Bailout Challenge
We periodically run challenges here at Car Lust--for example, we have challenged readers to identify the most interesting used car available for less than $5,000 (challenge, results), the most interesting used car for less than $25,000 (challenge, results), and the best first car for a teenager (challenge, results). This time I'm going to take a slightly different tack.
My boss and I were discussing the potential bailout for the struggling American automotive industry this morning, and we agreed that if the automakers are going to request help from taxpayers, the taxpayers should have the right to make that help contingent on the automakers changing how they do business. After all, it makes little sense to throw billions of taxpayer dollars into what appears at the moment to be a broken business model.
So, assuming you could present a list of take-it-or-leave-it conditions to the automakers, what would they be? Silly, serious, semi-serious--it doesn't matter, I want to hear your suggestions. I would only ask that the discussion not get partisan--remember the comment guidelines and be respectful of each other, or I will need to shut down comments and suspend the challenge.
My thoughts in the comments section.
--Chris H.
Chris Hafner on November 17, 2008 at 10:30 AM
So, what are my conditions? I haven't really thought these out, but this is my first cut.
1. I wouldn't give the auto industry a dime until it got its labor costs in line. I forget where I saw this quote, but it has stuck with me--the domestic automakers are now benefits providers who just happen to make cars. That just has to stop - if it doesn't, I don't see how the US automakers can ever be competitive.
Indirectly, this is a condition for the UAW - the personnel overhead is just way too high compared to foreign automakers who make cars in the US. I haven't verified the numbers, but this is a bit eye-opening:
http://mjperry.blogspot.com/2007/07/uaw-pricing-themselves-out-of-market.html
It's not the workers' fault that they've negotiated a good deal for themselves, and the commitments made for pensions, etc., should be honored. Perhaps that's what the bailout covers--if the ongoing compensation structure is competitive. Whether that's the UAW moderating its demands or the automakers going elsewhere for their labor needs, I don't know. And either is easier said than done - but if it doesn't happen, my pocketbook would stay closed.
Especially since in essence the bailout would pay for these ongoing uncompetitive wages--call me selfish, but I'm not willing to help subsidize somebody's unsustainable salary when they make more than I do.
2. I would hold light-duty trucks to the same regulatory pressures as cars, and I would require *every one* of those vehicles to average at least 20 mpg in the EPA city cycle. Not the mix of vehicles, every single vehicle. This would need to go beyond a condition for American automaker bailout, of course--it would need to be a regulatory change for every automaker.
There would be one exemption--cars made in quantities of fewer than 500 would be exempt.
Automakers would scream bloody murder at this, but today's Corvette already does 16 mpg in the city cycle. With today's technology, we can absolutely have effective work trucks and sports cars that get more than 20 mpg in the city cycle. It would require only a modest step back in performance, if that. And eliminating the light-truck loophole (look, it's one of those Subaru Forester light trucks!) just makes sense.
3. Each manufacturer can only make 14 different models. Period - no more badge engineering. So GM, you can make 14 models. You too, Ford. Making Chevrolet, Pontiac, and Buick versions of the same vehicle is a waste of time and energy. Same thing with Chevy and GMC trucks. What purpose does Mercury serve?
If you must have different nameplates, just pick the one that fits the car the best. Having competitive Chevrolet and Pontiac divisions, for example, where one division complains that it needs a version of a car, is totally inefficient. The dealers won't like it, but we're not here to bail out the dealers.
You should be able to have a full line with 14 models - that provides for a subcompact, a compact, a medium family car/wagon, a large family car/wagon, an inexpensive sports car, an expensive sports car, a small and large truck, a large and small SUV, and four other models. Honda/Acura makes do with 15, for example.
Do fewer cars and do them right.
4. I would demand that Saab no longer offer an SUV in its lineup.
5. I would demand that the new Dodge Challenger be a retro tribute to the Sapporo Challenger, not the early 1970s Challenger. *That* would be highly entertaining.
jiminjersey on November 17, 2008 at 10:38 AM
Why don't we just buy all of the big 3? It would be much, much cheaper. Honestly, their market cap is about $7 billion. Ford is already $160 Billion in debt. They already blew $160 billion dollars. Are we honestly supposed to believe that another $8 - $10 Billion is going to do the trick. They have been making poor business decision since the last time they were bailed out.
Oh and than there is this...
How about after the first warranty repair the manufacturer refunds the owner 5% of the vehicle's purchase price for each subsequent warranty repair.
Build a quality product. I don't care that it is under warranty. I do not want to go back to the dealer. Ever. I have owned 3 Toyota's and a Honda Civic over the last 15 years. I have been to the dealer once.
Anthony Cagle on November 17, 2008 at 11:07 AM
My only requirement is that they become profitable or go out of business. Since the latter seems not to be an option politically at this point, the best I can hope for is some sort of debtor-in-possession financing while sending them into Chapter 11.
Chris Hafner on November 17, 2008 at 11:11 AM
jiminjersey: "Why don't we just buy all of the big 3? It would be much, much cheaper. Honestly, their market cap is about $7 billion."
Yeah, that's pretty funny, isn't it? When I was a kid, I fantasized about buying GM so I could remake it into what I wanted it to be. It's looking more and more realistic - except I don't think I'd want any part of that mess.
Chris Hafner on November 17, 2008 at 11:16 AM
Anthony Cagle: "My only requirement is that they become profitable or go out of business."
Well, that's the core thing, yeah. If that doesn't happen, nothing else will matter. And honestly, I'm not optimistic that it will happen. The loss of these automakers would be pretty devastating on a bunch of levels - there are a whole bunch of suppliers that would be in really rough shape without GM and Ford to supply.
It would be a blow for Michigan and the Detroit area, certainly. You know, because things are just peachy there right now.
Cookie the Dog's Owner on November 17, 2008 at 11:52 AM
If the government owns GM or Chrysler, then business decisions will be made through the political process. You'll end up with a lot of scenarios like this:
The Hubcapburg Assembly Plant was built in 1924 and has an inefficient layout that cannot practically be improved. It builds the Buick Landau Custom Supreme Brougham, a massive old-style luxobarge which gets 16 MPG downhill with a tail wind, ranks dead last in the JD Power & Associates quality survey, and has a one-and-a-half star crash rating. Seems like a candidate for rationalization; however . . . Hubcapburg is in Rep. Cranchford's district, and he's chairman of the House Appropriations Committee and has a lot to say in D.C. about whose porkbarrel projects get funded . . . and one of the new president's best fundraising "bundlers" was the president of the Buick Dealers' Association . . . and the UAW is thinking about whether to back the state's senator or his primary opponent . . . and thanks to political factors like these, the Hubcapburg Assembly Plant becomes untouchable, and goes along its merry way producing Buick Landau Custom Supreme Broughams, keeping thousands of assembly-line workers in Hubcapburg--and thousands more tow-truck drivers and warranty service technicians at Buick dealers throughout the land--occupied building and servicing a craptacular car that only sells because they discount the living daylights out of it to keep the price down where the demand curve is. Not only is there the direct waste of keeping an inefficient operation in operation building cars that lose money, there is also the "opportunity cost" of all the things you couldn't design and build because the funds that should have been used for new product development were directed by the political process into keeping Hubcapburg alive.
In other words, British Leyland 2.0--same pathetic build quality, same untenable economics, but no cute little two-seat roadsters.
No bailout. Let it all go through Chapter 11 if that's what it takes. The parts that are worth saving will be more likely to be saved, and the parts that need to be discarded will be more likely to be discarded, if it's a matter of economics in bankruptcy court than if it's a matter of politics in the Capitol building.
Jeff Cunningham on November 17, 2008 at 11:53 AM
Why should we, the taxpayers, give them anything at all? If a business cannot make it, why is it my responsibility? They have seen the changes that Honda and Toyota have made, and those companies seem to be doing just fine. If they no longer make products that people want or need, why should we care? Did we bail out Tpyewriter manufacturers when they closed or had to retool for word processors? They should do what any failing busines does, file bankruptcy, re-organize, or shut down. ...oh, and getting rid of the useless unions migh not be a bad idea.
Big Chris on November 17, 2008 at 12:06 PM
1 - disband UAW.
2 - Set pay scale according to USA Toyota wages
3 - Fire 2/3 of the designers. We need new blood.
4 - As Hafner stated, a ALL non-commercial vehicles must meet minimum of 20MPG.
Chris Hafner on November 17, 2008 at 12:10 PM
Cookie and Jeff: Agree completely, especially on the political scenario. Government running a corporation like GM would be a nightmare.
I think it's good for America to have competitive automakers, but pumping money into uncompetitive automakers accomplishes little. It's one thing to help a fundamentally viable business get over a rough patch if that investment gets paid back with interest - it's another if you're just temporarily propping up a failing business model.
So I'd only be willing to do a bailout if these companies were set up to succeed. Right now they're not, and they would need to make fundamental changes to get there. Most important are points No. 4 and 5 in my plan above. No way a company that sells a Chevrolet SUV under the Saab name gets a penny of my money.
Chris Hafner on November 17, 2008 at 12:12 PM
Big Chris: "3 - Fire 2/3 of the designers. We need new blood."
I'm tempted to agree, but I just keep thinking it's the management holding these guys back. I can imagine a cadre of really frustrated designers and engineers in these companies who really badly want to create cutting-edge products--but their management keeps pushing them in the wrong directions.
Even so, it feels like there are some interesting things going on with product at GM nowadays. Not so much at the other two.
Steaming Pile on November 17, 2008 at 12:43 PM
@BC - Don't get me started about unions. The chief function of a union is to level the playing field between labor and management. Without them, we go back to the situation where hours were long, pay was barely adequate to pay the rent and buy groceries, and benefits nonexistent. Think Wal-Mart, except you were employed at a dangerous, back-breaking, and soul-destroying job, not folding T-shirts in a well-lit, OSHA-regulated, climate-controlled environment like a retail store.
Did you enjoy your weekend? You have labor unions to thank for that. They invented the weekend. Before, the typical shift was 10-12 hours, six days a week, and the only reason you weren't at the plant on Sunday was because of some now-quaint notion about working on "the Lord's day." The fact that you no longer have to fear for life and limb, die at a young age from overwork, possibly endure discrimination and prejudice in the workplace, or suffer routine abuse from your employer, are mainly due to the labor movement of the early 20th century. Don't think these conditions won't come back if labor unions and the government regulation they fought for suddenly went away.
Anthony Cagle on November 17, 2008 at 12:44 PM
BTW, I take some issue with the whole "Detroit makes cars no one wants to buy" idea that keeps popping up. According to the Detroit Free Press (http://www.freep.com/article/20081117/COL14/811170379):
"General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota."
I would posit that the Big 3 don't make cars that no one wants to buy, they make cars that people don't want to buy at the price that would make them profitable.
Rob the SVX guy on November 17, 2008 at 12:50 PM
Excellent subject. I was going to suggest we have a "Poll" about this topic, actually. Should they or should they not receive bailout money? I say NO. Why? Apart from believing in capitalism, I have a multitude of reasons. The big three have largely ignored the bread and butter of their market for a long time: building quality cars for the general public. If you wanted something fuel efficient from them, you were stuck with a hard plastic interior full of rattles, obvious shortcuts, and quesitonable reliability. If you wanted a family sedan, you were forced to buy some obnoxiously ill handling boat, with questionable reliability. If you wanted a daily driver that had an element of sport to it, you were left with... well, basically nothing. Instead, they focused on selling cars to a largely uneducated, largely rural market. They focused on big pickem'up trucks, and instead of designing them around user needs, they got into an e-penis fight with each other over who could tow the most (because obvioiusly the more you can tow the more of a "man" you are... whatever). And they focused on Nascar, with the cars on the track not even remotely resembling what you could buy off their showrooms. They basically refuse to compete with the rest of the world in the WRC, and this is a major reason they are failing: They CANNOT compete. They refuse to make nice efficient cars, they refuse to make nice family sedans, they refuse to make cars that compete in the WRC. Hence, I really don't care what happens to them. Let them burn. Will lots of people lose their jobs? Sure. But they will even with a bailout, as they'll just run out of money again. Let them die, and other NEW automotive companies will spring up to replace them. Could a restructuring work? Sure. Fire EVERYONE in management. All of them. Some of the ideas in the big three are so deeply rooted they will not be fixed by replacing a few bad apples with better ones, it'll only spread more rot. The factories are fine, the equipment is fine, the UAW also needs to go. When someone is getting paid more than a teacher or most people with a college degree to work on assembly line, something is wrong. It is NOT sustainable, or profitable. Seems to me Honda, Toyota, and all the other companies that have plants in the US do just fine without unions. Screw em. Ford? Bring over all the european models. Yesterday. You could still live. GM? You're fucked. You made too many retarded decisions. Chrysler? Who knows. Another huge problem is resale value. Domestics plummet in just a few years, which is why I would never buy one. Maybe a government buyback program, at a certain percentage of the original price? Then use the used cars as government fleet cars? I don't know. I do know that it IS a major problem though, and even if the cars were just as good, I'd still refuse to buy one because of that aspect alone.
David Colborne on November 17, 2008 at 12:54 PM
In an ideal world, I'm siding with those that say that we should let them sink or swim on their own. They made their bed - management, labor, you name it - now they need to lie in it. However, assuming that we were giving them a bailout whether I wanted to provide one or not, here are the conditions I would enact:
1. Tie it to overturning all state-level dealership protection laws. We might have to abuse the Commerce Clause to get this done, but it's not like it would be the first time. This brings me to...
2. Every domestic manufacturer loses what would probably amount to at least half of their dealers. Each market would get only one GM/Ford/Chrysler dealer (one of each) and they would be responsible for every single brand that each manufacturer sells. This means that all ChryCo dealers would sell Chryslers, Dodges, and Jeeps. This also means that all GM dealers will sell Chevys, Pontiacs, Buicks, Saturns, etc. This would greatly simplify the distribution chain.
3. Nuke superfluous brands. All Buicks and Pontiacs would become Chevys. Mercury would disappear entirely. I'm not entirely sure what to do about Hummer... their brand is distinctive, even if they don't necessarily do anything anymore. Saturn would either get spun off the way they were in the past as a semi-independent entity or just absorbed into Chevy.
4. Nuke GM's and Chrysler's upper management from orbit. Ford has already done this, near as I can tell, and is already starting to turn things around; they just pulled the trigger too late.
5. Find some way to rework all executive compensation packages to require a long-term outlook to managing the company. I'm not sure how this would specifically work, but I'm quite certain that stock options and automatic payouts wouldn't cut it. I'd have to think about this one for a while.
6. Bring US safety and emissions laws in line with Europe and the rest of the world. The reason we don't see more cars like Ford's Ka is because our regulations are entirely out of whack from everyone else.
7. (WISHFUL THINKING IMMINENT!) Declare that all states must become right-to-work (i.e. no union membership requirements for any position). Again, this would almost certainly be highly unconstitutional, but while we're living in fantasy land, why not? Plus, this would allow management and labor to figure out pay without having to step in and say, "Uh, get your wages and pensions in line with Toyota or else." Instead, we could let the unions go on strike and let management hire back lots of scabs at a lower rate. Problem solved. Alternatively, if we're not just declaring the US to be the People's Republic of Davidstan, we'll just declare that all bailout funds dedicated for factory improvements will go only to those states that don't have "overly restrictive" labor laws (i.e. those that are right-to-work); this will make it possible to modernize plants that have a fighting chance of getting workers that are willing to use new techniques and technology. Then, a buyout for all auto workers in non-right-to-work states will be implemented.
8. (ABSOLUTELY HALLUCINATORY THINKING IMMINENT!) In exchange for number 7, declare that we'll fund all pensions and post-employment packages set up before the bailout such that they'll be in line, cost-per-worker-wise, with the industry average of our non-domestic manufacturers (i.e. GM/Ford/Chrysler will still pay for parts of their liabilities, but only to the levels that Nissan/Toyota/Honda/BMW/etc. are paying). This will make sure the contracts created when the UAW were playing chicken with the economy while domestic management spent their money on mediocre European brands instead of designing better cars will still be honored.
9. (POSITIVELY HUNTER S. THOMPSON-LEVEL THINKING IMMINENT!) Institute a mandatory gas guzzler tax on all non-commercial vehicles that get less than 40 MPG overall. This will be used to pay back the bailout in case the domestics fail.
Chris Hafner on November 17, 2008 at 12:56 PM
Steaming Pile: "You have labor unions to thank for that."
I'm totally on board with the idea that labor unions are important. If their charter is to increase pay and benefits for their members, they have been clearly successful.
The problem is that the UAW has been *too* successful, and they're not universal in the automotive industry. If the UAW provided labor for every manufacturer in the world, the American automakers wouldn't be at such a competitive disadvantage. Instead, we'd just pay a lot more for cars! :-)
But as it is, the UAW has guaranteed its members great benefits from an employer who, as a result, can't compete. How do you fix that? Forcibly disbanding unions seems a little too ... um ... totalitarian for me. And if I was a UAW member, I'd be stubborn about not having my pay cut by a third or a half. But having your company go out of business isn't the best idea either. Perhaps having multiple unions competing against each other would provide the needed competitive pressure to keep salaries good but sane?
I don't think all of the Big Three's problems stem from the UAW - a long history of poor decisions and (broadly speaking) uncompetitive product has been a key driver as well. But it's hard to imagine GM, for example, being competitive with a smart company like Honda with this millstone around its neck.
Cookie the Dog's Owner on November 17, 2008 at 12:58 PM
SP: You are correct in describing the historic contribution of unions to the quality of life in the industrialized world. However, I would point out that labor is more mobile now than at any time in human history--a situation very different from 50-75-150 years ago when unions were at their peak. An employer can't treat its labor force like crap and stay in business very long because the employees will decamp to greener pastures--and high turnover means increased training costs, inconsistency in operations and customer service, and poor productivity. Also, most business owners are people, too, and the ones I deal with regularly are quite pleasant--they want to treat the people around them decently.
Workers at Honda's or Toyota's nonunion North American plants do not toil in a Dickensian nightmare--they live quite well, because their employers realize that they have to pay competitive wages and provide a pleasant workplace if they want to keep their best employees around.
Rob the SVX guy on November 17, 2008 at 01:05 PM
I also take offense at the "fire the designers" comment. I am an industrial designer, we are a VERY small, specific field. At the fairly large company I work at, we have 5 fulltime designers, and two interns (I'm one). We have over 200 marketing/business douchebags that tell use what to do, what to design, and how to design it. When we point out things could be done better this way, and it'd be more ergonomic, more efficient, more comfortable, and safer, they fight back saying that isn't "the norm" and we need to do it the way we've always done it. I am 100% sure this is the same in detroit, becuase I've talked to a lot of designers, in the automotive field and elsewhere. Marketing CONTROLS design. Business and marketing majors are the people who rise to the top to control a company, NOT designers. They are the ones taking million dollar bonuses when their company is in the red, NOT designers. They are the ones that RESIST CHANGE. Designers, because they are trained to think creatively, strive for change and something "new". They want to evolve, to revolutionize, to rethink current problems. Marketing dickwads feel the opposite. They say they want change, but they pick the cheapest, safest route EVERY TIME, because they want to climb the corporate ladder. That is all they care about. They do NOT care about innovation, refinement, and making the best product. They care about a consistent, "pretty good" solution that costs as little as possible. Any design driven company is doing fine. Look at Apple, VW, Audi, BMW, Mini, and Target. They're not having major problems. Businesses run by MARKETING, that ignore designers, are doing poorly. GM needs to put some designers in charge and we'd have tons of fresh ideas, instead of rewarding ass kissing and one liners from people who play solitaire all day when they aren't taking 3 hours lunches or going golfing.
David Colborne on November 17, 2008 at 01:29 PM
Now, as for the root fundamental causes that led to them getting into this mess in the first place, well... let's take a look at things from Detroit's position about five years ago or so:
You are an American car maker. By the late '90s, your cars were close enough in reliability and price where you were becoming a credible alternative to the Japanese. People were actually thinking of buying your cars again. However, there are a couple of problems. First, the Japanese economy is starting to improve enough where Honda and Toyota are putting money into R&D and facilities improvements again, which means you're pretty much done playing catch-up. Second, due to some well-deserved perception issues, even if you do build cars that are as good as the Japanese, you'll still have to sell them at a $1,000+ discount for the better part of a decade before people will legitimately believe that you can actually make a decent automobile. This means that, even if your labor and productivity were in-line with your Japanese rivals, you'd still be fighting a losing battle.
Fortunately, there's some good news. People are starting to buy SUVs and trucks. Unlike passenger cars, which you can barely sell for cost + distribution, you can actually get $4,000+ in pure profit for each SUV and truck that you push out the door. Of course, you'll need to resort to some clever marketing in order to convince people to buy YOUR truck, instead of your fellow domestic's truck, but that's where tow ratings, horsepower, and all that good stuff comes into play. Better yet, the Japanese barely have a presence in these markets and the Europeans are virtually non-existent here. Best of all, SUVs and trucks belong to the one market where people still trust your craftsmanship, meaning that you can charge full price for these things and not get humiliated in the process.
Then the price of gas skyrockets. Everyone complains that you didn't put any money into marketing or developing a decent car. The politicians are breathing down your neck. Your bottom line is evaporating faster than a pool of water in Death Valley. The only question everyone has for you is, "Why?! Did you learn nothing from the '70s?!"
Of course you did. Trouble is, at least for you, there is NO future in passenger cars. None. Like we established, not only would you have to produce better cars than Toyota and Honda, you'd have to do it for less. Basically, you'd have to become Hyundai, and there's no way in heck the UAW or anyone else is going to let you do that. You'd have to junk most of your legacy factories while Korea and Japan invest in brand-spanking-new ones. You'd have to cut floor compensation to near-Walmart levels, which the UAW certainly won't fly with. You'd have to increase labor flexibility, allowing people to do whatever happens to need to be done, which, again, UAW work rules will shoot down faster than a Spitfire facing a FW-190 over the cliffs of Dover. So, you try to fake it and hope it works. You buy a Korean manufacturer or two (Daewoo?). You buy some European brands. You hope that somewhere in that is enough car know-how, enough labor flexibility, and enough modern tech in the factories to let you crank out some cars and rebadge them as American.
Detroit has learned that their hopes were in vain. Daimler nuked Chrysler's stake in Mitsubishi and Europe, which is why they're done. GM is discovering that people in the US still don't want rebadged Opels or Daewoos. Ford is trying desperately to figure out how to get its excellent Ford Europe cars over to the US before their bank account breathes its last breath. Is it unfortunate that Detroit didn't put more money and effort into passenger cars? Sure. Did they have much of a choice? Not really.
So here we are.
Chris Hafner on November 17, 2008 at 01:36 PM
Wow, David. That's about as good an explanation as I've seen.
One quibble, though - the Spitfire might shoot down a BF-109 quickly, but the FW-190 might be a tougher proposition.
Cookie the Dog's Owner on November 17, 2008 at 01:57 PM
@David C.: "...even if you do build cars that are as good as the Japanese, you'll still have to sell them at a $1,000+ discount for the better part of a decade before people will legitimately believe that you can actually make a decent automobile...."
Very true. I used to have a '78 Chevrolet Monza which suffered from an underwhelming powertrain, pathetic build quality, and epic unreliability. I even wrote about it for Car Lust once! (http://www.carlustblog.com/2008/07/car-disgust--19.html)
That car put me off GM for decades. I flat-out would not consider purchasing a GM car, any GM car, new or used, for any purpose because I did not trust the brand. I looked at a Cobalt SS Supercharged last summer (didn't buy it, for various reasons to be detailed in a future Car Lust post) and it took me a real effort of will to get past the fact that it was a GM car built in the same plant as the Monza and consider it on the merits.
Want to know why GM's market share is half of its former glory? Multiply the above experiences by a few million customers, subtract the result from brand equity, and there's your answer.
Rob the SVX guy on November 17, 2008 at 02:04 PM
WRONG. They had a choice. They CHOSE to agree to union contracts. They CHOSE to convince people to buy SUVs and Trucks with their images of the outdoors, and convincing people that more fuel efficient cars were "lame". They chose to prop up menacing looking vehicles that get poor MPG and handle like crap. They CHOSE to ignore my entire age group. Do you think anybody near my age bracket wants a new american car? No! Why? They suck! They aren't fun! They aren't cool! They have crap resale value! Are they reliable? Sure, but they're about as fun as a boring rental car, which is why most rental cars ARE domestic. If they offered something like a mini, a fuel efficient car that was fun to drive and had some personality, they'd have a hit. Think NEON. Oh wait, they killed that and replaced it with a mini-SUV. If they offered a turbo AWD car to compete in the WRC, they'd have a hit. Think SRT4. Oh wait, they had that and killed it. Right now, the ONLY, and I mean ONLY car I would consider buying from GM would be the Cobalt SS. Four doors, turbo, hauls ass, handles, and gets decent mpg. However, it's rental car roots still show inside, so I'd probably opt for a used WRX instead. The G8? Cool, but who can afford gas for something like that? Nobody I know, unless they have a second car. Detroit has focused on selling vehicles specifically designed for hicks for so long, and I think the nation is sick of it. We don't want vague rubber vehicles with cheap interiors, we want something with some build quality inside that is actually fun to drive. I really don't think this is that hard to do.
Steaming Pile on November 17, 2008 at 02:12 PM
@cookie - unfortunately, manufacturers are also mobile. They have the capability of moving to the nearest right-to-work state, or even across the ocean, with a phone call. Again, I hold up Wal-Mart as an example. Unions threatening to gain a foothold in Fungusville? No problem. Close all the Fungusville Wal-Mart stores. Sure, that's gonna cost money, but if it keeps the other 2,320,792,873 Wal-Mart stores from even thinking about going union, it's worth it.
Better to try to talk sense to the UAW president. It might work, or it might not. If it doesn't, there will be a lot of people getting pink slips for Christmas, but it doesn't need to be that way.
@everybody - Am I the only one who finds it just a teeny bit suspicious that all this wailing about $700 billion bailout schemes, GM going bankrupt, and all that just happens to come during the waning months of George W. Bush's term of office? What would be the harm of holding off any decision involving real money until January? Could this all have to do with the number of strings that might be attached if the funds were authorized now instead of 75 days from now?
Steaming Pile on November 17, 2008 at 02:16 PM
@Rob - also think PT Cruiser. When they first came out, you couldn't find one at MSRP to save your life. People were lining up to pay $20,000 for a $16,000 car. Why? Because the PT Cruiser was cool and fun, that is, the opposite of a Chevy Cobalt.
Smoke_Jaguar4 on November 17, 2008 at 02:17 PM
Serious Ideas:
- The US government, through the World Trade Organization, should establish common safety and emissions regulations with the European Union and Japan. This would let the Big 3 immediately import desireable cars from their overseas operations without spending millions in redesigns and recertifications. For us enthusiasts, it also means that we could now get our hands on hot Eurohatches and Japanese microcars. From a capitalism perspective, increased competition is ultimately good for the consumer.
- Give the automakers favorable laws to renegotiate their dealership networks. You wonder why we still have a Buick-Pontiac-GMC network? Because GM took way too many lawsuits and settlement pains when they shutdown Oldsmobile. This will then let them close redundant brands and improve internal operations.
- Establish a progressive taxation system where people who buy vehicles with poor fuel economy and emissions will subsidize others who buy more socially responsible vehicles. This needs to be paired with stricter rules on commercial versus personal use vehicles.
Obligatory Wacky Ideas:
- Each surviving brand must have at least one car designed by a team of 14-year-old adolescent males. Big wings, hood scoops, slammed suspensions on 24" wheels and your choice of Flaming Orange, Ultra-Violet, or Florescent Green exterior with contrasting interior. This car would be automatically exempt from all safety and fuel economy rules.
- All cars assembled in Mexico come with an obligatory sombrero, a radio which only tunes in ranchero and norteño stations, and a year pass to Taco Bell.
- Managers at the companies would have to wear a Scarlet "I" (for incompetent) until they repay all government-backed loans. Once a week they will draw straws to see who gets placed in a stockade in front of Congress, where citizens may spit and heap scorn upon them.
David Colborne on November 17, 2008 at 02:50 PM
Rob - yes, they did choose that path, and I wish they didn't too. From a purely financial standpoint, though, I can't come up with a single logical way to suggest they should do otherwise.
Think of it this way:
If I told you that you had enough money to invest in one type of vehicle - SUV or compact - and that, if you invested in SUVs, you'd get a decade of being able to get $4,000 in pure profit for each SUV you built, but that, if you focused on compacts, you'd be lucky to get $1,000 for each unit, which one would you put your efforts on? Yeah, going for the compacts makes sense long-term, but you have to make it that far, and a decade is an AWFULLY long time in business terms.
Yes, focusing on trucks and SUVs looks like a bad idea now. At the time, it was the one field where Detroit actually had leadership and some profit margin, which is something that hasn't been true about passenger cars for over three decades now. There are many reasons why passenger cars aren't profitable for them anymore, and they've each been touched on here at some point - bad union contracts, worse dealer networks, and borderline criminal management. Bailing out Detroit without addressing all three of these issues will just be putting bad money after worse, and the chances of anybody being able to fix all three of these issues before, during, or after a bankruptcy (at least in a way that allows any of the Big 3 to live) is almost nil at this point. It sucks. I don't like it.
That said... why did the Big 3 accept those union contracts? Easy - the UAW is a semi-monopoly. Need proof? How about this...
Let's say you're Microsoft and decide that, if somebody decides to sell a competing Office suite or a different operating system with their new computers, that you'll refuse to sell them Windows and MS Office. What happens? You get sued for uncompetitive business practices.
Let's say you're Intel and decide that, if somebody decides to use a competing processor on their products, that you'll cut off all supplies of all Intel chips to that vendor. What happens? You get sued for uncompetitive business practices.
Let's say you're the UAW and decide that, if GM is going to build a plant where the UAW isn't active, that you're going to withhold ALL UAW labor from their plants and all of their suppliers. What happens? You become a powerful political force and you get to write laws in state legislatures that REQUIRE the use of YOUR product in ALL auto factories in that state.
That's a problem and the only solution is to treat the UAW like a business. However, the chances of that ever being politically palatable to anyone in power is next to nil, and will remain so for as long as the UAW is a going concern. With any luck, that won't be for too much longer.