A crippled Detroit, making better cars

   WASHINGTON -- You wouldn't know it based on what the Big Three are telling you, but the quality of American cars is improving.

   In fact, U.S. vehicles top the J.D. Power and Associates 2008 quality ratings in the midsize car, large car, midsize SUV, large pickup and van categories.

   Such facts have not been stressed much in the debate over a $34 billion federal loan rescue for the used-to-be-Big Three. Instead, there's been much more talk about the concessions that the United Auto Workers must make and the corporate jets the auto executives flew to D.C. two weeks ago.

   But think about the following for a minute:

   "If [the American manufacturers] could go two more years without going out of business, they would be very competitive with the foreign manufacturers," said Karl Brauer, editor in chief at Edmunds.com, the auto web site. "But they can't go two more years without help from the government."

   So do comments like that make you rethink this idea of lending the U.S. auto industry $34 billion in taxpayer funds?

  -- Jerry Zremski

Comments

[RW]

Karl Brauer talks about the domestic automakers needing two more years of survival to turn their industry around, however, what is conveniently not mentioned is that GM, Ford and Chrysler have been steadily losing market share in North America since the mid-1980's! The number of autoworkers employed are less than half of what they were since the beginning of this downward spiral. If money is to be provided to these companies, the first thing that has to be done is to get rid of ALL the idiots at the top of these companies and replace them with executives with vision and ideas rather than continue with those that don't look beyond the next quarter's P&L statement.

[BobbyCat]

Building better American cars is fine but it won't solve the immediate crisis.

I think that Congress is afraid that if the Big 3 go bust, a great depression would follow. A bridge loan would probably throw good money after bad, it's true, and the Big 3 will probably come back for more $, but before you throw them to the wolves, tell me in some detail, what is the possibility of a great depression and what would it look like,circa 2009. Would there be bread lines? Would millions shiver in darkened homes or freeze to death? Would there be mass migrations to warmer climes as in Grapes of Wrath? Would we see long caravans of vehicles abandoned, run out of gas on the way to Florida and miles and miles of American refugees trudging south?

I'm serious. You had better factor-in a great depression before you say 'let them fail'. I'm annoyed at the Big 3, too. They miscalculated, misread, misjudged, missed the friggin boat in a thousand ways. But remember the multiplier effect - that every UAW job affects 7 other jobs related to the auto industry. So if a great depression would follow, we'd better be prepared for it. Your mild mannered, salt-of-the-earth, church-goin, accountant-neighbor, will do whatever he needs to do to feed his starving children. If you have food in your home, he'll come for it, club-in-hand. I'm not trying to fear-monger, but grim scenarios are a real possibility, unless there is a safety net that I'm not aware of. I'm mindful that "the only thing to fear is fear itself" but there is also the reality that no money and no job and no home and no food are real possibilities for millions of Americans. Let's think hard on this one. It's time for Obama to weigh-in with some ideas since the other President went AWOL, again.

The UAW has made serious concessions. (It sure doesn't help that the media [like Ch 4] is repeating the urban myth that the average worker make $72/hr rather than the actual $28/hr)

If Congress can find $300 billion for Wall Street and insurance companies, then surely we can find $36 Billion to keep the Big 3 afloat.

All that theoretical yada yada about letting businesses fail in a free market is a nice theory as long as millions of real people don't go hungry.

[gfunk]

your employer pays for more than your salary. $72/hr includes benefits, overtime, and overhead expensives. everyone's "labor cost" is calculated that way. the problem is that local "news" channels assume that their audience has a high school education and leaves out the details.

[Reality Check]

Let the market place run it's course and here's what will probaly happen

GM will have to file for Ch. 11 reorg. That doesn't mean it disappears, but finally makes deep changes.

Ford isn't as near collapse as GM, and might not need Chapter 11 reorg, but if it does it would similarly benefit.

Chrysler should be bought by some other company.

By the way, Jerry, Edmunds.com has a lot of biased reasons to hope the Detroit 3 stay alive, so that was a strange quote to highlight.

[robert james]

So, GM wants us to give (oh yeah, "loan") them $18,000,000,000 for a company whose total stock value is now worth $3,000,000,000? And that will only get them through the end of this year! On what planet does that make sense?
Let them go bankrupt - like the rest of us would be required to do - so that they are either forced to restructure, or forced out of business altogether.
When they finally realize that colluding and conspiring with the big oil companies by not producing truly fuel efficient vehicles was not in their best long-term interests, they will change their ways.

[hatemenow]

Yes and while they file Chapter 11 all of those former employees who had a pension plan that they were promised through contract negotiations, lose that pension plan. They also lose healthcare, so what does that do? It ends up costing the taxpayer billions of dollars to keep these retired folk alive and living in their homes. It also means that they will have almost ZERO purchasing power. they will become retirees living on fixed incomes, and causing an enormous bill for the taxpayer. Oh yeah, seniors also steal a lot from retail stores, because they can not afford common medicines, and food. this means raised costs for you as well, as retailers have to fill in the gap for the loss. All this means is that we pay more for much longer then if we give these automakers 30 Billion today. Oh yeah factor in the loss of current jobs as well when you see the overall loss.

More food for thought, why do the automakers get grilled by Congress for a bailout that is 10% less then the financial institutions? The fact that they actually make money off of real goods, and not make money off of money like the financial institutions. Oh yeah they also employ blue collar workers, not white collar workers. So they want less, make things we actually need, and they employ blue collar Americans, they get grilled when the other guys who helped to put us into this mess get whatever they want. Well when we take a closer look maybe it is because that the financial guys are the ones who are on the President Elect's financial advisory board.

This bailout is very much needed.

[robert james]

Trying to justify the bailout of the auto industry because the financial corporations were also given money to flush down the toilet is ridiculous.
My mother was right when she would remind me that "Two wrongs do not make a right", and asked me when I did something stupid and tried to justify it because everyone else also did it: "If your friend Johnny jumped off a cliff would you do the same?"

[Buffalo Mother]

Ok, gfunk....Here's one for you...I am a college graduate, and I make $18.00 an hour. I receive no benefits, no health, no dental and no sick time...I have no pension other than the one I've been building myself during the last 10 years. Not every employer provides the benefits that are seen by UAW. I would love half of what they get...However, unless you are born into it, those jobs are impossible to get. I am all about helping those workers, but the unions have to understand there must be consessions. Retirees should keep their pensions, after all they worked for it and taking health care away is just terrible. But the existing workers could stand to give up some of their "perks" for the good of the company.

[paterno]

The difference between bailing out the banks/Wall Street and the auto companies is that the money given to Wall Street and the banks may actually do some good. The money given to the Big 3 will only be used to keep the status quo. Does anyone actually think that the UAW will make any concessions on salaries, pensions and health care once the bail out is approved?

[Neil]

US auto-makers have a decades long legacy of manufacturing poor quality vehicles, the public's perception of this fact will take time to overcome. Everyone in the US auto industry will have to perform a whole lot better if they're going to survive into the future, including the UAW and their workers commitment to producing a quality product at an affordable price. In the meantime the auto industry and our manufacturing base are too important for this country to allow their failure. We (the US Government) should LOAN them the money needed to help as long as they make the required restructuring to become viable on their own merits.

[Hank]

Rethinking isn't an option. It's going to be done. But at a price. The continual dismantling of what was called "The American Dream."
More and more workers, when they have jobs, will be making less than ever. They have been let down by the academics and the politicians and the corporate executives and boards. This is the School of Hard Knocks. And a neo-socialism. Would I buy an American automobile? I don't think so now. In two years one or more of the Big 3 may still go bankrupt. Chris Dodd said today, "We're working on top down help, but will anyone buy the products?" They don't know. Competition from foreign automakers is going to be even more fierce with more at stake. And the U.S. had better not go protectionist.
Mullaley of Ford is the only one at the table who understands and puts ob the right face, but he can't be trusted either. Where are all those University Professors in Business Schools who were supposed to be leading lights? Stunned like the rest of them.

[peeples]

The GM ceo said "they made mistakes". Is that why they were paid and took their mega-bonuses? To make mistakes? If their worth the excess money they were paid, for their sheer "talent", for their sheer "experience" they supposedly brung to the table, they would not be in such deep, deep trouble.

Let them borrow the money from the banks we just finished giving the mega bailouts to.

There are way too many mega-monoplies that, if they are ran even slightly improperly, like they have been, will severely affect the entire economy when they go belly up. We were warned.

They outsourced to the max, built ineffecient "junk", then took huge bonuses for it, now they want our help, our money? Outsource for that $$$$ too! Opec benefited like bandits due to the auto makers greed and gass guzzling mentality. They are building gold plated rotating malls and buildings. What are they offering in help in any way?

The ones who have the biggest portions of incomes, are demanding help from those "WITHOUT",...the ones whose jobs they did their very best, to eliminate and then took big bonuses for doing just that.

They should have gotten rid of the stable of private jets, a long time ago. When they 1st realized they were in trouble. Not after the public screamed "wtf"! The ceo's said they made mistakes.
How are they, the mistake makers, going to pay for those mistakes in anyway what so ever? Sleep in the bed YOU made.

[Buffalo Libertarian]

You people in the media really need to knock off this ongoing attempt to convince the American people to go along with this bail out nonsense! I really don't give a rat's behind how good the cars are: the Big 3 are losing money because of bad business decisions and because people are choosing not to buy their cars. If you don't have what people want or you make bad business decisions, then you deserve to fail.

[RocketKid]

I'm not buying all this quality is great scenario from Edmunds and J.D. Power. I have bought a Ford Taurus in the late 1980's and a Dodge Grand Caravan in 1997. Both had high ratings from these so called consumer experts. After 5 years, these vehicles were a lot of troble and I didn't trust them on long trips. I now own Toyota's and Honda's and my Honda Civic is still going strong after 15 years. For a $20,000 - $30,000 investment, the Big 3 have lost all my confidence in their product line. This is the bottom line. Consumers in the age group 55 and younger are not Big 3 customers. In addition, with the rapid demographic growth of western and southern states due to growing economies versus "status quo - do nothing to stem the tide" rust belt states (Michigan, Ohio, WNY), many people feel no allegiance to the Big 3 anymore as many of the Toyota's and Honda's and Nissan's and Mercedes they like are made in the South. I believe Congress will have a hard time passing this as even Democrats from Southern districts will be hard pressed to tell their constituents on the benefits of bailing out the Big 3 as it doesn't really benefit their constituents making a whole lot less per hour in pay and benefits than what the UAW worker gets.

[OP Mike]

Members of Congress should stop all their asinine grandstanding and ridiculous pontificating and give the Detroit Three auto makers the money they desperately need, now. It's time for the men and women of Congress to drop their right wing, left wing ideologies, remove their Democrat and Republican arm bands and begin to act like true leaders by moving forward with an honest, sober, well thought out plan to save millions of our fellow citizens, and possibly the entire country, from economic ruin.

Here is some data from the U.S. Department of Labor, Bureau of Labor Statistics:

U.S. employment for Detroit Three (as of 12/31/2007)
* 167,319 Motor vehicle manufacturing
* 6,920 Warehouse and distribution
* 24,008 Engineering
* 41,094 Management and administrative

U.S. wages paid by Detroit Three (as of 12/31/2007)
* Production workers: $67,480
* Skilled workers: $81,940

Also, there are 973,969 indirect/supplier jobs and over 1.7 million spin-off jobs associated with auto manufacturing, bringing the total auto related jobs in the U.S. to more than 3 million.

In economic terms, the loss of the Detroit Three U.S. operations would be devastating. It is estimated that personal income would decline by over $150.7 billion in the first year and would generate a loss of $398.2 billion over three years.

The impact of this personal income loss on government operations at the local, state and federal levels includes reductions in personal income taxes paid, reductions in social security receipts and substantial increases in transfer payments (unemployment insurance; cash public assistance; Temporary Assistance for Needy Families [TANF] food stamps, Medicaid; housing assistance; etc.).

The net impact to the various government entities would be about $60.1 billion in 2009, $54.3 billion in 2010, and $42.0 billion in 2011. Total government tax loss would exceed $156 billion in three three years, alone.

In the big scheme of things the $34 billion needed by the Big Three is not significant. It makes no sense to risk so much for so little.