The end of the road for U.S. carmakers? Are the Big Three worth saving?
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M
MIREGMGR
Economies are cyclic. The Big Three have been caught in a combination of negative situations plus the downturn of a periodic economic cycle. Saying "let them go bust, the Japanese companies will just fill the void" is dumb.
We shouldn't want this country to no longer have any large-scale manufacturing base. Our international power fundamentally comes not from our ability to buy things, or from the attractiveness of our media and lifestyles, but from our ability to make things.
Besides, the amount of money the Big Three will need to bridge the valley of the current downturn is much smaller than the economic support and social-impact costs of having massive parts of the Midwest become economically non-viable for a generation or more, with real estate values going to zero. The cascading economic impact has been projected to likely be more significant in the Midwest than the Great Depression, and probably longer lasting since the new auto jobs would be in other countries or at least other states, meaning that the structural lack of jobs (other than service and retail jobs, which fundamentally depend on on disposable income brought into the region by manufacturers) would be permanent, not just cyclic.
And most important, the doomsayer analysts are mostly ignorant of the real cost structures involved. The Big Three plants in Michigan are becoming quite competitive with the non-union Japanese plants elsewhere in the US...except for their legacy costs for retiree health care and their projected retirement health care costs going forward, which are contracturally secured. What hurts is their more-senior workforces, which get sick more often and retire sooner. The Japanese manufacturers don't have many employees near retirement yet, due to well-managed hiring policies. If national healthcare--Hillarycare, or a Republican/Democrat-compromise corporate-friendly version--had been put in place ten years ago, all of American manufacturing would be on a much more even footing with the rest of the world by now.
Being anti-American-manufacturing-industries is economically suicidal, unless you think the rest of the world is willing to loan us money forever and never foreclose...and if you think that, I've got a bridge I'd like to sell you.
We shouldn't want this country to no longer have any large-scale manufacturing base. Our international power fundamentally comes not from our ability to buy things, or from the attractiveness of our media and lifestyles, but from our ability to make things.
Besides, the amount of money the Big Three will need to bridge the valley of the current downturn is much smaller than the economic support and social-impact costs of having massive parts of the Midwest become economically non-viable for a generation or more, with real estate values going to zero. The cascading economic impact has been projected to likely be more significant in the Midwest than the Great Depression, and probably longer lasting since the new auto jobs would be in other countries or at least other states, meaning that the structural lack of jobs (other than service and retail jobs, which fundamentally depend on on disposable income brought into the region by manufacturers) would be permanent, not just cyclic.
And most important, the doomsayer analysts are mostly ignorant of the real cost structures involved. The Big Three plants in Michigan are becoming quite competitive with the non-union Japanese plants elsewhere in the US...except for their legacy costs for retiree health care and their projected retirement health care costs going forward, which are contracturally secured. What hurts is their more-senior workforces, which get sick more often and retire sooner. The Japanese manufacturers don't have many employees near retirement yet, due to well-managed hiring policies. If national healthcare--Hillarycare, or a Republican/Democrat-compromise corporate-friendly version--had been put in place ten years ago, all of American manufacturing would be on a much more even footing with the rest of the world by now.
Being anti-American-manufacturing-industries is economically suicidal, unless you think the rest of the world is willing to loan us money forever and never foreclose...and if you think that, I've got a bridge I'd like to sell you.
Friends,
I hope that this Country finds its way back to manufacturing again. What has made this Country great was the ability to produce innovative quality products at a decent price that others in the world were willing to buy. Many years ago, I always heard my Dad bragging about "American quality." Manufacturing is one of the very few enterprises that creates wealth. I doubt if we can do this by serving each other hamburgers....
The manufacturing industry in general has not done a good job promoting the value of manufacturing and getting young people interested in becoming skilled/competent operators, machinists, programmers, etc.
I hope that the new Administration will look at programs to help make American industry more competitive.
Just a few thoughts......
Stijloor.
I hope that this Country finds its way back to manufacturing again. What has made this Country great was the ability to produce innovative quality products at a decent price that others in the world were willing to buy. Many years ago, I always heard my Dad bragging about "American quality." Manufacturing is one of the very few enterprises that creates wealth. I doubt if we can do this by serving each other hamburgers....
The manufacturing industry in general has not done a good job promoting the value of manufacturing and getting young people interested in becoming skilled/competent operators, machinists, programmers, etc.
I hope that the new Administration will look at programs to help make American industry more competitive.
Just a few thoughts......
Stijloor.
It's difficult, IMHO, to feel sympathy (other than for the thousands of hapless workers caught in the situation) for the 'Big 3', when they continue to exercise poor judgment in basic business decisions.
Ford lost millions when they bought Jaguar, Land Rover, Volvo and Aston Martin and then were forced to sell them (Volvo is in trouble at the moment) - simply because they wanted 'boutique brands'. Meanwhile they badge engineer the vehicle range as 'Mercury' - with the attendant complexity and cost. The same with Chrysler products. Such a strategy helped to kill the British car industry - at one point in history you could buy the same car in Austin, Morris, Riley, Wolseley, MG, and Vanden Plas versions!
GM are guilty of a similar 'boutique thing with the 'Hummer' brand. Their costs associated with badge engineering are well documented - from back in the 50's, 60's and 70's. Yet, until fairly recently, GM were putting out 15 different versions of the same body-style! That's GMC, Buick, Chevrolet, Pontiac, Saturn, Oldsmobile and Isuzu. You don't see that with Toyota or Honda! If that's on the outside, what is going on "under the hood"?
Possibly, the biggest travesty (from a quality professionals p.o.v) is that despite a lot of hype and grandstanding of ISO/TS 16949, Job #1, and countless quality tools programs, the car makers don't live and breathe 'quality' and customer satisfaction the way that the benchmark guys do.
I believe that anyone who has bought a domestic car and had something that required to be corrected under warranty will know what I'm saying. I'm not talking about the fact that most of their facilities are registered to one ISO or another, either. Actually, under the same type of brutal price pressure that all suppliers go through, one major engineering center has not (to my knowledge) been part of any CB registered quality system.........
Is it right that the customer, who is wooed and dumped in car buying land, should also pay to perpetuate these conditions through a taxation funded bail-out?
I'm not trying to say that the picture isn't more complex/complicated than this, but you have to get basic blocking and tackling right, before you can aspire to playing at the Superbowl, don't you?
Ford lost millions when they bought Jaguar, Land Rover, Volvo and Aston Martin and then were forced to sell them (Volvo is in trouble at the moment) - simply because they wanted 'boutique brands'. Meanwhile they badge engineer the vehicle range as 'Mercury' - with the attendant complexity and cost. The same with Chrysler products. Such a strategy helped to kill the British car industry - at one point in history you could buy the same car in Austin, Morris, Riley, Wolseley, MG, and Vanden Plas versions!
GM are guilty of a similar 'boutique thing with the 'Hummer' brand. Their costs associated with badge engineering are well documented - from back in the 50's, 60's and 70's. Yet, until fairly recently, GM were putting out 15 different versions of the same body-style! That's GMC, Buick, Chevrolet, Pontiac, Saturn, Oldsmobile and Isuzu. You don't see that with Toyota or Honda! If that's on the outside, what is going on "under the hood"?
Possibly, the biggest travesty (from a quality professionals p.o.v) is that despite a lot of hype and grandstanding of ISO/TS 16949, Job #1, and countless quality tools programs, the car makers don't live and breathe 'quality' and customer satisfaction the way that the benchmark guys do.
I believe that anyone who has bought a domestic car and had something that required to be corrected under warranty will know what I'm saying. I'm not talking about the fact that most of their facilities are registered to one ISO or another, either. Actually, under the same type of brutal price pressure that all suppliers go through, one major engineering center has not (to my knowledge) been part of any CB registered quality system.........
Is it right that the customer, who is wooed and dumped in car buying land, should also pay to perpetuate these conditions through a taxation funded bail-out?
I'm not trying to say that the picture isn't more complex/complicated than this, but you have to get basic blocking and tackling right, before you can aspire to playing at the Superbowl, don't you?
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Upper management. Vision (lack of). Short term profits.... Don't get me started...
How GM Plans To Dominate The Electric Vehicle Market - Circa 1980
And now they want a 'loan' (read Bailout...) to 'survive and merge'...
W
wmarhel
It isn't just the Japanese that would fill the void, but likely a number of spin-offs from the remains of these three lumbering monstrosities.
A government bail-out would accomplish what besides being a risky gamble with taxpayer dollars? The real problem stems from the bailout only being a panacea, without any real ability to address some of the underlying reasons behind the need for the bailout: P**s-poor management of resources, lack of vision, lack of understanding of market dynamics, sense of entitlement of the entire workforce (management and labor), and on and on.
Even considering the potential merger being discussed between GM and Chrysler, which would undoubtedly be a mistake, instead of two big companies bleeding money we'd have one giant company acting like hemophiliac.
Wayne
I agree 100%.
C
Craig H.
What's REALLY dumb and suicidal is murdering our economic system, the system our WHOLE society is based on. Does anyone remember capitalism?
The current spate of bailouts will have the effect of further reducing the strength of the dollar, the one that our paychecks are based on. Where is the bailout money coming from? It is "funny money", minted in thin air. Do you think people will continue to loan the U.S. money when our dollar's strength is failing?
We are now messing with the efficiency of the market, prolonging and expanding the pain. Instead of just the midwest being hit, the effects will be felt not only nationally, but internationally. Allowing mismanagement and contuinued bad decisions (not being learned from, even) to be rewarded distorts the economy.
I am not insensitive to the pain of those involved. I am very sensitive to the pain this will cause ALL of us. For a long time.
You want to bring health care into this? Take it to the controversy forum.
Please.
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D
Dean Frederickson
Is it too late?
Ford says CEO will work for $1 to get gov't loans
By Tom Krisher and Kimberly S. Johnson
AP Auto Writers
Updated: 12/02/2008 10:28:13 AM CST
DETROIT — Ford Motor Co. will tell Congress that it plans to return to a pretax profit or break even in 2011 when its CEO appears before two legislative committees this week.
Also, CEO Alan Mulally said he'll work for $1 per year if the automaker has to take any government loan money.
The plans Ford submitted to Congress on Tuesday also say the company will cancel all management employees' 2009 bonuses and will not pay any merit increases for its North American salaried employees next year.
The company also said it will sell its five corporate aircraft. The CEOs of all three Detroit automakers were harshly criticized during congressional hearings last month for flying to Washington in separate corporate jets while seeking loan money.
Mulally said in an interview with The Associated Press on Tuesday that Ford will emphasize its cost cutting efforts with the United Auto Workers union and will give much more detail to Congress than it did when lawmakers grilled the automakers' CEOs last month.
Mulally said Ford will seek $9 billion in government loans but may not need them. The Dearborn-based company has said it has enough cash to make it through next year without assistance.
As part of the plan submitted to Congress, Ford said it does not anticipate a liquidity crisis in 2009, "barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales." The loan would provide a safeguard
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against worsening conditions, the company said.
The company said it will accelerate plans to roll out plug-in electric vehicles as part of its plan. The vehicles will come out starting in 2010 and include the Transit Connect small van and a car the size of the Ford Focus compact.
Ford also said it will accelerate plans for hybrid gas-electric vehicles.
The CEOs of the Detroit Three are scheduled to appear before congressional committees Thursday and Friday to seek a total of $25 billion in government loans. Chrysler LLC and General Motors Corp. have said they are perilously low on cash and need the government loans to survive the recession and the worst auto sales environment in 25 years.
Ford's plans to achieve profitability or break even by 2011 are based on industrywide sales estimates of 12.5 million units in 2009, 14.5 million in 2010 and 15.5 million in 2011. The seasonally adjusted annual sales rate dropped to 10.6 million vehicles in October.
Ford's plan calls for an investment of up to $14 billion to improve fuel efficiency over the next seven years. The company said would improve the overall efficiency of its fleet by an average of 14 percent in 2009.
Mulally also says he will encourage automakers and parts suppliers to join forces to develop new battery technologies in the U.S. for future electric cars so the country doesn't rely on foreign batteries.
Ford's plan said it will reduce its number of dealers by 606 to 3,790 by the end of the year. It will also trim the number of major sourcing suppliers it uses to 750 from 1,600.
Ford reiterated its intention to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company. Since 2007, Ford has sold its Jaguar, Aston Martin and Land Rover lines. It also sold most of its stake in Madza.
Ford says CEO will work for $1 to get gov't loans
By Tom Krisher and Kimberly S. Johnson
AP Auto Writers
Updated: 12/02/2008 10:28:13 AM CST
DETROIT — Ford Motor Co. will tell Congress that it plans to return to a pretax profit or break even in 2011 when its CEO appears before two legislative committees this week.
Also, CEO Alan Mulally said he'll work for $1 per year if the automaker has to take any government loan money.
The plans Ford submitted to Congress on Tuesday also say the company will cancel all management employees' 2009 bonuses and will not pay any merit increases for its North American salaried employees next year.
The company also said it will sell its five corporate aircraft. The CEOs of all three Detroit automakers were harshly criticized during congressional hearings last month for flying to Washington in separate corporate jets while seeking loan money.
Mulally said in an interview with The Associated Press on Tuesday that Ford will emphasize its cost cutting efforts with the United Auto Workers union and will give much more detail to Congress than it did when lawmakers grilled the automakers' CEOs last month.
Mulally said Ford will seek $9 billion in government loans but may not need them. The Dearborn-based company has said it has enough cash to make it through next year without assistance.
As part of the plan submitted to Congress, Ford said it does not anticipate a liquidity crisis in 2009, "barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales." The loan would provide a safeguard
Advertisement
Quantcast
against worsening conditions, the company said.
The company said it will accelerate plans to roll out plug-in electric vehicles as part of its plan. The vehicles will come out starting in 2010 and include the Transit Connect small van and a car the size of the Ford Focus compact.
Ford also said it will accelerate plans for hybrid gas-electric vehicles.
The CEOs of the Detroit Three are scheduled to appear before congressional committees Thursday and Friday to seek a total of $25 billion in government loans. Chrysler LLC and General Motors Corp. have said they are perilously low on cash and need the government loans to survive the recession and the worst auto sales environment in 25 years.
Ford's plans to achieve profitability or break even by 2011 are based on industrywide sales estimates of 12.5 million units in 2009, 14.5 million in 2010 and 15.5 million in 2011. The seasonally adjusted annual sales rate dropped to 10.6 million vehicles in October.
Ford's plan calls for an investment of up to $14 billion to improve fuel efficiency over the next seven years. The company said would improve the overall efficiency of its fleet by an average of 14 percent in 2009.
Mulally also says he will encourage automakers and parts suppliers to join forces to develop new battery technologies in the U.S. for future electric cars so the country doesn't rely on foreign batteries.
Ford's plan said it will reduce its number of dealers by 606 to 3,790 by the end of the year. It will also trim the number of major sourcing suppliers it uses to 750 from 1,600.
Ford reiterated its intention to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company. Since 2007, Ford has sold its Jaguar, Aston Martin and Land Rover lines. It also sold most of its stake in Madza.
K
Koivisto - 2009
United States workers make much more than their overseas competitors, and south of the border. Do the math and you see why we can't compete. It's not that they are better than us, just cheaper. Our quality is as good as the machine produces it. Very few things are handmade for mass quantity goods. Operator "A" in India makes 2$ a day and operator "B" in America makes 120$ a day. Where are you going to buy your parts/components/product from?
