I could write about the execs flying in on private jets and how dumb that looked, but I won’t. They *could* have driven a small cavalcade of Ford and GM cars from Detroit to Washington, doing a small 2-3 day roadshow building public support for their cause, visiting dealerships and parts manufacturers along the way saying “we’re doing this for you”. But they didn’t.
No, what gets my goat is that the Big 3 (Big 2?) are asking for assistance and seemingly being left out in the cold, but the banking and finance industries get 5-10x what Ford and GM are asking for, *seemingly* with no strings attached (did any heads roll at BoA?). Yet it’s primarily the banking and financial industries that *caused* the collapse we’re in right now, which is hurting F and GM especially bad.
Yes, Ford and GM should have seen this coming. They’ve fought CAFE standards for years, yet can produce natural gas cars for other markets, and can produce higher MPG cars for other markets. They’ve lived high on the low-MPG SUV gravy train for too long. But really, they’re getting caught in the crossfire of something far larger than they can handle, through *some* fault of their own, but not entirely.
Ideally, what would happen is Congress would agree to a certain amount of loans, provided a decent plan of turnaround is proposed, which would need to include high MPG cars *immediately* (within next 6 months on showroom floors) and some degree of leadership change. It’s clear that the long-term vision of the entrenched leadership at F and GM have been asleep at the wheel with respect to real product vision. In many respects, I don’t even care who the replacements are – almost any new blood would likely be better than the old blood. While this is partially me spouting off, it’s also informed by some conversations with friends in Detroit and at some of the Big 2, both recent and from years ago. The story’s been pretty much the same for years. As an extreme example, go find the ‘death of the electric car’ video someplace and watch that.
Yes, Detroit should have ‘seen this coming’, and perhaps we shouldn’t ‘reward’ their failed leadership for not seeing a potential financial crisis. But somehow we, as a nation, endorse bailing out many of the same institutions that had a much greater hand in *causing* the crisis in the first place? Unconscionable, in my view.
You know, i think that the car manufacturers in the USA are *JUST* as much responsible for the whole bubble that’s now bursted.
Everyone just got huuuuge cars that you could lose the next month, and that are paid for by creditcards that are paid for by creditcards in 99.99% of the time? Sorry! You Lose!
Who financed those car sales? Oh yeah – banks and financial institutions. Yep, F/GM/others have ‘in house’ financing depts, but I don’t think they hold all their own paper.
What can you do to bail out a bank or a financial institution? They only deal in money, you’ve got to give them money. Well, you aren’t required to give them money, but it’s not easy to give them anything else.
If the government could (somehow) give the Big3 a new set of cars that people wanted to buy, I’m sure they would.
I was told that if we didn’t bail out AIG et al that the world’s economy would collapse, there would be anarchy, money would be worthless, and that the Chinese would take over the Earth. Now, I’m being told that if the Big3 fail, Michigan’s unemployment rate will jump to 15%… not so bad, considering we’re already at 10%. The Big3 bailout isn’t being “sold” (pitched)* to the American people in the same way as the Bank Bailout.
As a side note, I saw someone actually driving a 2009 Ford Flex. Woohoo, 17mpg city.
I also think that people don’t want to bail out the Big3 because of their stance on making vehicles which get good gas mileage. They treat it as some “alternative” to driving 17mpg SUVs. They think that there will always be someone who wants to drive a vehicle that gets 17mpg just because they can afford one. If nobody made cars that got under 20mpg, then not one consumer would be demanding a 17mpg SUV. The thought wouldn’t enter their mind. Higher gas mileage cars cannot be treated as an “alternative” to “regular” cars.
Think about bailing out the Big3 though… take the Ford Flex for example. Came out in 2008 (2009 model). Let’s say that it took them 3 years to create this car, to bring it to market. In 2005, the national avg price of gas jumped to almost $3/gal, and never dropped back below $2/gal. They went ahead and make a car that gets 17mpg anyways. Think about how long it will take them to make cars that get 25-30 mpg. Another 3 years?
If we start a bailout for the Big3, we have to *keep* bailing them out for the next 3 years until they can produce sellable cars. Imagine that we bail them out, then in 2 years the execs close the doors anyways because of labor disputes, low sales, etc. That’s just flushing money down the toilet. Also, guess which creditor will be on the bottom of the payback food chain if one of the Big3 close… you, the taxpayer!
*p.s. In Britain, do they say “bowl an idea” to someone?
The CEO of GM *or* Ford should have stayed home and not gone to Capitol Hill.
They are claiming that declaring “bankruptcy” would cause everybody to stop buying their cars. Well, flying to D.C. and begging for money doesn’t inspire much confidence.
Imagine what the news reports would be saying if one of them stayed home. Imagine the consumer confidence boost in that brand. (“hmm… GM doesn’t need a bailout, they must be doing something right” (or change the name to Ford)).
I have to agree – we were quick to act and give banks anything they needed, and Paulson and Bernanke won’t even show us the receipts on how they spent the money; on top of changing how they will use the money after it was given.
I think it’s right to point out the failures of Detroit, but are people so willing to zero out their 401Ks to let them fail? Is anyone believing the US economy is so strong right now we can take an auto collapse? What I’m seeing is Tues night congress reject saving the autos anytime soon, and the next two days the market dropped record amounts.
Congress should have said they recognized the importance of the matter, and started working with the autos on a plan. They didn’t tell the banks “go home and come back with something better”. And given that Obama has stated he will take care of this day one if it’s not done before he comes into office, why assume bailing out the autos is even a real option? Of course, if we have to wait until Jan 21st to act, it may already be too late to matter.
I think letting the Detroit companies pull themselves through this on their own is a viable option. I feel bad for the workers who may suffer as a result, but it’s hard to have much sympathy for folks who may lose their pensions when I don’t have one myself and very few folks I know have one either. Most of us in the U.S. workforce now operate under the assumption that there’s no such thing as “permanent” employment and that we are responsible for saving for our own retirement. The Big 3 need to restructure themselves into profitable enterprises, which I’m sure they can do. They’ve already taken steps toward this.
I was against the banking bailout as well, and I agree with your point about they double standard here.
@mps – I agree on the pension thing (didn’t feel all that bad for worldcom folks either, for example). I’m worried more about the real knock-on effect that’ll happen if a GM closed. Parts suppliers would close, marketing/pr/advertising jobs lost, dealers closing, etc. Some of this is bound to happen anyway in a down economy, but we’ll see a huge acceleration of this all happening at once in a worst case scenario. The ‘free marketer’ (think of ‘free willy!’) in me thinks that other companies will fill the void – other part companies will manufacture GM parts, Toyota/Honda/etc will make more sales, etc. The gap supplying the demand will eventually be filled, but that may take awhile. the labor necessary to fill that gap probably won’t require all the labor it did before. Theoretically less labor should drive down prices, but fewer competitors means there’s less incentive to lower the prices. Real mix of issue going on here.