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Five Mistakes by DC and Detroit Hurt Detroit Three's Survival Shances
Five mistakes Washington and Detroit are making which could kill any help or support for our American car companies:
Mistake #1: Consumers and the environment are no longer considered in Washington's loans to the Detroit Three.
In Sen. Harry Reid's new bill to allow direct and swift loans to the Detroit Three, consumers and environmentalists are being forgotten, left out in the cold. While top industry executives would have to give up bonuses and golden parachutes and stockholders would receive no dividends (all good and necessary), the bill does not set additional fuel-economy requirements on automakers getting loans. Nor does it establish a government oversight board to help manage the companies. That's two strikes against getting our money's worth; can hardly wait for strike three.
(We've used this photo in other posts, but that's because it's so interesting. What's Harry Reid doing, hanging with Kirk Kerkorian at a Las Vegas prizefight? Kerkorian has owned hundreds of millions of dollars' worth, and probably more, stock in all the Detroit Three at one time or another. His sale of his Ford holdings a few weeks back lowered Ford stock to under $5. Interesting bedfellows to say the least).
MISTAKE #2: The General a no-show in Los Angeles.
GM canceled any new vehicle introductions and all press conferences at this week's Media Days before the public opening of the Los Angeles Auto Show this Friday, Nov 21. The corporation also announced last week that they are halting all research and development on future cars and trucks. This would seem to make their Volt plug-in hybrid - and the high-mileage Chevrolet Cruze, already on-sale in South Korea and slated for Europe in mid-2009 - both dead issues - at least for the time being. This is all how not to build confidence in your company.
(Chevrolet's high-mileage Cruze will be built in Lordstown, Ohio, if and when GM gives the go-ahead. It's already being built by GM division Daewoo in Korea and sold there, and St. Petersburg, Russia, will be the site of the car's building when it goes on-sale next year in Europe. So far, no word on when - or if - US production might begin).
MISTAKE #3: Don't anger your dealers by making them pay for an auto show display when asking them to lobby local, state and national officials plus local newspapers, radio and TV, all on your behalf.
Chrysler has told their local Southern California dealers that they, the dealers, are going to have to pay for the company's Chrysler, Dodge and Jeep exhibits at the Los Angeles Auto Show. By the way, the Dodge Viper brand, name, tooling, spare parts, brochures, "blue sky" and more is still for sale, so if anyone wants to make an offer, meet me at the LA show.
On a similar note, GM has just announced "delays" in getting their dealers money they are owed for factory-to-dealer incentives, the ones the public never hears about. On average, GM spends about $3,600 per unit in incentives. Based on GM's US October sales, the company sold about 84,000 vehicles in two weeks. That amounts to total incentive payments of about $302.4 million for those two weeks, and no one can say when GM's dealers might see any of that. We're talking real money here, folks, even to GM. That amount might keep their doors open for another week or so. Reminder: Hummer is still for sale; interested parties should contact GM.
(Chrysler's Jeep Commander for 2008. Big enough for you? Chrysler is making all sorts of noise about some EVs which will go on-sale - well, no announcement on that little detail as yet. The heavily hyped Hemi Hybrids from Chrysler have already been discontinued, making them possibly the shortest-lived models in US history).
Mistake #4 - Don't discuss dirty laundry, especially if you're a Congressman.
At the opening of a new Honda - HONDA - plant in Greensburg, IN, US Rep. Mike Pence, a Republican from Indiana's 6th District, said about the Detroit Three: "Reorganization in federal Bankruptcy Court happens all the time. Companies utilize it all the time and come out stronger and more whole in the end. It seems to me a better option than putting taxpayers on the hook," said Pence, whose district includes the Honda factory.
Can you believe that?
Jeffrey Smith, assistant vice president for corporate affairs at American Honda said, when asked about Pence's comments, "Honda supports measures that would maintain the short- and long-term viability and stability of the auto industry.
What those measures would specifically be, we're not in a position to comment," Smith said. But he also said "the auto industry is made up of individual companies that are deeply and closely integrated at the supply base."
We can safely say that Honda definitely has numerous employees smarter than Mike Pence (maybe he wants a PR or lobbying gig with Honda?).
(Honda's Fit is among their best-sellers in Japan and has hit it big in the US, too; the 2009 version of the car sold in the US adds a bit more in the creature comforts department; Americans drive much,much more than the average Japanese, and are more willing to lose a bit in fuel mileage for more comfort, and more comfort weighs more, which hurts fuel economy, and so on, and so on, and ...).
Mistake #5: Failing to educate the nation on how the closure of even one of the Detroit Three would affect us all.
There are literally hundreds, perhaps several thousand, auto industry "supplier companies" scattered all over America. While it's hard to say how many workers they employ, the figure "above three million" is being tossed around in the media; it's likely many more. We know that one out of every ten jobs in the US is auto industry-related, and worldwide the number is one in seven manufacturing jobs.
We've written much of supplier companies' plight, a distinctly unsexy part of the carmaker equation. We're hoping that when Barack Obama takes his Oath of Office, he'll hit the ground running (and driving) to settle the "Detroit problem," once and for all.
(Partsmakers are critical to every carmaker; without them, apart from sheet metal for body panels, the platform under a car which holds all the bits and pieces together and the engine, almost everything else comes from suppliers. Here's an example: Nissan's XTRONIC - CVT. Continuously variable transmission are annoying to long-time drivers like, uh, me, with their whiny noises and creating pent-up demand for a real honest-to-god shift, but they are lighter, cheaper, and easier to make and fix for the carmakers, and they offer a one or two mile per gallon benefit over a conventional automatic).
At this point, I wouldn't be surprised if any assistance for Detroit isn't approved until next January 20th. Might be among the first official actions taken by our new President.
Your turn - What are some things which Detroit and DC have done or not done, or should do or not do - not in general (we all have our limits), but during this crisis - which have helped or hindered Washington, and in the case of the Detroit Three, thrown their very existence into question?
Keep posting your messages, positive or not - we can assume that folks with "DC juice" stop by here to get a taste of what's on the minds of Huffington Post visitors when it comes to cars.
We'll be at the LA Auto Show, back Friday with a large photo album, complete coverage (huge push for green at the show this year) and video - as soon as I figure out our new editing program. To view our 150 images from last week's SEMA Show, just click anywhere on this line and the Photo Album will open in another window.
Follow Steve Parker on Twitter: www.twitter.com/autojourno
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Bailout it so tricky. I've written many comments and thought of all the angles, but what it seems to come down to is $25 billion total for GM, Chrysler and Ford to split. GM has been blasting through $5 billion a month, so how far will their portion go? Sounds like it will be gone in two months max. Then what? The problems they are facing are not going to be eliminated in this time period. I haven't heard anything consider this but one other comment here.
Oh, and I love the Hummer ads on all these pages.
Detroit car manufacturers supported big oil by building big cars and trucks that kept the demand and profits for big oil high. Now big oil, not the tax payers, can bail them out or buy them out. I was raised on GM dollars. My retired dad says, "The welfare state of GM has been a good ride. All things too good come to an end....America is now a bannana republic.
Here is what the UAW ultimately would want. The USA taxpayer should pay all UAW workers salaries and pensions for as long as they or there descendants live even if the Detroit Big 3 close their doors. They can live the high life with no worries about jobs etcwhile the rest of society has to inevitably live off a social secuity check. O I forgot they would also have all their health care paid by tax payers as well. Suweet!!!!!
I listened to the Big3 testify yesterday and what seemed to be missing was a BIG plan for the future...all they seemed to be doing was protecting their turf. The conversation here seems to be grouping all 3 together. Do we need 3 automakers? If GM was to go into bankruptcy, how would that benefit the other 2? I like all other middleclass Americans would not like to see anyone loose their job, but if only ONE of them actually had a plan for the future, couldn't they absorb some of the laid off autoworkers?
Until I hear of a truly transformational car from one of them that is not a "pie in the sky" dream, then I just cannot support this "bridge" money.
The difference between the Paulsen play and the Big3 is that the Big3 do not have anything but words and they followed Paulsen who was Chicken Little screaming that the Sky was falling...and after 6 weeks...it did not fall! Congress should not be "fooled again"
UAW must share blame for helping make the Big 3 uncompetitive, but the buck stops with GM/Ford/Chrysler execs, all choosing to spend millions lobbying to sell too many SUVS & light-trucks, obtaining fuel efficiency & pollution exemptions, and ignoring vastly growing green markets for more fuel-efficient vehicles & alternate fuel vehicles.
Ford once had 7 alt-fuel models but chose to not sell ANY of them in the U.S. Now, Ford has just 3 alt-fuel models, all of which are only sold abroad. GMC had 16 alt-fuel models but now only sells 3 in the US. Chrysler just seemed to shuffle money/owners around, not investing in alt-fuel vehicle design, production or marketing.
So the Big 3 were killed by competition making fuel-efficient & reduced-sized vehicles, dominating the alt-fuel vehicle markets which the Big 3 dawdled over - snoozers are losers.
It's knee-jerk to blame it all on the UAW, but Toyota/Honda/Nissan did not suffer similar fates, despite paying union wages - they expanded market shares & profitability. If there's another bail-out for such incompetence, much tied to greed & lobbying, we must acknowledge that capitalist models [business that fail to adapt fail; those with foresight prosper] are sickly. Hand-outs are tossed to auto & insurance industries. Who's next, pharmaceutical companies? Exxon when the price of oil drops to $50/barrel? As recently suggested, why not let Exxon-Mobil bail-out the Big3?!
The one thing I have been wondering about is why the Bush Administration was so eager to bailout the Financial Industries but hasn't been about the Auto Industries. Then I figured it out. Financial Industries are not unionized, while the Auto Industries are. How better to get finally get rid of one of the more potent American Unions than to kill their jobs. That would be just one more enemy out of the way. Whittling away at the power of the average People one stone at a time.
Wall street has long hated Detroit, and Manufacturing in general
part of the class warfare being waged against mainstreet
Here is what the UAW ultimately would want. The USA taxpayer should pay all UAW workers salaries and pensions for as long as they or there descendants live even if the Detroit Big 3 close their doors. They can live the high life with no worries about jobs etcwhile the rest of society has to inevitably live off a social secuity check. O I forgot they would also have all their health care paid by tax payers as well. Suweet!!!!!
The credit markets and economy were approaching complete collapse if the financial industry was not saved. The economy will not collapse if GM files chapter 11.
not collapse but will be seriously harmed.
You think it sucks now try putting 1/4 of the midwest out of work
I think that the biggest mistake that American Automakers made was in being greedy. Just as the Housing Industry got greedy. Make everything massive. The bigger it is the more money people will have to spend. A car is not a house. It doesn't need a tv, a stereo, electric this and electric that. They are filled with too much garbage. Unless Automakers are looking at the day when people won't be able to own a home and have to live in their cars, in which case you forgot to think of things like a toilet, sink and shower stall. Why not try for a little style, simplicity, less speed and more efficiency. You might also think about giving away less pay to some of your grossly overpaid execs. Less pay and fewer unearned bonuses. That might be a good start.
I would rather buy a vehicle from any of the BIG 3 after they are have filed under chapter 11 protection. I would feel much more secure that they would be around in the future after they are reorganized. Current bail out just prolongs inevitable collapse which means they may just close doors altogether leaving me with a new car I would have difficulty getting serviced. Money they get now will go toward pensions wages etc. and they will be back for more every month. Hate it for the UAW. Lifes a bitch. Nothing is guaranteed. Go get a real job you overpaid cry babies. Move to Smyrna, Jackson. Tupelo.
We must save the American Auto Industry. During WWII they built many of the ground war machines for the Allied Powers. Without them we might be speaking German or Japanese today. The failure of the American auto industry would soon be followed by the steel industry and the many other various industry suppliers. The United States would become a Banana Republic. If WWIII should come are we going to depend on Toyota, Nissan and Mitsubishi to supply our troops? Or maybe BMW, Mercedes and Volkswagen? I'll opt for the American Auto Industry. You had better too. BUY AMERICAN!
Very, Very good. You get it. Without manufacturing, all we have left is "service industries". In other words, we'll all live off selling each cheeseburgers, or "selling each other houses with money borrowed from the Chinese" [ Thomas Friedman?].
Work is the origin of value. Then banking and "finance" manipulate money in a rising tornado of obscure transactions that nominally "increase" value.
We've just seen how well that works. At some point we actually have to manufacture real objects that can be sold for a decent profit.
I don't understand why everybody is so up in arms. When we outsourced mineral mining nobody cried, tools and parts no tears, and when they outsourced parts of other industries to Mexico and low wage jobs, I did not hear the CEO of the "BIG" 3 sob and cry. Out sourcing and off shoring was a gift by god (I don't know which god it was - it wasn't the one I know). It was such a fad to outsource companies into non existence. Global free market and trade was the excuse to create the modern slave abroad. Now they are still arrogant in a situation that requires humility. Like it is there right to be bailed out and they use lay offs as a threat. This is certainly not a good negotiation strategy. An era has to come to an end. It is not as much about failure to read the markets and be innovative but the believe of immortality that does not exist anymore. Even if they could catch up with the rest of the world in technology, it would be like a black hole that swallows Billions of Dollars, year after year. I think that the government should go into receivership selling off the pieces and build new technology companies. That is way cheaper.
They gave $700 billion to the banking industry with no strings attached. And guess what? The banking industry is saving up all that money, instead of lending it, as was expected.
Now Detroit needs just 3% of that total to keep millions of people at work, in a crisis what was caused by the financial industry, and you have a problem with that?
Agreed
you think the economy sucks now wait till you put 1/4 of the midwest out of a job
Yes, there are mistakes being made.
However, you are missing the point entirely. People will not willingly buy the crappy tincans that the big three think they can push off on the customers in the name of economy.
In the late seventies, my wife and I moved to DC and hade to look for a new vehicle.
We looked at an American Motors car and would have been happy except the dealer started putting all sorts of conditions on the deal, we looked at what Ford had and frankly they were poor quality.
We finally bought an Audi Fox GTI, which we still have even though it needs a lot of work after 200,000 miles on the road with little maintenance necessary. It gave great gas mileage, was comfortable, and great fun to drive. Plus,even though the United States refused to do crash tests on them, the European tests, of that modle Audi, far exceeded the results from testing American Cars of a similar class here or there
WHAT AMERICAN CAR MAKERS NEED TO DO IS TO BUILD HIGHLY EFFICIENT, QUALITY, AND SAFE vehicles that people want to buy and will enjoy driving.
Many US cars have 5 star crash ratings, they have continually improved safety. The quality is on par with japanese brands, and is better than most european brands according to JD Power
Who has the highest avg mpg car line up? Toyota? Honda? nope - Chevrolet
Who makes the highest MPG Pickup and SUV? Toyota? Kia? Ford - Ranger and Escape
Which crossover gets the best mpg? Kia? Hyundai? - Pontiac Vibe
BTW - Audi is one of the worst quality cars on the planet - there are whole websites devoted to how bad volkswagen brands suck
Your/Chevrolet's claim about the highest mpg car lineup is a misnomer. The reason they can claim that is because they have the most cars to figure in to the equation, which is also why they are failing as a company. Too many duplicate and triplicate vehicles across all their divisions.
I would also add that the US avg mpg lineup doesn't take into account that only Honda and only Toyota offer hybrid vehicles that get over 50mpg ... the US auto industry has ignored that segment completely.
We have our US made sports car, but our vehicle that gets driven the most is the high-mileage hybrid and it will be replaced with another when we look to replace it. Looks like Ford & GM want us to remain loyal Japanese car buyers.
Quoting JD Power is like conservatives quoting Newsmax---no credibility at all.
Now if you can make the same case from the standpoint of Consumer Reports then it would be worth listening to.
Why won't the oil companies buy Detroit?
Wy would you want that? It is becoming well known that Chevron bought new technology of electric cars from GM, only to suppress production and keep the U.S. addicted to oil. I think they should be required to invest by some sort of tax, but I don't want Big Oil owning Big Auto. We would never get off oil without extreme mandates by the government.
How many minivans have 8 passenger seating?
Chrysler recently redesigned their minivan. The new design is extensively updated and should compete well in the industry. That said, here is a conversation that I expect happened during the design phase of that car:
Engineering: "The new Odyssey has 8 passenger seating. We can add an eighth seat."
Management: "What about the market segment?"
Marketing: "Our research shows that people need an eighth seat 5% of the time."
Management: "Lose the eighth seat."
Later in the hallway...
Engineering: "I thought we really had something there."
Marketing: "Funny that. People need four wheel drive only 3% of the time."
Later in a showroom...
Ms. Checkbook: "When my sister's family comes to town, because we each have 2 kids, it would be nice to fit everyone into the van. Let's get the Odyssey."
Mr. Checkbook: "Yes, dear."
Much has been written this year about how modern media (the web, blogging, 24-hour news cycle) influenced the election. Very little has been written about technology's influence of personal spending habits. Many Americans have most, if not all, of the following:
Cell phone
expanded cable/satellite
high-speed internet
IPOD or other mp3 player with pay-for downloads
video game systems with online play
GPS
These things add up. All of these devices plus their monthly fees easily eclispe a car payment. Not only has Detroit failed to recognize the failure of their product line, but also had no clue consumers' spending attitudes were changing. Everyone needs transportation but not necessarily a new vehicle. That purchase falls under disposable income.
Ten years ago, when SUV mania was at its peak, none of the aforementioned tech items existed (if they did, it was in a much different form like cell phones). Young people, the newest of consumers have made their choice on how to spend their money. Detroit must find a way to reach these people and identify their interests if they are to survive. Hint to Ford: Toby Keith ain't it.
cell phone - check - provided by my employer
cable/satellite - nope - waste of money
Ipod - nope - my 30 year old US made marantz stereo still works fine
video games - nope
GPS - nope
You might not have these things but virtually everybody else does. I don't know anybody without cable or satellite TV.
I'm bottom-up kinda guy. On the current financial situation and bailout initiatives, I'm for
the Fed working with people facing foreclosure to be able to refi their loans on one home
declared as a family residence. I'm for making loans and grants available to AIG, banks
and auto companies on a matching basis; we'll advance $1 dollar for every private $1
dollar invested. That banks be required to open-up credit to customers and that money
not be used for executive pay, stock-holder dividends and to finance mergers. In cases
where taxpayers are granting capital, tax payers should end-up owning a proportionate
share of each entity. An added condition on the auto companies; that they take
significant steps to produce alternative fuel vehicles while they provide guarantees of
immediately raising gas fuel mileage standards on all new '09 autos by 5mpg- 10 mpg
by 2010; and hold-back any and all payment until results are realized.
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