Today, the executives of the Big Three return to Washington to pitch their case for federal assistance. Presumably they will not be blundering into town on corporate jets. Whether they will walk away with anything more than a political whipping remains to be seen, though given the current atmosphere they had better expect to be tied to the post.
I’m not an industry analyst, but my great-grandmother swung rear axle assemblies for Chrysler; my grandfather on the other side retired from the FoMoCo; both a brother and an uncle currently work in the industry; and i was raised in a UAW town dominated by three auto plants. You can take the boy out of Detroit, but you cannot take Detroit out of the boy. And i can tell you that the bullshit in this “debate” piles up so fast that you’d need wings to stay above it.
First things first, a UAW line worker does not receive $70/hour in compensation. That number is arrived at by dividing total costs by current employee hours worked. In other words, it includes all the famed legacy costs. Whether those legacy costs are good or bad/right or wrong is an issue worthy of discussion; however, placing $70/hour worth of blame on the fat cats assembling cars is nothing but GM propaganda. Theoretically, those legacy costs were prefunded. If the company was too short-sighted to plan for the future, that’s a problem…but it is in no way the fault of the current employees. The new contract sets a starting wage of $14.50/hour, less than what transplant, non-union auto manufacturers pay. The new contract also puts the legacy costs in the hands of the union starting in 2010.
Is the union lilly white and blame free? No. They’ve made concessions of late, but the UAW has done its bit to make American auto manufacturing uncompetitive. Not one of those contracts was negotiated in “good faith”. They were all examples of both sides trying to nail the other side to the wall without much thought for the long term health of the company.
American cars have a somewhat deserved reputation for being rolling piles of shit. That really isn’t true anymore…at least not across the board. Quality has improved greatly, if unevenly, over the last decade to the point where there is little difference between buying American and buying Japanese. The perception gap, however, remains.
That perception gap also creates an issue when the discussion turns to fuel economy. I’ve read several columns categorically stating that Toyota doesn’t produce V8’s. Apparently these writers have never heard of the Tundra. The Japanese jumped right on the SUV boondoggle bandwagon. It’s the market. All of these companies build the cars that people want to buy, and Americans want rolling houses.
None of these companies have made giant strides in fuel economy over the years. A 2009 Camry (2.4L, 5 speed manual) gets 21/31mpg according to the EPA. A 1985 Camry (2.0L, 5 speed manual) gets 25/31. Twenty four years of technological improvement has produced a net decrease in fuel efficiency. Modern cars are heavy because the government has mandated safety and the consumer has mandated comfort. All those silly doo-dads that we can’t live without come with a cost. They add weight, manufacturing complexity (and hence cost), resource use, and draw energy.
Big 3 management has been atrocious. They’ve been practicing fealty to the quarterly profits of doom for so long that they probably couldn’t see straight if you hit them over the head with a hardbound copy of The Toyota Way. Then again, the Big 3 are actually three distinct companies. According to the suits at the Glass House, Ford only went a beggin’ the first time because it is very afraid of a GM bankruptcy and the havoc such an event would unleash in the supply chain. Ford is in a much better cash position than GM, and 75% of its next product cycle will be eligible for the already approved $25B in loans for improved fuel efficiency. It is Ford that has made the greatest gains in quality and safety. Well into their restructuring plan, Ford says that it only wants the possibility of a bridge loan if the market stays soft.
GM and Ford began life in very different ways and the differences still show.
In 1908, the Flint carriage maker, William Durant founded General Motors. The numerous badges under the GM umbrella today are vestigial appendages of GM’s evolution. Durant bought small, independent car makers to build his corporation. He also lost control of GM on two occasions because he ran the company into massive amounts of debt and then suffered from market collapses. Sound familiar? GM has always been focused on short-term profits and has always lacked any sort of conscience. Flint is a shithole today because GM simply left for greener pastures when it was in the corporation’s best, short-term interests. GM was deeply implicated in the demise of the electric public transportation network that used to serve American cities. GM is the company that actually developed an electric car…and then sent them all to the compactor.
Contrast that story to Henry Ford’s founding of the FoMoCo in 1903. Henry concentrated on building cars rather than building a corporation. Wall Street chastised him for voluntarily raising pay to $5/day and instituting the 8 hour, 5 day work week. Productivity soared and his workers could actually afford to purchase the product that they made. He never had much use for Wall Street anyhow. If not for a freak fire and the outbreak of WWI, his collaboration with Edison might have brought us electric motoring before 1920. The man was building bio-polymer body panels in the mid 1930’s and operating his plants with renewable power whenever possible.
Ford is still controlled by the Ford family and it is still headquartered in Dearborn. The Rouge Complex, Henry’s crown jewel, has recently been revamped at great expense. The truck assembly plant has 454,000 square feet of living roof and a host of other environmental design facets. W.C. Ford Jr. felt a commitment to his family’s legacy, the community, and the environment; he did the same thing his great-grandfather probably would have done.
This time around the Big 3 will pitch their cases individually, and we owe it to them to look at the situations on a case by case basis rather than lumping them all together and heaping blame equally regardless of whether it is equally deserved.
We should not throw good money after bad, but we should examine ways to make Detroit more efficient and effective. Ford would like to bring some of its European line to the States, but the plan is difficult because of differences in safety/crash test standards. There is no earthly reason why these companies should be forced to work under two different sets of rules. CAFE should be scrapped and replaced with a gasoline or carbon tax. Fleet averages are too easy to manipulate and have far too many loopholes. They are the reason that Toyota can produce a truck that gets 15 mpg and still brag about how “green” they are. We should mandate that American factories be retooled to provide American jobs and that new facilities should be constructed within the United States. And money given should be used as subsidies for research and development. The Japanese jumped ahead in the hybrid game because for a long time Japan payed $20,000/vehicle to make the early hybrids profitable enough for the companies to sell. We can argue whether that’s right or wrong, but it worked.
One final note. Keep your eye on GM. Don’t focus on the outstretched hand; be mindful of what the other hand is doing. GMAC (which is roughly half owned by Cerberus, the three headed dog of Hades that owns Chrysler) has applied for “bank holding company” status. If that is approved then GM gets its hands in the TARP cookie jar. If GMAC gets bailed out, i predict that GM and Chrysler will happily file for bankruptcy. Whether they will even bother to restructure and still build cars is anyone’s guess, but i wouldn’t be surprised to see them both walk away from the industry and let others deal with the wreckage.
You are free to continue hating on the city that built the American Dream, and i realize that this is mostly about making Detroit the scapegoat for all the fear and loathing that’s piling up in America today. It may be the nothing can be done because the American Dream is dead. But Detroit didn’t kill it, we all killed it. The land of pleasant living keeps hitting the snooze button hoping that it won’t have to deal with the rude awakening that it has in store, and the head snoozers are the same ones railing against “bailing out” the automakers. What room do they have to talk about mismanagement? Have any of them looked at the federal government’s books lately? I have a sinking feeling that my nation will throw my city to the wolves to make itself feel better today. I can’t say that it surprises me, but it sure hurts like hell.
The Motor City’s burnin’
Ain’t a thing that I can do
Don’t ya know the big D is burnin’?
Ain’t a thing that i can do
I just hope, people
It’ll never happen to you ~John Lee Hooker
*photo credit: NY Times/Revolution Studios
Categories: Business/Finance
Progressive Culture | Scholars & Rogues 
What a coincidence – we were talking about this last night.
A couple of weeks ago, a neighbor took the “For Sale” sign off his enormous SUV, which he had reluctantly decided to sell exclusively due to the rising cost of gasoline – which of course, no one could have anticipated or predicted, and why not drive a planet-killing behemoth if he can afford it? It’s his right as an American. Never mind the fact that even with exorbitant fuel costs, most people wouldn’t profit by selling their gas-guzzlers anyway; prices shot up, he panicked, another SUV for sale by owner.
So then, out of the blue, he took down the For Sale sign. And when asked why by a rather nosy woman I know, he replied,”Are you kidding? Gas prices are lower than they’ve been in years! Why sell it now?”
Oh yes. We did it to ourselves. And it wouldn’t surprise me in the least if, when asked by that nosy woman how he feels about bailing out the Big Three, he goes on a tirade about lack of planning and poor decision-making.
I have a perception of Japanese cars being better because, that’s what I’ve seen.
The last 4 American cars I bought were flat out lemons. They were having major problems before the warranty ran out, and were undrivable afterwards since no one wants to replace a major part every single week. The cars were a Lumina, an Intrepid, a Neon, and an Impala, in that order. All brand new. Only the Lumina broke 100k miles, and only managed that by replacing stuff constantly. I wanted to buy an American car, I really did. I still do.
The Honda CR-V I have has had the distributor and cap replaced at 210k miles, and is about to break 300k miles with no other problems.
My Camry is about to hit 400k with only a few minor parts replaced.
None of the American cars broke 100k. Only one broke 60k. (The Lumina) The rest were just too much of a pain in the ass to keep taking back to the dealership and forcing them to honor their warranty.
While I’m aware the plural of anecdote isn’t data, eventually it becomes a trend.
All that being said, I’m behind the bailout 100%.
The cars were getting better and closer to Japanese autos in quality lately, and if we’re going to bail anyone out, it should be companies that are employing large amounts of people at decent wages.
Bail out those that spread the wealth rather than the ones that concentrate it, in other words.
Even with the horrible luck I’ve had with American cars I was still going to buy a Focus this year and hope for the best. 😉
It took a lot of will power to not go on a fire breathing rant about SUV’s, Ann. I hate ’em. The physics are terrible. It feels like you’re moving slower than you actually are, so people tend to drive them faster. They are too tall and too narrow. And the idea of taking most of them “off road” is a joke because there is no ground clearance. And they’re only “safer” if you manage to hit a passenger car with one. In which case the occupants of the passenger car will probably be seriously injured, but not you. If you hit another SUV, everything equals out.
But that’s what everyone wants, so that’s what all the companies make. Toyota’s Sequoia (their extra large SUV) appears to be the only model that gained in the November sales reports. Everything was down 30% or more, including the Civic.
GM’s had hybrids for YEARS already. Through its Allison division, it’s one of the world’s largest makers of hybrid buses. Ford had a diesel-hybrid it unveiled at auto shows two years ago. And, back to GM, which could have Volt on the market already if it had settled for starting with NiMH batteries and a non-plugin version, then worked the kinks out over time.
And, you’re too generous to the UAW, which bought the Big Three Kool-Aid about not being able to make greener cars.
As for car size? Most of that has been carmakers interacting with the market. Safety features have had very little to do with it.
As for the Japan? The Japanese Big Three have adapted to the U.S. market all too well, tis true. In order, Toyota, Nissan, then Honda have been the most egregious.
Back to the Big Three, though. Why do they, GM in particular, STILL spend R&D on hydrogen cars when they KNOW that’s not the wave of the near, or medium future?
And, that’s why I DON’T favor a bailout. “Green” R&D could mean GM pounds more money down the rathole of hydrogen research.
Lex,
A great article, that’s for sure. Well thought out analysis, and dead on. That being said, I ended up buying both Ford and GM stock right off their lows. I was betting that at least one of the companies will make it. Plus, I did the math on the combined value of both stocks and found that the cost was less than a Whopper Meal at Burger King. My conclusion was that either the Whopper Meal is overvalued, or the sum of both stocks was undervalued. So far, I seem to be right:)
While the companies certainly aren’t out of the weeds, there is opportunity there.
Jeff
I believe you have a misconception regarding the relative EPA ratings between the 1985 Camry and 2009 model. The methodology used to calculate fuel efficiencies was changed recently to more closely match real world results. Before, one could almost never achieve the EPA rating with normal, everyday driving. Now, your mileage will be much closer to the EPA estimates.
It took a lot of will power to not go on a fire breathing rant about SUV’s, Ann. I hate ‘em.
Down here, a huge shiny pickup with an immaculate bedliner is the alternative SUV. So imagine trying to find a tiny gray TT in a parking lot full of Rovers, Rams and Tahoes. Then imagine navigating that lot as Rover, Ram and Tahoe drivers roar into reverse without warning; even if they’re looking, you know they probably can’t see you… Once on the road, though, I feel safer driving my souped-up rollerskate than I ever do driving a pickup.
JThompson, i understand…i drive a very old Toyota (and if i won the lottery i’d have it rebuilt bolt by bolt before buying a new one; i’d also purchase a Focus if i were buying a new car). The Big 3 wore through a lot of good will.
Socraticgadfly, yes, the market accounts for a great deal of the weight gain in vehicles. But the market (and the companies that advertise to it) is influenced by studies like the 2003 NHTSA report that says, “One hundred-pound weight reductions in lighter LTVs and most passenger cars significantly increased fatality risk.” (http://www.nhtsa.dot.gov/cars/rules/regrev/evaluate/pdf/809662.pdf) How does the UAW have any control over the design process? As for hydrogen, we’ll see how the FCX from Honda does. It won’t be a silver bullet, but it may have applications. But i’m not at all impressed with the hybrid technology that can’t even outperform an 85 Escort diesel.
Jeff, thanks. I’d put my money on Ford making it, and not just because i have an admitted thing against GM. I just think that they’re better positioned.
Ann, up here pickups are for the boys and SUV’s are for the girls. But there is some sense to the pickups. Most of them are used pretty hard and it is a place liable to record 50 inches of snow by December 1st. Even liberals drive pickups here, though the liberal elite prefer Subarus with ski/kayak racks. You probably are safer unless someone in a giant truck hits you; your vehicle is certainly more friendly with the forces of physics. Excellent definition of a true sports car, by the way.
I’m puzzled by all the complaints about the lack of quality in American cars. I’ve owned three Chevrolets (all new) over the past 10 years (yes I like to trade my cars every three years) and they have all be excellent cars. I have not had one warranty claim on any of them. I will acknowledge that American cars suffered from a lack of quality in the 70s and 80s, but I think if you give them a try and are honest you’ll see that they are greatly improved and every bit as reliable as a Honda or Toyota. As for all this ranting about SUVs, I don’t like them because they seem oversized and dangerous to other cars; however I really don’t care if others want to waste gas driving these things. I don’t blame people for not wanting to ride around in a little box made for someone who is 4′ 2″! It’s too late to save the planet earth anyway, if you cared about that you should have woken up decades ago, so I say drive what you like and enjoy your last years here. Me, I’ll be driving big, spacious, comfortable cars as long as Detroit keeps making them.
If I were any kind of photographer, I’d love to do a photo essay called “Real Trucks.” You know, the ones that are actually used for their intended purpose: work. They’re still around, but not in the suburbs.
Marlene and I would probably slip safely under a giant truck. In any case, I’d rather be nimble and fast than bulky.
Mike @6, i used the revised EPA ratings for the ’85 Camry.
I used to own an 89 Camry, and it’s not the same car as the new Camry. You could get a manual transmission in 89, you can’t now. The new Camrys are land barges, while the old Camrys are about the size of today’s Honda Civics (which I own, non-hybrid).
Thanks for an intelligent, thoughtful and exceptionally informative article on an important issue to all of us. No bullshit here. What reporting should be and rarely is.
I have always driven GM products and have a new one now. However, there is always one thing missing in the discussion of the new technology re hybrids, alternate fuel cells etc. etc. I live in an apartment building and would have no place to plug in an electric model. So that lets out how many millions of new buyers for just that reason alone? What about those discussing compressed natural gas… until there is a comprehensive plan for someone to organize and start building places to refuel your car why would anyone purchase a new car with no place to “fill er up” when empty? So to me it is not only the new car technology that counts but what also needs to go into after your purchase so you can use it. Why would I buy a new car with a technology that perhaps I could fill up in one or two places across a huge city. The convenience of owning one will still come first in the minds of buyers no matter how good or efficient it is to produce one. Detroit can produce all the wonderful cars it wants but who do you look to also to plan for the “using of the vehicle” after it leaves the showroom.
Maybe they could nationalize GM (and Chrysler if it can’t meet its payroll either), fire all the executives (but keep all the blue collar workers), and then lease out management of its capital, factories, labor force, and dealerships to the highest bidder like they are doing with turnpikes in some states. I am sure there is someone somewhere on this planet who has the resources to do something productive with it.
My ranger 1992 vintage has 220K miles. runs like a top. looks great. great pickup when i have to punch it. I owned a suburu that didnt make 100K and i cared for it as well. Had a bad experience with chrysler who wouldnt stand behind an inferior product.
i dont buy the anti-union whinefest that bellows from the mouths of rightwing ideologues. after all it was they who turned the US economy into an anti-savings consumer debt economy.
Historically, Unions have been the only natural market force that equitably distributed income. Work was valued. These days and in the past 2 recessions we face deflation. Its not difficult to draw a line from the 80’s anti-union movement to today’s consumer and corporate debt problems. Not to mention a whole host of problems with speculation and greed fed by the concentration of wealth and income into fewer and fewer hands.
As productivity continues to rise the working class must share in those gains. Capital and Labor must strike a balance for sustainable growth to occur. we have biased the economy against labor. The US has taken a divide and conquer approach to a global working class. The truth is we have much more to gain tha to lose from a strong labor movement here and abroad. Hopefully, President Obama understands that
Nice piece, Lex. Thank you.
I’m a proud native of the great state of Michigan as well. However, I have never lived south of of the 45th parallel, so I didn’t grow up with the true “Michigander” connection with Detroit. We simply drove an hour to Green Bay, WI to meet our “big city” needs. In fact, I didn’t visit my state’s most famous city until my early 20s.
For a number of reasons, the Straights of Mackinac no longer isolate me from the plight of my neighbors. I have gotten to know your city over the past couple of years, and yes I would say I finally have a “connection.” But, only a true Detroiter could write such an insightful piece. By the time I came to John Lee Hooker’s words, I had tears in my eyes and a true sense of statemanship and understanding. I may never fully appreciate the depth and scope of this situation, but I have faith that Michigan will renew herself and evolve. The people of Michigan will persevere.
Brian, i know. I recently fiddled around with Toyota’s website and decided that i wouldn’t buy a new Tacoma even if i had cash on hand for it. They wouldn’t let me get the offroad package unless i agreed to supersize the cab, and i’m philosophically opposed to four door pickup trucks. (personally, that is, i don’t care if others buy them)
Mike @13, thank you.
Canadian visitor, that’s an excellent point that that is rarely addressed. I’m a proponent of the Natural Gas option because it represents a very feasible bridge technology without massive infrastructure changes or massive changes in how cars are built. It does not significantly improve mpg, but it does clean up emissions a great deal. By delivering the fuel as a vapor, combustion is far more complete and NG is a much lighter hydrocarbon so there’s less left over. The other bonus is that it pretty much eliminates carbon build up within the engine, so they run efficiently for much longer. NG fueled engines also require fewer oil changes because the breakdown of oil is mostly from unburnt fuel passing the piston rings. I’ve seen converted engines still have honey colored oil after two years without an oil change.
Ann, have you ever read Truck by Michael Perry?
Ken, when i was looking for a new truck i would have happily bought an old Ranger (especially if i had found one with the 2.3). I learned at a tender age about the value of unions when my best friend and i crossed a picket line at the grocery store to buy some treats. His dad (UAW) gave us a dressing down that i’ll never forget.
r.elizabeth.m, i’m now a transplanted Yooper myself (MQT), and i love it up here. Thank you
In other news, GM/Chrysler (they seem already joined at the hip) are saying that they won’t make it through December without $34B…it’s beginning to sound like blackmail. Keep in mind that Ford requested $9B as an emergency line of credit that they would only tap if they really needed it.
http://www.freep.com/article/20081203/BUSINESS01/812030376
GIVE ME A BREAK… PERCEPTION?? Sorry sister, but ALL American automobiles are STILL rolling piles of crap. They are outperformed by the Japanese cars in test after test, and they go bad at 50,000 miles. Who do you think you’re kidding? I’m sorry, but I have no sympathy and would love nothing more than to see ALL THREE of the big three go down once and for all. They had YEARS UPON YEARS to bring a better product into production, and they sat on their hands while everyone else worked on it. The workers sat on their hands while the executives continually gave themselves raises, stock options, compensation packages, severance packages, and bonuses galore. They SHOULD have FORCED them to scale them back. I DO blame Detroit for not having the fortitude to do what’s right and stand up to the bosses. How is it that the CEO of Japan Airlines can eliminate his own office and the offices of everyone from the rank of V.P. and up, to working together in a single room, eating in the cafeteria together, taking the train to work, giving himself a pay-cut to make LESS than his pilots do, so that the company can survive, while OUR executives award themselves for a job poorly done and our worker do NOTHING to STOP THEM??? NO WAY!!! This is unacceptable, and the workers and union officials are just as guilty for letting this go this far. Hell the PEOPLE OF DETROIT were supposed to be forcing their hand en masse… but they didn’t. So don’t expect sympathy for inaction. You want them to get a bailout? Then get your ass down to the big oil companies and put your hands out, because there is NOBODY who should be bailing them out EXCEPT for the big oil companies. AND DON’T TALK TO ME ABOUT HOW MANY PEOPLE ARE EMPLOYED BY THE BIG THREE… because the word is already out about the planned shedding of U.S. jobs regardless of whether they get it or not. They are building state of the art facilities in BRAZIL… NOT here. It’s already DONE, and they’re only going to keep doing like THAT. So… NO BAILOUT!
Have to understand Meow’s anger, even if I think the tone is a bit harsh for this particular discussion (civil so far).
I am a firm believer that the oil companies and the automakers, as well as the government, pushed SUV’s on the public in anticipation of the higher gas prices Bush’s wars and foriegn policy (or lack thereof) have helped to cause.
They all made huge profits and are now leave the automakers out there as scapegoats while they blissfully continue on, with the highest profit margins in history and no accountability. Meow is correct – the oil companies should bail out GM and Chrysler, if they are to be bailed out – if Ford is doing all you say, they’ll be fine on their own.
Personally, I’ve been driving small pickups for some time now (work truck, Ann – I use them for everything from driving to my office job to small side construction jobs to home repair). Currently I have a ’99 2.5L S-10 I bought used. It’s had a new rear, rebuilt transmission, various replaced components I’ve put in myself. Nary a month goes by that I don’t have to fix something.
Honestly, I’m so discouraged that I have no idea what to buy when this thing finally craps out, other than that it’ll be another 4 cyl pickup.
Maybe an older Ranger WOULD be the way to go . . .
I hate to agree with meow, but I believe this to be the truth.
The big 3 have failed. Let them merge as one, maybe some good will come out of that. But to give them money in light of their poor management and lack of foresight is an outright disgrace. The Japanese are laughing.
…Umm, isn’t this the government that let New Orleans die?
As much as I’d dearly love to blame “W” for that, the dems are complicit because they’re
spineless; Republicans are just dolts.
So we (Detroiters) are probably toast. What a world, what a world…
Here’s an Objectivist take on unions written by Branden, who was a disciple of Ayn Rand, Whether you agree or disagree, this piece makes a compelling read,
http://www.nathanielbranden.com/catalog/articles_essays/labor_unions.html
Jeff
After watching the Senate Hearings yesterday, I was amazed at Senators Corker and Shelby. Both represent states that spent millions in tax rebates to get the foreign “transplant” car factories to locate in the “right to work” states of Alabama and Tennessee where workers are not paid union wages, and receive no benefits. These are the two Senators who were pushing hardest for the Detriot automakers to declare bankruptcy.
Of course Toyota, Honda, Nissan, etc., have been “government subsidized” for years with the state paying worker’s health care and retirement benefits.
Before we blame this all on Detroit, I’d like to give them a chance at survival. I’d like to see the playing field more level.
We bailed out Chrysler in 1979. It worked. We not only got our taxpayer money back, we made a profit. The model is there.
Given that we have thrown $300 billion at CitiCorp — no questions asked — and that they are throwing $400 million of that at the NY Mets for naming rights to the former Shea Stadium. We should not let our manufacturing base go bankrupt.
I don’t want see a white collar bias, over a blue collar bailout, in our country.
We need to save the jobs of people who actually make products. Not just the people who make money on other people’s money.
Jeff, thanks. I don’t necessarily agree with everything in the article, but there’s certainly a lot of sense there. And it points to a serious issue: that the unions (at least the UAW) isn’t really protecting workers at this point, but protecting itself.
There’s a famous exchange between Henry Ford and Walter Reuther where Ford is showing Reuther around a new plant and pointing out machines that will replace men on the line. He says, “well, no union dues from this worker.” Reuther replies, “Will the machine be buying your cars?” Both sides have been short-sighted and have behaved like they don’t really need each other…but they do.
There is a great book written by David Halberstam called “The Reckoning” which will amplify what was written here in detail. I am a native Detroiter and lived there during the glory days but also watched its downfall starting with the 1967 Riots which it has never recovered from. Detroit has also never recovered from the 20 year reign of corruption of Coleman Young. It was great place to grow up in the 50’s and 60’s but I’m glad I moved to California. I will always in my heart be a Detroiter.