Romney's Idiotic Plan for Detroit
For the past couple of weeks I've been pontificating that Obama would have had trouble winning if he had run against Mitt Romney. Unlike McCain, Romney had serious economic credentials and, as a Washington outsider, he wasn't as tied to Bush's record. The past week, however, has reminded me why Romney got trounced by McCain in the first place. He's a freakin' numbskull.
In an op-ed in the Times this week, and again on Good Morning America today, he argues that we should let the Big Three go bankrupt so that they can restructure. Okay, maybe it's a reasonable proposition, but what's his logic?
Well, turns out his father did something similar to help save a car company called AMC. Back in 1954.
And that is why we are all driving AMC cars today.
Well, you might be, if you're driving a Jeep brand, the only nameplate alive from American Motors, which was acquired by Chrysler in the early 80's. Of course, Chrysler never would have been able to buy it if they hadn't had a bailout in 1979. They would have both been gone by now.
But back to Romney's plan, the first thing he'd do is change senior management. The way he sees it, they got us into this mess. Well, actually Mr. Romney, senior management has already changed. The majority of the leadership in Detroit have been sitting at their desks less than two years. They came from companies like Toyota, Boeing, and GE. They came from markets in South America, Europe and Asia, places where our domestic brands have actually been doing pretty well. Romney's ignorance of Detroit's management shows how well he's thought this thing through. Though I get the sense he hasn't really done anything except look at his dad's old photo album ("Aw, there he is with Walter Reuther!")
But let's not be coy about the real agenda here. Republicans like Mitt Romney see this as an opportunity to wage war against the UAW. The union vote was a deciding factor in states like Ohio and the GOP sees a chance to make them pay. Forget the fact that the UAW gave up massive concessions in the last negotiations, historic concessions that will put the domestic car companies' costs at par with the imports and save them tons of cash (which they could use to pay back the government loans) this is all about political revenge, plain and simple.
The auto industry has persevered for years despite being a favorite punching bag of both the right and the left. After Rush Limbaugh takes a swing at them, Michael Moore kicks them, then Ralph Nader stomps them and now Romney comes in for the kill. Add to that a credit crunch that was none of their making - your aunt who bought the McMansion in Simi Valley is more responsible than they are - and now they're in serious trouble.
Yet despite all this, they've been doing an excellent job. That may sound funny, but it's true. The cars are better made than they've ever been (Consumer Reports rates Ford on par with Toyota and Honda) and more efficient (Chevy offers more models than Toyota or Honda with mileage of 30 mpg or better.)
The only problem is, like the beautiful girl in the teen movie hidden behind the glasses and the braces, nobody sees how good they really are.
Despite their successes, most of us stopped shopping American, even considering American, a long time ago. You may love the fact that the UAW helped elect Obama, but chances are you're not supporting them when you shop for cars. You may have a "Country First" bumper sticker on your car, but chances are it's an import.
We can complain about the fact that they make SUV's and trucks, but the fact is the imports do too. Toyota would rather sell high profit Tundra trucks than Priuses any day of the week (and those trucks get a lower mpg than Ford's do.) We can say we don't want to our government to lend money to the Big Three, but that government was once perfectly happy to take in tax revenue on the big ticket vehicles they sold. We can say they don't deserve a 25 billion dollar loan, yet for some reason Wall Street gets to play with 700 billion?
There isn't a simple solution. These aren't the 1950's. It's a global landscape with so many interlocking parts, making the manufacturing base of our country as complex as AIG, Fannie Mae, and the Lehman Brothers all put together.
So yes Mitt, having the Big Three go bankrupt may lead to some "restructuring," but when you think about the local dealers, the suppliers, and all the businesses contingent on their success - somewhere between two million or four million jobs are tied to the domestic car business - your plan stands a good chance of restructuring our economy right into the garbage can.
Just something to think about while you're driving your Gremlin home.
Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
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The auto industry is no worse off than many other industries in the US. It is GM and Chrysler (and to a lesser degree Ford) that are in worse shape. The other domestic manufacturing plants (BMW, Honda, Toyota, Mercedes) aren't doing great given the economy but they are doing okay. Hundreds of companies in many industries are laying off workers or closing. How does it make sense to take funds from people who don't work for GM or Chrysler and most likely have their own issues and provide them to three select companies?
If the government is going to support an industry (not first choice but if they have to) they should support the whole group (like the financial industry bail out). If they are going to choose winners within an industry we are going to end up with Government Motors and the other ones. I own a Suburban (I needed it to tow...real
At most the government could provide capital as they come out of bankruptcy. Perhaps guaranteeing the warranty for the product lines that continue ( I could have used that on my MiniVan's transmission).
Bailing out Chrysler's hedge fund group will make the government look pretty silly in the future.
Korea feeds Hyundai underpriced steel. Thats why they are so cheap. We need to back to tariffs on imported cars. Dumping is dumping why do we tolerate it? Reagan let Sony dump color TV's for $100 less than they cost to make. 3 US tv companies died while Ron was pres. Then he collected 6 million in speech money for letting it happen. Now hdtv plants cost 25 BILLION including infrastructure!
BTW...go rent the documentary Who Killed The Electric Car, then tell me if you think GM deserves a bailout. Almost 10 years ago they HAD a chance to get ahead of the curve, but alas, they always did what they'd always done. What on earth makes you think they'll be changing attitudes now?
Underwood's tpewriter business went under when they were no longer viable. If you can't keep up with the demands of the times, you GO AWAY. That's business.
Not to put too fine a point on it, but YOU killed the electric car. I was there for the marketing of that car. We tested it in the Midwest. We tested it in the South. We tested it in California. We even took it to Hawaii. You, the people, didn't want an electric car. It was too small. Not powerful enough. Not enough range. It had big batteries and no infrastructure for charging them.
The domestics do almost all of the R&D in cars for the whole world. Hybrids, hydrogen fuel cells, turbocharging and more have come out of Detroit's R&D plants. The problem isn't a lack of innovation. The problem is the American consumer's lack of trust in innovation. If America put their money where their mouth is, they'd all be driving diesels, which are far more fuel-efficient than gasoline cars. And who leads the pack in building and selling diesels in Europe? Good old Chrysler.
If only Americans were as intelligent about buying cars as Europeans!
My bumper sticker reads "Martin Guitars - Finger Pickin' Good", and it's on a 10 year old made in the U.S.A. Mazda.
I ain't seen anything in the bailout proposals about them making an affordable car.
Some electric car 4 years from now that costs $40,000 ain't gonna' do me a bit of good.
... I walk to work, so...
As I watched Romney's campaign unfold, he struck me as a cross between an empty suit and
a weather vane.
Mit Romney conveniently leaves out that the US system is rigged against US manufacturing workers. The Republicans want to destroy the country in order to save it. "The Wrecking Crew" by Thomas Frank.
My post seem to be getting eaten up. Sorry if this is a repost:
Scion tops reliability ratings as U.S. cars fade from top 10
THE ASSOCIATED PRESS
Thursday, October 23rd 2008, 7:45 PM
Toyota's Scion topped the list of most reliable cars in Consumer Reports' annual vehicle reliability rankings, as Asian automakers again crowded the top of the list.
Chrysler vehicles saw their scores fall sharply from 2007, while Ford's nameplates gained ground over their Detroit rivals.
Scion is "a basic form of transport, but put together well," a magazine official said. The study, released yesterday, compiled responses from Consumer Reports readers for more than 1.4 million vehicles this spring, using the results to predict reliability of 2009 models. The results are watched closely by automakers because of their influence on car buyers.
In this year's study, Honda's Acura and other Honda brands ranked right behind Scion, followed by Toyota, maker of the highly ranked Lexus.
Asian models occupied all top 10 slots, with a domestic automaker not appearing until No. 11 with Ford's Lincoln brand.
UncommonSenz, I want to apologize for getting out of control with the sarcasm.
Allow me to explain my frustration. Toby said that studies show that Ford cars are on par with Japanese cars. You pretty much out of hand said that was false.
This is where the frustration comes from. Many people will not believe, despite strong evidence, that Detroit is capable of making good, reliable, fuel efficient vehicles. I will also acknowledge that Detroit earned the reputation after years of churning out sub-par cars.
Now this frustration is compounded by many of people who suggest in the current crisis that Detroit's solution is "if they only build better, more fuel efficient cars." My question is, if no one is acknowledging that they can do that now despite evidence, why would anyone believe it from a company that is an bankruptcy or a company the has been rushed through the development process by the government.
A large part of the problem is that a high percentage of Consumer Reports comments are based on consumers' evaluation of rental cars! Yes, you read that correctly. Rental cars! Those same cars that are abused by the mass public, fail to receive proper maintenance from the rental agencies, and are later dumped into South America. That's why we, in the industry, scoff whenever CR publishes their "research.
If you look at the warranty claims published by the DOT, or in Automotive News, you'll find that Big 3 claims are down substantially over the last decade, as are recalls. In fact, Toyota now has a higher warranty claim percentage, and their recall numbers are through the roof. (There are many at Toyota Japan who blame these problems on American workers. But that's another story.)
If you want to judge an industry, the best way is to use comparisons that the industry uses for itself. Not some mail-in popularity poll.
I don't see that there is much of an option other than re-organizing and restructuring under bankruptcy . Giving a blank check will result in business as usual until that money runs out - which it surely will.
The union doesn't want to give up anything. The CEOs say their salaries are all good. But the business doesn't make profit. Too many dealerships, product lines that are losers, and pay scales from top to bottom that are unsustainable. And they are trying to push their product into an oversaturated market.
They're like a divorcee that wants alimony to continue the lifestyle to which they've become accustomed.
What do you mean by "business as usual"?
Do you mean renegotiating with the UAW to transfer healthcare costs away from the automakers? Restructuring UAW pay scales to be in line with foreign owned auto plants?
Spending billions in R&D money on plug in hybrids?
Producing hybrids that exceed their Japanese equivalents in fuel efficiency?
Retooling plants to produce smaller vehicles from their European line-ups?
Then I hope they continue business as usual, because that's what they've been doing in the last couple of years. These aren't the companies of 5 years ago! Ford's CEO has only been with the company for two years, and his restructuring led to Ford's first quarter profit this year. That profit was not repeatable after gas prices went up, but before those gas prices rose, Ford had already begun planning for small cars for the US market, and more hybrids. The Fusion/Milan hybrid that will be out first quarter of 09 has been in the works for over two years.
We can argue back and forth about the quality of American made automobiles.
But the market is the final arbiter, and the big three market share has been steadily eroding- for whatever reason. So consumers are choosing the big three less and less.
You can say it is irrational, you can say how "great" Ford is doing, but they are still failing. If you honestly think that they are in this condition solely because of the economic crisis, you have blinders on.
"What do you mean by "business as usual"?"
The 2009 model year lineup of SUVs get about 14 miles per gallon, and some as low as 10. I'm not in the car business, but in an age of limited oil supply when the country needs to off of imported oil entirely that seems kinda stupid. I don't really want to subsidize it. It's already costing us all money by raising the price of gas.
The Chevy Volt and plug in Hybrids are the right direction, and for $25 billion I think we could get some kind of guarantee they're actually delivered to the American public this time .
See Toby Barlow's Profile
from The New Yorker's Balance Sheet blog:
What’s most mystifying about the opposition to bailing out the automakers are the assertions that having G.M. or Ford go bankrupt would not be that big a deal for the economy or the markets as a whole. In the first place, at a time when we’re talking (as we should be) about spending hundreds of billions of dollars on a stimulus package to get the economy moving again, it’s the very definition of being pennywise and pound-foolish to put tens or even hundreds of thousands of jobs at risk. It’s possible, of course, that the automakers would be able to go into Chapter 11 and still keep the assembly lines running, but there’s also a good chance they won’t...
Sen. Richard Shelby may think that the “best option” for the automakers is Chapter 11. But there is no way that it’s the best option for the economy as a whole. Letting them go under will do far more than twenty-fiv
But what alternative is being proposed?
All I see is the suggestion we should give the automobile manufacturers a huge chunk of money taken from the taxpayers, with no guarantees they're going to produce anything. No restraints, just "trust us".
Basically, the proposed auto industry bailout is exactly the same as the financial "industry" bailout. They're going to take the money, use it for dividends, mergers & acquisitions, management bonuses and golden parachutes ... while "restructuring" with massive layoffs and off-shoring more jobs.
So, what it all comes down to, is GM, Ford and Chrysler are going to screw the U.S. economy whether they get the bailout or not.
Come back when you've got a plan that CREATES MORE JOBS, instead of less.
I see it this way. You go to a restaurant and have so-so food. Later you may ask yourself, was the food so-so just today or is the so-so food from a so-so restaurant? Then sometimes you go to a so so restaurant and get an outstanding meal. Same can be true of a generally high rated restaurant. They have bad days.
The big 3 are so-so restaurants which ocassionally turn out a decent dish.
Imports, for the most part, are in the running for top chef.
But when you do have that lousy meal with great service do you still tip the waitstaff with your most generous hand? Are you more upset with the food or the service? Who gets stiffed when all is said and done? When you you decide that the restaurant is just so-so and you can't tolerate so-so anymore?
I take issue with a lot of what you wrote, but this takes the cake:
"You may love the fact that the UAW helped elect Obama, but chances are you're not supporting them when you shop for cars."
This makes as much sense as the "Buy American" line that was fed in the 80's when the big three were refusing to retool and compete. I will buy the car that best fits my needs. If that is made in America, great. If it is made by union workers, great. If not, so be it. "Supporting" a union by buying a car that didn't compete well enough to be your number one choice is NOT doing the union any favors long term.
Your entire article seems to say "well, gee- the big three haven't done anything wrong... it was just bad economics that got them". They have been falling steadily LONG before the current economic crisis. You cite one study that says Ford is "comparable". I can cite many others showing lower initial satisfaction, higher repair costs, and lower long term satisfaction scores with American brands.
As this crisis has exposed, they are not competing well. They have been losing market share steadily and consistently- for decades. Maybe the unions are contributing to their woes, maybe not. But saying "Yet despite all this, they've been doing an excellent job. " sounds about as true as "heckuva job brownie!".
See Toby Barlow's Profile
Ah, but you miss a subtle difference. I am not asking people to Buy American. Actually, I wholeheartedly agree that the phrase "Buy American" is obnoxious. (I always imagine a red faced drunk Archie Bunker type banging on my windshield yelling it.) But I don't think it is too much to ask for us to perhaps Shop American. Perhaps a buyer, weighing your studies against mine would come to the same conclusion you do. Or perhaps they would find something American they could believe in. I was only suggesting that, considering the strides forward that have been made, consideration is not too much to ask.
UncommonSenz, please quote me one of your sources saying. Ford cars are not on par with their Japanese counterparts. Or better yet, site "many others".
It's not Consumer Reports (The most scientific and respected study).
It's not JD Powers. (4 or of 5 for cars for Ford, Toyota, and Honda)
It's not Strategic Vision ("Toyota and Ford tied for leading in the most segments on Strategic Vision’s Total Quality Index")
So please, enlighten us.
Here is the first one I picked up (at random) off Google.
US News rankings:
Affordable Small Cars
Generally priced under $20,000.
* #1 2008 Honda Civic
* #2 2008 Honda Fit
* #3 2008 Honda Civic Hybrid
Upscale Small Cars
Generally priced $20,000 to $35,000.
* #1 2008 Volkswagen GTI
* #2 2008 Audi A3
* #3 2008 Saab 9-3
Hatchbacks
* #1 2008 Honda Fit
* #2 2008 Volkswagen GTI
* #3 2008 Audi A3
Affordable Midsize Cars
Generally priced under $25,000.
* #1 2008 Chevrolet Malibu
The results show the number of failures reported for every 100 vehicles (3 -9 years-old) covered by Warranty Direct’s policies.
And just so you understand what the numbers mean: Mazda, with a score of 8.04%, would mean that nearly 92 percent of the Mazda cars covered experienced no mechanical failure of any kind ... pretty darn good.
# 1. Mazda - 8.04%
# 2. Honda - 8.90%
# 3. Toyota - 15.78%
# 4. Mitsubishi - 17.04%
# 5. Kia - 17.39%
# 6. Subaru - 18.46%
# 7. Nissan - 18.86%
# 8. Lexus - 20.05%
# 9. Mini - 21.90%
# 10. Citroen - 25.98%
# 11. Daewoo - 26.30%
# 12. Hyundai - 26.36%
# 13. Peugeot - 26.59%
# 14. Ford - 26.76%
# 15. Suzuki - 27.20%
# 16. Porsche - 27.48%
# 17. Fiat - 28.49%
# 18. BMW - 28.64%
# 19. Vauxhall - 28.77%
# 20. Mercedes-Benz - 29.90%
# 21. Rover - 30.12%
# 22. Volvo - 31.28%
# 23. Volkswagen - 31.44%
# 24. Jaguar - 32.05%
# 25. Skoda - 32.12%
# 26. Chrysler - 34.90%
# 27. Audi - 36.74%
# 28. Seat - 36.87%
# 29. Renault - 36.87%
# 30. Alfa Romeo - 39.13%
# 31. Saab - 41.59%
# 32. Land Rover - 44.21%
# 33. Jeep - 46.36%
Keep looking lower to find the US makers
Toyota's Scion topped the list of most reliable cars in Consumer Reports' annual vehicle reliability rankings, as Asian automakers again crowded the top of the list.
Chrysler vehicles saw their scores fall sharply from 2007, while Ford's nameplates gained ground over their Detroit rivals.
Scion is "a basic form of transport, but put together well," a magazine official said. The study, released yesterday, compiled responses from Consumer Reports readers for more than 1.4 million vehicles this spring, using the results to predict reliability of 2009 models. The results are watched closely by automakers because of their influence on car buyers.
In this year's study, Honda's Acura and other Honda brands ranked right behind Scion, followed by Toyota, maker of the highly ranked Lexus.
Asian models occupied all top 10 slots, with a domestic automaker not appearing until No. 11 with Ford's Lincoln brand.
http://www
I originally thought like Romney that Chapter 11 bankruptcy was intended for just such a problem as what the auto companies are going through now. I figured the airline industry had used it so why not the auto industry. Of course in the airline industry it was basically used to make the bankrupt company more appealing for merger, like Northwest Airlines. Then I heard another Republican financial guru spouting the same idea and got really scared. I was starting to agree with Republicans! I did some research and found a few people that claim the Republicans are promoting bankruptcy not to save the auto industry but to bring down the Democrats that have beat them so badly in the last 2 elections. Just think. If the auto industry is allowed to go into bankruptcy and that ends up being the death blow that changes recession into depression the electorate will blame the Democrats and put Republicans back in power. So now I hope that our Democratic Congress and Democratic President are wise enough to see this and help Detroit but do it with control and oversight so car company executives are not using our taxes to fly them to spas but to build the kind of vehicles that we need now. And one last point. Why are they calling them the Big Three. Chrysler has not been in the top for years. They were going under before all this started.
I'll admit that I am torn by the automotive bailout.
I understand how massive the industry is, and what will happen to the economy if they fail.
I understand that bankruptcy would impose the type of "Now sit down, reorganize and get your sh-t together!" discipline that they need to truly become competitive again. However, I also understand that people make 5-10 year commitments when buying a car, and nobody wants to make a commitment like that with a car company in bankruptcy.
I see the dire need to prevent them form failing, but I am terrified that they simply do not have any idea how to make the hard changes required to become profitable. The fact that their management is so tone deaf that they show up to a hearing in individual corporate jets just shows that these people have NOT allowed the reality of situation (and the public perception of it) to sink in- which makes me wonder how in the hell are they supposed to turn around those failing giants.
I am not a big fan of Mitt Romney but I do agree here. If any of the big 3 go under many jobs will be lost. Letting them go Chapter 11 and setting aside money to guarantee parts and repairs is a feasible alternative. Without setting aside this money for parts and repairs, the consumer will be very reluctant to buy their product. Yes this would reopen negotiations with the unions but without concessions by the unions, these companies are likely to go away. What would these workers have then with massive job losses? This is the old 1/2 a loaf is better than none.
See Toby Barlow's Profile
The P.R. and marketing challenges of emerging from Chapter 11 would probably be insurmountable.
Toby, yes there are marketing challenges of emerging from Chapter 11. There are companies out there that has emerged from Chapter 11 and worked out these marketing issues. Had they not gone Chapter 11, the results would have been worse. The government cannot give out money without a plan and without having some control over how it is spent. The auto companies have gotten into this mess by ignoring their customer base. They felt they could do business as usual and all would be OK.
HEY - I drove a Gremlin for twelve years back in the '70's - all my friends had two or three cars in the time I had Greta. And I bought her USED !!!! But I wanted to ask - who would buy a car from a company in bankruptcy, how can you get service or parts ? What confidence could a consumer have in a company that the government will simply leave to the wolves ? Why are Republicans so willing to piss billions away into the sands of Iraq and Afghanistan, but not save a domestic industry that is so critical to our own country ? Once again, Republicans are where they are now for VERY GOOD REASONS.
I had a Gremlin, too. It wasn't pretty, but it was more reliable than most cars. The body wasn't great, but the engine and drive train were bulletproof.
I agree to loans to the Big Three with stringent conditions attached. No giveaways and no beating up on the UAW - mismanagement had more to do with this mess than anything the UAW did. Besides, management agreed to the contracts with the UAW. If they were bad contracts, they should have done their jobs and kept negotiating until they had a contract that they could live with. Blaming the UAW for the current mess is a blatant attempt to shift management's blunders onto the union.
I'm not sure that I agree with Mr. Barlowe here. Given the conditions, they may well be able to come back out of Chapter 11 in good shape. Granted, they have a lot of work to do.
Could we try something different for a change, instead of continuing to prop up the same old failing behemoths? They have the resources to remake themselves if they can find the will to do so.
Instead of bailing out the old companies, we should subsidize new companies. Give a couple of billion to Neil Young and the LincVolt project. He'll use union workers (right Neil?) and mostly existing infrastructure to produce at least one vision of the all-electric American highway.
the problem is, they don't have the resources to remake themselves.
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