White House Still "Gathering Information" While Detroit Suppliers go Bankrupt
Chrysler has announced that 30 factories - all of their North American production plants - will close and remain that way until at least January 19th.
In the meantime, the White House says President Bush is still "gathering information and looking at options," with some expecting an announcement this Friday, while two major carmaker suppliers have filed for bankruptcy. Even Bush doesn't want to go down in history as the man who oversaw the destruction of GM, Ford and Chrysler (I hope), and I'd guess President-elect Obama wishes he could install his own new team now and fire Henry Paulson, who is still blocking using any of what's left of the $700 billion TARP (Troubled Assets Relief Program) fund for Detroit.
While GM and Chrysler are busy announcing plant closings across the country, Ford is being aggressive, some say too aggressive, in telling Washington and the public they don't need cash right now, but they do want a $9 billion line of government-provided credit they can draw upon if and when it's needed (GM and Chrysler are both asking for $4 billion before this month is out).
(Chrysler created and dominated the minivan market, but this one is from China's Brilliance carmaker, which will be exhibiting at January's Detroit Auto Show).
Ford walks a fine line in trying to appear a "winner" as far as their products are concerned, but they must do so without making GM and Chrysler look like "losers."
Ford has been placing Bill Ford (Henry the First's great grandson) and CEO Alan Mulally (who Ford hired to replace Bill Ford, who admitted, after a few months of trying, he couldn't run the family business) in front of as many TV cameras as possible; Ford was on with Larry King this week. The company is also being aggressive in trying to get its message out through online social media Web sites like Facebook.
(Ford's Flex, their 21st-century take on the station wagon, looks a lot better in this production version than it did as the Fairlane concept seen at many auto shows two years and more before Flex went into production. A big, thirsty V6 engine meant Flex never stood a good chance of enjoying big sales numbers, though. Ford's luck - and timing - with this car was bad).
Mulally told an interviewer this week, "The most important thing is that we help everybody understand where Ford is and where it's going. We're looking at every medium we have to tell that story."
Ford's Americas President Mark Fields sounded a more realistic tone: "Our job going forward is to be confident, but not arrogant."
In spite of the happy corporate talk, Ford will close 10 factories for a week beginning January 5th.
But Ford's biggest problem is what they can't control; the possible bankruptcies of GM or Chrysler, or both. For many industry onlookers, Chrysler's bankruptcy is already a foregone conclusion.
Last week, General Motors said it will temporarily close 20 factories across North America and cut a massive 250,000 vehicles from its production schedule for the first quarter of 2009 (a normal quarter would see GM making 750,000 cars and trucks).
Detroit Three plants and offices nationwide generally close for the last and first weeks of the year, so some of these closings were planned for, at least partially.
GM has also halted construction of a Flint, MI, plant that would make 1.4-liter engines for its upcoming Chevy Volt plug-in hybrid and Chevrolet Cruze. Flint was the city with the unwanted "starring" role in Michael Moore's masterful documentary about the effects of GM closing plants in Flint, where Moore grew up, "Roger & Me."
(GM CEO Rick Wagoner hops out of what looks like a Chevy Cruze but what GM PR types said was a test car using their plug-in hybrid's Volt drivetrain last week in Washington. The Levin brothers, Sen. Carl and Rep. Sandy, the rule-makers from General Motors, rode in the car with Wagoner).
Volt and Cruze development, a GM spokesperson says, will continue as scheduled, and GM still plans to bring them to showrooms in 2010, though I don't see how that's possible if a factory crucial to both cars is still being built.
The Cruze is a high-mileage small sedan developed by GM-owned Daewoo in South Korea. The car is already being built and in showrooms throughout that country (where it's called Lacetti; don't ask me why, because I don't know, either).
(Whenever GM can start building the Chevrolet Cruze in the US, we think a lot of Americans will buy this high-mileage sedan; but they can't buy it if GM is not building it).
All this happening against a backdrop of two large and important supplier companies filing for Chapter 11 bankruptcy protection, before any of the Detroit Three actually fail (Chapter 11 allows companies to return to business fairly quickly after reorganizing).
First, Special Devices Inc., with plants in Southern California, Arizona and Thailand, makes pyrotechnic (translation: exploding) devices for automotive use in airbags and other safety systems, and very specialized products for aerospace, mining and blasting. Their bankruptcy could easily push many companies in different disciplines into a sudden, mad rush to find other suppliers.
(Interior of a concept car built to showcase products from industry supplier Sabic, and it was just outside the door of the press room at the 2007 Los Angeles Auto Show; the company didn't care if anyone from the public saw it, they wanted media people to see and ask about it. Supplier companies are integral to the industry, and two have already gone bankrupt).
The second filing is by Key Plastics, which makes numerous parts and devices for the auto market worldwide. Their customer list includes most of the carmakers in North America and Europe. Their global operations encompass 23 facilities, nine in North America, 12 in Europe, and two in Asia. Now their customers need to find another supplier(s), at least for the time before (and if) Key can return to doing business.
The Detroit News also tells of rekindled anger against foreign carmakers in their metropolitan area, reporting, "After a month of Detroit-bashing in Washington and nationally, some say a backlash is forming among Metro Detroiters, annoyed by the attacks on their lifestyle and angry at their neighbors' choices of vehicles. Some fear that simmering resentment could turn to outright hostility."
And indeed, Woodhaven, MI, police said that last Friday, four cars, all produced by foreign carmakers, had two tires slashed and "Buy USA" written on them. Police said three of the cars were parked in a strip mall in Woodhaven that sits next to a Ford stamping plant. (Coincidentally, the new Clint Eastwood film, Gran Torino, tells the story of an ex-Ford factory worker living in a changing and somewhat violent Detroit neighborhood).
(This shot looks a bit Photo-shopped, but it ran on the newswires, without any retraction, and purports to show a car vandalized in Detroit; though built in the US, models like the Toyota Camry raise the ire of the UAW and of most all Detroiters, thinking their city and state is getting a raw deal from Washington - And so far, I agree. If any Detroit carmaker shuts down, many suppliers will close, and Toyota - and all the other foreign transplants - will be scrambling to get the parts they need).
In the mid-'80s, as Japanese and European carmakers solidified their US market positions, there were similar - and more violent - attacks of this kind in and around Detroit.
And incidentally, both the major Detroit newspapers, the Detroit News and sister-paper Free Press, announced they were cutting-back home delivery to just three days a week. "Automotive" is generally the number one advertiser in every medium, print and electronic, in every market, worldwide, and the industry's advertising dollars are becoming few and far-between at every level, from factory to showroom.
We should know more Friday about a plan for the Detroit Three. After the news breaks, we'll have our take - and yours - right here.
Follow Steve Parker on Twitter: www.twitter.com/autojourno
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This reminds me of when they believed New Orleans "dodged the bullet". Please ignore the video of all those US Citizens drowning, the "elite liberal media" newspaper headlines, and all other intrusions of the reality-based community.
What GOOD has EVER come out of Supply Side economics.
I'm all ears.
What does that have to do with anything? The Big 3 have lost many tens of billions of dollars over last several years. They even lost money when they sold a lot of cars.
Name one auto maker besides Ferrari who is making money.
After, Bush and his Administration collected a lot of information regarding prewar Iraq and the Auto big three bailout. Bush was able to make an extremely fast decision on invading Iraq, and an extremely slow decision on the Auto big three bailout. Bush has caused enough pain for our country and globally. The world has two great events to calibrate on Jan. 20, 2009, Obama becoming our president, and president Bush taking a long walk home. God bless America. Jan 20th will be a great day for America and the World.
I'm in favor of using the car companies as jobs programs, but what are you gonna do when no one is buying and the inventory keeps piling up? These guys don't make anything people want to buy. It's over for these idiots!
I own a 2004 GMC Sierra truck. Before that I had a 2000 GMC truck, and before that I had a 1996 Ford Ranger. I have had hardly any problems with the GMCs - the Ford, on the other hand, not so good.
As you can see from my history, I buy American every four years so I should have bought one in 2008 - except the economy sucks! My house value is in a freefall, there are foreclosures all around me, and there are layoffs where I work every quarter.
The MAIN (not only) reason the car manufacturers are hurting is because of what this administration and their rubber-stamping Congressional counter-parts have done to our economy. When the economy stabilizes I will buy another GMC truck, and maybe even a Ford Fusion.
Bush/Cheney is the worst administration we've ever had. There's nothing they can do; they have prevailed over the deepest recession, almost a depression world over. Some legacy. Worst than Nixon.
The car makers just don't have the lobbying clout they
need to influence top lawmakers, and the White House.
One less union, less cost. That is what Congress wants,
to break down the power of the union to secure a living
wage and great benefits for workers. How it effects 2,000
other industries is not important. We were told we could
not fall into another Great Depression, so why worry?
Obama should appoint Bernie Madoff as Car Czar!
I'm tired of surprises.
Thanks, Steve, for using a Megaphone while the rest of the media turns a deaf ear. I know of 3 families in Detroit where BOTH SPOUSES LOST THEIR JOBS this week alone.
Will the union busters get over themselves already. Every single job in this country is now at stake, while Bush and Chaney waste time.
Do you think it's a coincidence that Levin (Senator from MI) is the one leading the charge to prosecute Bush and Chaney for war crimes? I don't think so. It takes a village to raise a child? It takes a state to sink an administration. And, come to think of it, it takes an administration to destroy a country.
Game Over.
It is probably a foregone conclusion at this point that 1 or 2 automakers will be allowed to go into a "controlled" liquidation. This slow death is preferable for the government's image than saying up front that they will not bail them out. Especially since they have shelled out exponentially greater amounts to financial companies.
Why? That's a loaded question, and facets of the answer has been discussed in countless ways. It's time for the reckoning. The triad of complacency, inefficiency, and inability to adapt will do you in every time.
The $14 Billion Loan is peanuts compared to the tax revenue loss if we fail to help the auto industry. In addition to millions of job losses, the treasury will have to do without the $150 Billion in tax revenue generated by the Big 3. The southern GOP reps are using tax dollars to subsidize the handful of foreign assembly plants which generate wealth for Japan and Germany.
And I thought treason was a capital crime.
Blaming the unions for this is just so ridiculous!
Are the unions to blame for Wall Street? Which union ruined AIG? Citi? Lehmen?
Which union does Bush belong to?
This is all about having leverage over congress to get another $350 billion in untraceable bills for Wall Street crooks. And the consrvative talk radio programs are part of it.
Why is saving the auto industry unpopular with so many people? Because the same radio stations that hyped everyone up on Iraqi WMDs are again promoting anger. Talk radio hosts raise their voice and get emotional as they mis-represent the UAW and auto industry.
For example, if you ever worked on the auto assembly line, then you would know you can not stop working for 20 seconds or your part of the job won't get done and there will be Hell to pay down the line as other workers will not be able to do their part. On the talk radio I hear about lazy UAW workers which is impossible when you are on the line.
This same talk radio media bias that brought you Bush, the Iraq war, the patriot act, now is attacking the very workers that believed their prior lies. Obama needs to regulate the media and make it free from the Bush evil doers.
I really like that Ford Flex 21st-century station wagon... it's got less interior room than the Ford Focus Wagon had and gets significantly less MPG. But Ford decided the Focus Wagon had to go - at least here in the U.S.
That's exactly the kind of thinking the Detroit three need to get themselves out of the hole they're in ... isn't it?
Ford Focus max cargo space: 51.2 ft^3
Ford Flex max cargo space:85 ft^3
Why did Ford stop offering the Focus wagon? Not enough people were buying it.
I like Volkswagens. Mine is almost 13 years old and while it ratles it still runs great. It was paid off years ago and we have really gotten our money's worth out of it. And it is not the first one we have had that is like that. We had a Golf that had 254,000 miles on it before someone plowed into its rear end.
My point here is that Detroits major problem is the quality of its cars as well as their longevity. All of their cars seem to built with planned time-line for destruction. That time-line seems to be about 5 years when the car payment is up. Until they start building cars that will last past beyond the car payments, we will continue to buy Volkswagens.
They killed the electric car they had because of lower maintenance costs and the fact that the car seemed out last the car payment period. With fewer moving parts there was a decreased need for tune-ups, parts, and of course the need to buy a new car every five years. With that kind of attitude, a company can not earn any customer loyalty.
And that's precisely why I hope visionary auto startup companies like Tesla make it!
In the latest Consumer Reports reliability rankings, Volkswagen ranked 25 out of 34.
I would consider your experience the exception to the rule considering all I ever hear is horror stories about Volkswagen cars on all the automotive sites. In fact, I doubt anyone who follows cars who would recommend a Volkswagen if you're looking for reliability.
And by the "They" in "they killed the electric car" I assume you mean Toyota and Honda too, who both ceased producing electric cars.
Do you know who killed the electric car? The consumers. Every car company that made an electric car years ago got out of the business. Now either it was a giant conspiracy between all major auto companies, American AND Japanese, or there weren't enough buyer to justify the cost.
I've had several VWs. None ever survived past 70-80K without MAJOR problems.
The house is on fire, and Bush is busy deciding whether to use water or foam to fight the fire.
The house is on fire, and some posters are saying "Let it burn to the ground. You shouldn't have built it out of wood."
The house is on fire, and other bloggers are saying, "Your house is bad quality. We won't let another 15 million people buy houses like yours."
The house is on fire, and still other bloggers are saying, "I like Japanese houses best. Who cares if yours burns down?"
The house is on fire, and our Senators are saying, "It's gonna cost too much to fight this fire. How do we know if you'll even rebuild? What do a few more homeless people matter to me? Let it burn!"
The house is on fire, and the neighbors are saying, "That could never happen to me. I'm way too smart for that. Honey, we got any marshmallows to roast?"
The house is on fire. And, oops, it's starting to spread to other houses.
But now it's too late to do anything about it.
Very eloquent and insightful post. Thank you.
No one believes this will affect them, till their neighbors have no work and can't make their payments, and they go into foreclosure and the bottom of the real estate market drops EVEN more in their neighborhood...
Please, don't let this house continue to burn! There are MANY innocent lives, many you may never realize, trapped in that burning house! And they, overwhelmingly, did nothing wrong to bring this upon themselves!
Bravo!
But if I may add one:
The house is on fire, and other bloggers are saying, "Your house was built by union workers. They charge too much and if you let them stay in business, too many people will prosper and they'll give their retirees pensions & healthcare and we just don't want that because we don't want to give our cheap laborers the same benefits."
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