Friday, November 14, 2008

"I, for one, have been punished enough. I already own an American car."

So says David Harsanyi, in his recent column, "Taxpayer money may be handed to a rotting partnership."


Blogger Cham said...

It used to be where one started a business, grew the business, managed the business, met the customers' needs and then reaped the financial rewards.

Now one creates a business on paper, treats the client like dirt, gives themselves a generous salary and bonuses, and when the business inevitably goes belly-up they ask the federal government for billions of dollars so they can continue giving themselves a generous salary and bonuses.

This works great for the business creator, not so much for me.

9:53 AM, November 14, 2008  
Blogger TMink said...

My family owns two American cars, and we have enjoyed good value and dependable service from both of them. I fail to see how the current financial crises affects the auto industry more than any other industry though.

I can understand how onerous government regulation and overpaid employees could hurt the industry though.


10:14 AM, November 14, 2008  
Blogger HMT said...

Honda, Toyota and BMW all have factories in the US and seem to be doing OK. The failure of GM rests squarely on the shoulders of incompetent leadership. You can't even blame "greed". If they were REALLY greedy they would have jumped on the "green" bandwagon and tried to squeeze money out of the hybrid craze, or market some other pseudo-green product. I say let them fail. Another company will rise from the ashes or the existing successful ones will pick up the slack.

10:39 AM, November 14, 2008  
Blogger Misanthrope said...

Honda, Toyota, and BMW's US plants are also non-union and generally in lower tax locales than the US automakers.

10:55 AM, November 14, 2008  
Anonymous Anonymous said...

3 million American jobs depend upon the auto (American) industry. What would John Galt do?

...and the insurance, mortagage, and banking companies? Bail out or let them all fail?

11:00 AM, November 14, 2008  
Blogger Derek said...

The best cars my family has ever owned were assembled in America - by Honda and Toyota.

While incompetent leadership is partly to blame for GM's problems, don't forget the unions.

I understand that unions are out to get the best deal possible for their members. What they generally fail to realize is that "the best deal possible at this time" is sometimes worse than the last deal.

I grew up in the 1970s and 80s in NE Ohio as steel mills were shutting down because they couldn't compete with imported steel. And what were the unions doing? Striking for higher wages and better benefits.

When your employer is loosing business is not the time to decide to increase the costs of doing business, in my opinion.

11:01 AM, November 14, 2008  
Blogger Factory said...

So many calling for the head of the Domestic Auto industry, so little knowledge of the actual industry....(sigh).

The car business is affected by safety legislation, CAFE, Unions, and an eroding customer base. It takes billions of dollars and around 3-5 years to develop a vehicle, and multitudes of tests have to be done. In that timeframe, weird things can happen (like Oil could triple in price, or the housing market could melt down). Contingency planning can only go so far...

As to the quality of American cars, anyone who doesn't think there's been an absolutely massive increase in both real and perceived quality (tight body gaps, good "feel" to the workings, low-gloss plastic), hasn't been to a GM showroom, or been in a new GM yet.

Additionally, GM for one is about halfway through revamping their entire product line...everything they have come out with in the last year or so, from Saturns to the new CTS, has been either raved about or praised as a solid product.

There seems to be a pervasive hatred of the Domestic Industry, and I think it's got more to do with symbolism than reality.

11:25 AM, November 14, 2008  
Blogger Cham said...

I'm confused, I don't understand factory. While the US car industry was busy cranking out gas hogging SUVs and Hummers, it seems as if Honda and Toyota were busy perfecting gas sippers and hybrid.

Did somebody forget to tell General Motors and Ford that there might be a fuel price problem with the extremely volatile Middle East and South America?

Toyota and Honda seem to be financially stable. Scratching my head here.

11:47 AM, November 14, 2008  
Blogger Hawver said...

Factory: what regulations apply to the domestic auto makers but not to Toyota/Honda etc? Also, in the last couple of years the domestics have somewhat increased the build quality of their products, but it takes a long time to erase the memories of 20 years of substandard reliability (and calling it substandard is me being charitable).

GM has been revamping their product line, and some of their cars actually reach the level of not being a joke compared to the imports, but there is no serious car they make that is actually better. The Cobalt and Malibu have finally made it to the same league as the Civic and Camry, but why take a chance buying them when you *know* you are going to get a rock solid car from Honda or Toyota?

12:13 PM, November 14, 2008  
Anonymous Anonymous said...

That is my point as well, I'm afraid. I lost faith in the quality of American made vehicles years ago.
Sure, we keep them as company cars, and we wear them out in a year - with lots of shop time involved.
Had that never happened, I would never have tried a Japanese vehicle and been there ever since. On my 16th vehicle now, I have given the big three lots of money over the years - with GM getting the lion's share. As far as I'm concerned, I'm done.

1:09 PM, November 14, 2008  
Blogger Mike said...

While we're diagnosing the many reasons why the big 3 are dying, here's another one: they stopped making cars that people really wanted to buy. Civics and Corollas sell very quickly on their dealers' lots because people love them. They're stylish, comfortable, pretty sporty, inexpensive and gas efficient. Honda and Toyota have done an outstanding job of building up the attractiveness of their brands, and have done an equally good job of not diluting them with several versions of the same car *cough*Mercury*cough*Ford*cough*Lincoln*cough*.

I have 28,000 some miles on my 07 Civic coupe. By the time my in-laws' mid-90s suburban had that many miles on it, it was costing them good money every other month to repair problems with it. So far, my Civic hasn't shown even a hint of wear and tear. The only way that I would trade it for a Malibu, Focus or Neon is if someone bought me one that still had at least 30,000 miles of warranty left on it.

1:48 PM, November 14, 2008  
Blogger Derek said...

I agree with MikeT. Remember the 1980s when Cadillac introduced the Cimarron? It was an overpriced Cavalier. Who in their right mind would pay that much for a Cavalier with leather seats, I thought to myself.

Years later, I suggested to a friend that the only way GM would make it would be to differentiate the brand names again, or get rid of them. It used to be you bought a Chevy, moved up to a Buick and then a Cadillac. Now, the different brands compete with one another.

2:15 PM, November 14, 2008  
Blogger BobH said...

I put the majority of the blame for the Big-3's problems at the feet of the UAW. I'm convinced that a big part of the reason that Japanese cars are more reliable than American cars is because they're made using higher quality components. That's easier to do when your manufacturing labor is cheaper.

Interestingly enough, high-priced German cars have a reputation for not being all that reliable and most of them are extremely expensive. They, however, know how to design, if not build, desirable cars.

3:57 PM, November 14, 2008  
Blogger Sio said...

Sorry Factory but the SS Sympathy ship has sailed. I'd buy more into the whole regulations deal if Detroit was even trying but they're not. Bad management and bad unions. Rotten at the top and rotten at the bottom. Yes, it takes 3-5 years to design/test etc.... but apparently they learned nothing from the 70s when they gave the Japanese their niche to jump into the US market.

I like my Ford trucks but thats about all I trust.

4:42 PM, November 14, 2008  
Blogger Unknown said...

I've had cars from all over the place - American, Japanese, Korean. And several "all of the aboves", involving Canada, Mexico, and further parts.

Right now, I'm happily driving a Saturn.

It isn't the quality, it's the price; and that can be pretty accurately laid at the feet of the UAW. My retirement investments have lost about a quarter of their value in the last year. Tell me again why I should be taxed to bail the UAW out?

8:23 PM, November 14, 2008  
Anonymous Anonymous said...

Of course unions are to blame for everything in America! But wait.
Am car firms carry some of health costs for union members and that drives up prices. In Europe and in Japan the health care is govt and so firms do not pay for worker health cares. But that is hardly what you want, right?

9:07 PM, November 14, 2008  
Blogger Mister Wolf said...


Even if the Big 3 didn't have that competitive disadvantage. And it's true that they don't have to worry about healthcare...but not because Japan and Europe have universal healthcare. It's because they've located their manufacturing to low cost countries, such as Mexico for instance.

So even if they had no healthcare costs to deal with they still lack any competitive advantage against the Japanese or European counterparts. Their manufacturing costs will STILL be vastly higher(pay, healthcare, and taxes). Their is no superior quality(Japanese) in their cars or perceived quality(German). They're not even status symbols anymore(not including Union households) as Derek mentioned.

In short, the Michigan based big three have no competitive advantage. Furthermore, the more the federal government coddles them and cushions them the less incentive they have to stay afloat.

As Jack Welsh said, "If you don't have a competitive advantage, don't compete." Until one(or more) of the big three fail, they will be nothing but drains on our economy. Forced reallocation of wealth by the Federal Government from the other forty-nine to the failed big three and the state of Michigan.

In short, the best answer is to not bail them out and let them fail(one or all three).

11:01 PM, November 14, 2008  
Blogger Tscottme said...

I work to bring parts into the Nissan plant near Nashville. Americans needs to understand the split in the car industry isn't between US and foreign builders. The split is between modern and legacy builders, or non-union and union builders.

You can tell the difference between a union and non-union shop the instant you come onto the property. The non-union plants are all about ruthless efficiency, while the union plants are like a bad parody of the Dept. of Motor Vehicles sterotype.

There is virtually no foreign parts in most of the Nissan, and other "Japanese" maked vehicles, except for the stereo system. The suppliers I pick up parts from also make parts for all of the other car builders, including "Japanese" and Detroit builders. The materials come from the US, are made into components by American employees, and assembled by American employees, before being sold to American consumers.

The hourly pay rates are similar between the Detroit and foreign makers, it's the addition of benefit costs that make the Detroit makers dead men walking.

The management and the unions were protected from enoug serious competition for so long that they have lost touch with what is reasonable and now they are paying the price. If we prevent the companies and the unions from "hitting bottom" they will not change enough to survive, and they shouldn't survive. Bankruptcy, if necessary, serves and valuable purpose. The industry around Detroit, and Detroit itself, will not change until they have tried everything else. The sooner it happens the less painful it will be.

Besisdes the Michiganders have long since invaded The South and advocated for more government and higher taxes. I have no pity for them.

2:25 AM, November 15, 2008  
Anonymous Anonymous said...

OK, fred. Let's hear your long dissertation on our nation's problems, and your fix for them all.

Not just two word fixes like "vote democrat. Or one word fixes like "Obama". I truly want to read your point of view, your reasons, or logical arguments. Pick a subject or two, or ten, and enlighten me.
Personal attacks will be immediately discarded, as they have no use in a real conversation.

Your team won on change, right? What you are talking about in your posts is same old same old - from your side of the fence - just much more of it. That is how I see it.

The government is not smart enough, nor efficient enough, to take care of things. Whether democrat, or republican. That has has become painfully clear. So yeah, change is needed. But government is no ones mommy. Big government is in the way. Outside of scientific breakthroughs by NASA,et. al., the government has rarely had a good idea.

31 of the 47 picks Obama has made are Clinton administration people. Change?

7:44 AM, November 15, 2008  
Blogger Cham said...

When I was a kid the American steel industry went belly-up. There was a lot of blame going around at the time: Cost of material, labor costs, unions, foreign competition.

The American steel manufacturers made raw materials into ingots, then remelted the ingots to make steel into a product. The Japanese went from raw material straight to product. The corporate heads of the American steel companies complained that they were forced to use an antiquated manufacturing process that was decades old while the Japanese were using this cost effective streamlined system that eliminated a number of steps.

Once the dust settled we learned that in order for any manufacturer to be competitive they must retool completely every 7 years. The American steel manufacturers were bleeding every last dime of profit from their antiquated equipment and then crying foul, and, naturally, begging for a government bailout which they never got.

I see no difference between the steel industry snafu of the 70s and the current state of affairs with the American auto industry. I currently drive a wonderful Chrysler product but I have no problem with a Toyota or Honda as my next car.

7:44 AM, November 15, 2008  
Anonymous Anonymous said...

Cham, you are speaking of the difference between fully integrated steel mills, and mini mills. Ingots, etc., and continuous casters.

There is a big difference between re-melting previously made steel in an electric arc furnace, and making steel from ore using blast furnaces and basic oxygen furnaces. Both methods, however, can be continuously cast. Saves time, money, capital investment. There are a lot of mini mills in this country now. Quite a few fully integrated mills yet, too. Not too many are American owned, however. The reasons are many. Some of them are being discussed here. Some of the reasons for defending how this has come down are being defended, even called "change".

The mill close to you is now Russian owned. The recent downturn has left them with over half there firm orders getting canceled. Not looking good. Things have not bottomed, or "crashed" yet. We have a long way to go.

8:04 AM, November 15, 2008  
Blogger Cham said...

Let's talk about that particular steel mill near me. Did you know it once had 80,000 employees?

20 years ago, when I first began my sales career I tried to do business with that place. I remember walking into the main offices, which were nearly empty, and meeting with some old men that must have been just a few months from retirement. I told them what my company and its services could do for them and the only question they asked was, "Is your company unionized?"

They refused to do business with any entity that wasn't unionized, which I thought was an interesting way to choose a set of services. They also told me that it took up to a year for the steel mill to switch suppliers, which wasn't in my time frame.

Good luck with that place, I'll never try to work with them again.

8:29 AM, November 15, 2008  
Anonymous Anonymous said...

Bethlehem is no longer, Cham. Unions and apathy are the reasons. There are very few originals left in there. And those who are, are steel makers. Not management and union leaders. Immovable object against irresistible force = no more steel company.

Try it now. Big difference. That is, if you really have something. "Me too" at a lower price doesn't cut it now. One actually has to bring something to the table.

9:46 AM, November 15, 2008  
Anonymous Anonymous said...

the anti-union explanation is patently looking for a single devil to blame everything upon. Take this test: explore your own home. Holw many items there Are not made by Americans in America? Now, why are you supporting Them and not American workers?

If Am workers were union at auto plants, recall, please, that they did not design, ok, push, advertise, and sell crap cars! They made what they were told to make.
And they got health benefits from the company because ther3e is no govt insurance to cover them, and that too has driven up costs.

is the very computer you are using--yes you--made by Americans in America? Your running shoes?
hint: growing wealth in India and China provides a much bigger market for goods owned by Am firms so they don't care about an American market and Am. workers.

11:06 AM, November 15, 2008  
Blogger MarkD said...

Blame is such a futile exercise. GM is where it is. Going forward, what can be done? Government assistance doesn't solve the $1500 per car they need to make over and above Honda and Toyota to stay in business.

If they can't shed the overhead, there needs to be something that makes their cars worth $1500 more than a Honda (and $3000 more than a Hyundai.) I don't see it.

Got a car that saves me $300 a year on gas and is just as good quality but costs $1500 more? That works, because I keep them forever. How about a ten year warranty? It worked for Hyundai. What about selling factory direct? No, the independent dealer model is working so well...

They are already dead. The UAW will plunder the corpse until it rots. Would have, could have, and should have are pointless speculation.

11:42 AM, November 15, 2008  
Anonymous Anonymous said...

The government is not an insurance company, fred. If they were, taxes would have to go up on every business and individual in the U.S. to cover the expenses. The majority of the population can not afford that. Insurance would be administered by a completely inefficient non caring bunch of non elected bureaucrats, who hang up on you at 5:00 P.M.

What boggles my mind is the overwhelming amount of liberal types who want the government to take care of everything, and raise our taxes to do it. I have an idea for you. Contact Pelosi. Tell her that the 52% or whatever, of taxpayers who voted democrat want this to occur. You can volunteer to give all the income you wish to have the government provide what ever to whomever you want. There is no law against that. Leave everyone out who doesn't want that, and we will continue to pay our otherwise fair share of the proceeds, and will be unable to participate in the copious flow of money flying into and out of Washington. We will just have to continue to purchase private insurance. It's a free country, you have every right to try it.

Let's see how that works out. I don't think that is what you want, however. You want to force me to participate in something i have no desire to participate in. You cannot, and will not sell me on it. I will have to be forced into it. Katy bar the door.

12:31 PM, November 15, 2008  
Anonymous Anonymous said...

The govt insured my bank account--perhaps not yours. And they insured my G.I. Bill, and for relatives, Medicare etc etc
The free market? with price supports? not free. The govt sucks, granted. But now when I see how the invisible hand performs I see the economy at its best. Ok. Now you will blame it all upon...olf course, the Dems and sub-prime, as though for the past 8 years we had a Dem running the nation and no conservatives in Congress.

This is not to say that both parties are not to blame, I would never say that, but then if yiou so dislike the Govt, do you think they ought not bail out anyone at all in the current mess? and I mean bail out no entities whatsoever and let the chips fall where they may? Please advise.

1:38 PM, November 15, 2008  
Blogger Cham said...

Actually, BR549, I compete globally now so I'm not all that concerned about local business. I'll do business by email, by phone and it you can hand me dollars I don't care where I ship products. Services can be provided through email, and if there is enough money in the project I don't mind those 3AM phone calls from China.

1:53 PM, November 15, 2008  
Anonymous Anonymous said...

Cham, I do mind the 3 A.M. calls. But not the money. Cham, there is no way you are a democrat. You're pulling everyone's leg.

The government doesn't "suck" fred. They build great water treatment and waste waste water treatment plants and infrastructures, allow for an excellent military, as long as the democrats don't screw it up, and other projects and services that are better as muni's. I think public libraries are a great thing.
The National Archives, the Smithsonian, National Parks. I do wish I owned a large chunk of Yosemite, though. I'd build a nice house right in the middle of it. And I'd cut a bunch of trees out of the way so I could see El Capitan from my back deck.

Even governments have limitations. Ours doesn't seem to know where its is. Or when to get out of the way.

3:51 PM, November 15, 2008  
Anonymous Anonymous said...

I was of course merely kidding about when I said the govt sucked. I love the govt...I like it so much I send it money every year so it can both function and help out hedge fund managers and CEOs who seldom send them money.

But one thing about the meltdown. I now know how the system works: if you are big enough, then the govt must bail you out because, well, just because. And that applies to guys making lots of money (ie, Warren Buffet or AIG et al)...

Our govt does not know when to get out of the way? isbn't that why we have elected congressmen and senators? Why not tell them when and when not they ought to be "in the way."? I figure one guy's notion of in the way is another guy's notion of be there, pronto.

4:00 PM, November 15, 2008  
Blogger Bill Dalasio said...

A bailout of GM is a joke. The company has a burn rate of $4.2 billion per quarter. Given the expected bailout of $10 billion, the "loan" will be used up by next July. No one has given me any reason whatsoever to believe that there is any plan, strategy, or expectation beyond praying for divine intervention that the current burn rate is going to be reduced, let alone that the company will return to profitability. As far as I can tell the sole strategy is to get the U.S. public stuck with GM via the loans to extort further interventions to their advantage.

4:37 PM, November 15, 2008  
Blogger David Foster said...

Cham...not all of the woes of "big steel" came from Japanese or other foreign competitors. The U.S. mini-mills (which melt scrap using electric arc furnaces) also contributed to their of these companies, Nucor, was a pioneer in the use of the continuous casting process. The story is very well told in a book called "American Steel."

In general, companies that are successful at one stage of a technology are rarely those that are successful at the next stage. See Raynor & Christensen's book "The Innovator's Solution"--my review here.

7:35 PM, November 15, 2008  
Anonymous Anonymous said...

The company that now owns the Sparrows Point mill also owns Rouge, Ford's old steel mill. Servestal also owns another mill in the states, but I forget where it is. Indiana, perhaps.

If you've read "American Steel", David, then you know in past history that Nucor (the Nuclear Corporation) was at one time Oldsmobile. It's a crazy world. A couple of Nucor's mills are customers. They pushed SMS pretty hard to develop continuous casting of thin strip. It really helped the process to become what it is worldwide. I think steel making is fascinating. BOF's and electric arc furnaces - talk about fireworks! Ever since I was a little boy I've love all huge machinery and processes.

11:28 PM, November 15, 2008  
Blogger Bob W. said...

This bailout would just prolong the inevitable. I would rather the Big Three enter bankruptcy and attempt to reorganize, or simply succumb to the market.

12:14 AM, November 16, 2008  
Anonymous Anonymous said...

I have heard it said that eventually all companies go out of business. I googled (may have said this on another post) "defunct companies of the unites states" An incredible number of automobile companies are on the list. The list itself is huge. A lot of big names there. Many that were household names.

10:17 AM, November 16, 2008  
Anonymous Anonymous said...

$1.65 a gallon locally today. In this day and age, I can see $1.50 a gallon as a fair price.

I know I'll never see $0.23 a gallon again, which is what I paid for my first tankful of regular during the gas wars.

6:45 PM, November 21, 2008  
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