying that they cannot afford. I have learned a lot from reading this spirited and informative discussion. But much of this is way above my payscale ! Why do people buy cars that they can't afford ?
My husband & I both have old used cars that we paid (little) cash for--he, an '89 Ford Ranger, me, a '96 Nissan Sentra. We love our cars. A few bucks now and then to take them to Jiffy Lube, a couple bucks to buy windshield fluid...and that's it ! No repairs have ever been needed.That's awesome, and I don't understand why others don't feel the same way. Why would someone take out some massive stupid loan to buy some massive stupid gaz-guzzling SUV ? Our consumer mentality has gotten way out of hand.
Regards
Thats the problem... For Detroit and why all other economies protect their major industries and home markets from such unfair compettiion. We dont and thus our STD of living will drift downward until we equalize with 3rd world countries.
Regards
Regards
As more and more business see this as viable, more and more will attempt to take advantage of this cheap labor. That will drive up the demand, and hence, the wages for this labor.
Many people look at China and say, "Look how much poverty they have", instead of going back 30 years and saying "Look how much poverty they had."
Imho, one of the best hopes for Africa is to make it viable for companies to use their labor. Then, like China (and now India) they can start their climb out of poverty.
You might also note that contrary to popular "progressive" belief, as our trade has become freer, our standard of living has gotten better, not worse. Although, it's true that some industries suffer because of the labor shift.
Regards
What in the constitution do you believe allows the federal government to take my resources and give it companies they do as "economically vital"? The General Welfare Clause? No, that is the very thing that prohibits this sort of special interest favor. Again, you are free to donate as much of your resources as you like to the big 3. Why must you insist on coercing me into doing the same?
For the present situation here in the US, it might involve the government "giving" significant cash to people who trade in "Gas Guzzlers" for new US-built economy cars. The size of the credit might vary by the differential in fuel consumption between the vehicle traded in and the new car.
The trade-ins would all be scrapped - never to be driven again - anywhere.
This scheme would clearly help get Detroit moving again, although we might then find out that their plants are not set up to produce the numbers of more fuel-efficient cars at the rate that a program like this would encourage.
If they could, this might be one of the quickest methods we could use to get the economy moving again while improving our green-ness.
The incentives would have to be big, maybe $10k per car where the mpg difference between trade-in and new car was greatest, but at least the money would pass across main street.
Toyota's flleet gets 2 less miles per gallon than it did 20 years ago.
Regards
I was worrying about whether Detroit has the capacity to build lots and lots of fuel-efficient cars. I don't think they do. My assumption was that greater fuel efficiency would come with some size reduction and that their lines are not all set up to build little cars and might take over a year to reconfigure.
I still think the best gas saver, though, is to ask yourself before every trip, "Is this trip really necessary?"
Its amazing that suddenly employers providing healthcare and paying a low end middleclass wage is bad! That attitude clearly states that America is well on its way to becoming a 3rd world nation.
Regards
But there could be a much more trivial reason behind the demise of the US automobile industry... their sales strategy.
Toyota and Honda advertise 1.8% APR (and no money back), Ford etc. give deals with up to $5000 in cash back. And that's not a new thing... US car makers have been giving their cars away under cost for years to make volume.
I've never bought anything but GM autos, but if I was in the market right now I would have to seriously reconsider that loyalty.
YOU REALLY DO NOT WANT TO KNOW about the handouts these corporations are getting from the states where they are... IF they are so much better at running these companies than the government, THEN by GOD, they should be paying their fair share INSTEAD THEY ARE STIICKING IT TO THE WORKING CLASS TAXpayers....
I sold it and replaced it with a Ford. Boy oh Boy, I have spent enough maintaining my current car to buy my old car back at this point.
It seems that Ford is one of the better off companies right now, or at least in the top 2. I worry how much the cost of maintaining a car that is not under warranty from a bankrupt company would be though. Things are already ridiculously expensive (even after-market parts).
I would honestly consider a new vehicle with a good business model that has a good rating on the market (which reflects investor confidence), and has a warranty and the features I want.
Unfortunately, I don't know if any of the BIg 3 will be around in 6 months let alone 5 years. That will make me consider a new car purchase.
I drive a ford built Ranger based mazda B series tuck - its twelve years old and not a thing wrong with - a darn reliable vehicle
Flying on a trip is a one time deal
Buying a car is a multiple year commitment. Few would make the commitment to buy a product for a company that may not be around to honor warranties and provide service parts
Automobiles, on the other hand, are your own property. If you buy a car and then the manufacturer goes bankrupt again, or can't restructure itself without abandoning the car line you have purchased from, then in a few years parts and services will dry up, your warranty lapses, and you are stuck with a potentially very heavy paperweight.
Part of me questions the stipulation that these 6,000 respondents were looking to buy a car within the next six months. I don't think these people accurately reflect the economic situation of the average American now, who is indeed having trouble with their own mortgages, food and gasoline costs, and job security. I doubt they would be shopping around for ANY vehicles.
Hogwash.
Toyotas and Nissans were cars that Americans didn't want to buy in the 1970s. Guess what? Americans DID buy them. And guess what? The Big Three wish that they were in Toyota's and Nissan's shoes today.
The Big Three insists that Americans don't want to buy smaller, fuel efficient cars because they've spent billions of advertising dollars to convince us that's the case.
The real question is, will you be happy with it? Will you swallow $4/gallon gasoline prices without getting upset the next time they come around?
The other, more important question is, does the government act responsibly if it lets the country get dependent on oil imports? The answer is trivial: no. And since there is no other solution to that than to regulate engine size and consumption, the government has a responsibility to change the current situation AGAINST the wishes of the people and those of a few select companies.
Everything else is a completely secondary discussion.
And you obviously haven't checked back since then. Several individual models of US cars are actually BETTER quality then their Japanese competitors.
Please do some research before posting provably false statements.
The Chevy Malibu was Motor trends car of the year
Ford is ranked by consumer reports and JD Power as having the highest quality cars
Ford just recieved the Insurance Institute for Hiway safety highest ranking for the most models with 5 star crash ratings as well
So many of these myths floated around about US cars by the Toyota/Honda kool aiders are so 1980s