Staff column: The big one, two, three and we're out
As I ate lunch last Thursday I watched CSPAN as some United States senators grilled the CEO's of GM, Ford and Chrysler. It was an ugly scene, as the politicians tried to act like they were there to help, but often stuck knives between the ribs of the executives to get some kind of reaction.
It is obvious from everything that is going on at least two of the big three are on life support and the third one is in a position to have the machine to keep it alive hooked up at any time. As of Friday, GM and Chrysler look like they will go down by the end of December if something isn't done.
Merry Christmas, Detroit.
Through the pages of the Wall Street Journal and sites on the internet I have watched this dramatic fall from grace of the once largest corporations in America for over a year. Even when things were booming in mid-2007 there were some real signs of weakness for these three businesses, and all it took was a small push to drive them over a cliff in vehicles of their own design.
Their demise has been a one, two punch. First gas prices that went through the roof crushed sales of what was previously the largest selling group of vehicles all three had (SUV's and big pickups). Then the credit crisis took away money that moderate and lower income families used to purchase new vehicles.
During this last year I have read and listened to the critics of the American auto industry continually, and most of the charges of incompetence they level at all three come from that land where dwellers think all things American made are bad. Let's examine some of those claims.
â¢American auto companies need to build vehicles that are quality machines and will last. The first response you will hear from American auto supporters to this charge comes right out of a Ford advertisement that is currently being played on the air. Based on the many measures from people who know, American cars now have the same quality as Toyota. Those that question that quality make it sound like there have never been American cars that lasted or had good initial quality before two years ago. I have owned largely Fords in my life, but I have also had Dodges, two Chevys, a Jeep, a Nissan product and two Volkswagons. Many of the cars I owned when I was in my 20's were already worn out when I bought them, so I won't count those. However, my experience is that most of the vehicles I owned, foreign or American, lasted if I took care of them. True there have been some bad cars built by American companies, but not many in the last 25 years. I had a 1986 Ford F-150 that lasted almost 500,000 miles before we had to junk it and that was because it got in an accident. Most people don't keep their cars more than three or four years; I keep mine a long time. I have many friends who have done the same with all the various American brands. Lemons do occur, but they happen in all car makes.
â¢American car companies need to build cars Americans want to buy. That's exactly what American manufacturers did all through the 1990's and up until gas hit $4 a gallon this past year. The manufacturers built big pickups and SUV's, because that's what over 50 percent of Americans were buying during that time. Gas was cheap and people wanted size. Some say people did that because the American car companies led Americans into buying those kinds of vehicles with their big ad campaigns. The big ad campaigns were there because the competition was stiff and people wanted those vehicles. Why the hell do you think Toyota and Nissan, both of which had been the small car experts grew the Land Cruiser and Pathfinder into big vehicles, and developed the Titan and Tundra; they did it to compete with the American manufacturers. They knew there was a lot of money there, and they wanted a piece of it. That's where the game for the biggest profits were and these companies are in business to make money, so the thinking was sell the units that make the most money. For those in business that kind of move is a no-brainer.
One more thing; at this point in time, the biggest consumers of foreign cars in our country live on the two coasts. Much of the middle of geographic America still wants an American built car or truck. Despite the fact that many of the foreign manufacturers say they build cars here in the U.S. most of those are just assembled here. For many models, 90 percent of the parts are shipped from Japan, Korea or Germany. While some American cars are built in other countries and imported, the lowest percentage of non-American parts in any of the actual U.S. models is around 60 percent. That means Americans built most of the components. And a lot of the other 40 percent of parts that aren't from U.S. sources comes from Canada, which most of us hardly consider foreign.
â¢American auto makers should have seen this coming and adjusted. Right now on the west coast thousands of imported Toyotas, Nissans, Mazdas, Subarus and just about every other kind of foreign imports are parked in large lots near ports where they are unloaded from ships. They are sitting there because their sales are down, in some cases as much as the American manufactured vehicles. Dealers don't want these vehicles because they are overloaded. But it isn't gas prices that are keeping these cars from being sold; it is credit. The markets are tight and in many places unless you have a perfect credit score and some money to put down you can't buy even a small car. The foreign manufacturers are taking a bath too; difference is that their legacy costs are much lower than the Detroit three's costs are. None of them have three workers supporting two retired workers pensions and health care plans. The point is that if the Detroit three go down, we the taxpayers will be supporting those same retirees anyway because their pensions are backed by the government. And we will probably be supporting the workers who will be out of jobs as well.
As for the foreign companies that are assembling cars in the United States, they are doing the same things the American companies are right now; they are slowing plants down, closing some of them around Christmas for a few days, etc. Nobody saw this economy going the way it did, or if they did, they didn't imagine it would get as bad as it has.
â¢GM, Ford and Chrysler should have come to the government about the problem sooner. Only a very short time ago GM was the largest corporation in the world. This fall from grace came as a result of the banking and mortgage industry failing. Because these big companies live on credit to make their systems work, when credit dried up so did their cash flow. On Friday it was announced that almost two million people have lost their jobs since the beginning of the year. Cash flow for all car manufacturers has become almost non-existent. Much of this happened in a matter of only a few months.
Detroit has not always been right; they have made a lot of mistakes over the years. But to let these companies die would be a huge mistake. The whole process of them going through these contortions to get money does look very discriminatory. Congress hardly asked a question of the banks and Wall Street when they got handed $700 billion a month ago; yet now they are tearing into the auto makers. It does appear to look like a white collar vs. blue collar decision.
What the Detroit three are looking for are bridge loans, designed to get them through the recession while restructuring and then coming out on the other side of it more healthy. During the questioning, one senator said "I just don't want any money we give them to build a bridge to nowhere."
Yet where was the bridge being built to when we, the American taxpayer gave all that money to the banks? To the land of Oz? And that money wasn't a loan, it was a gift. At least these guys are pretending to want to pay us back.
Congress needs to get off it's high horse and help the auto companies, before congressmen and senators fall off and break their damned necks, as well as ours.