Big Three hitting the big bottom

By | Friday, January 2, 2009

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MOTOR MATTERS

We can let Detroit fail. That's easy. Then what? How much do you think it will cost to support unemployed workers with no health insurance and no pensions - much, much more than $25 billion. General Motors Corp.'s failure could also take down Ford Co., Chrysler LLC and more than 1,000 suppliers

The failure of American automakers could kill our manufacturing base for years to come. Detroit didn't cause the credit mess. Banks and Wall Streeters caused it and Detroit got caught in it. The credit lockdown is killing car purchases. Total vehicle sales have gone from a high of 17.5 million to a predicted 11 million next year.

That hurts every company, not just Detroit.

Locally, dealers won't be buying any Little League uniforms or supporting the Lions Club. Blame banks if there are no green cars because automakers are out of money for research and development. Billions of dollars have been invested in raising fuel economy standards and dramatically lowering carbon emissions.

However, there are no miracles when it comes to complex technologies. Defunct car companies don't invest in new technology. Washington demands a plan from auto companies in exchange for loan guarantees, not free money. In the 1980s, Chrysler got a loan guarantee, paid it back and the taxpayers made $350 million on the deal. And check this out: No plan required from Citibank for $800 billion from the government, an obscene amount of money that we'll probably never see again.

We need our cars to get us to work and to the hospital at 2 a.m. when there's a medical emergency. Are we going to trust our livelihoods and lives to a bankrupt company?

Detroit doesn't need mandated restructuring. It has closed plants, reduced its work force, negotiated with the unions for two-tier wage structure. It has handed off health care administration to the union. It can do the rest itself.

Foreign car companies have cost advantages. GM is paying out $5.6 billion in health care costs this year for 1.1 million people covered by its plans; Toyota has a younger work force and only 375 retirees in the U.S.

The foreign automakers all got billions of dollars in local subsidies to build brand new plants in the South. American car companies such as Mercury, Ford, Jaguar, Cadillac, Chevrolet, Pontiac, Lincoln and Buick are ranked along with Honda, Infiniti, Lexus, Mercedes, Audi and Hyundai as above average in the recent J.D. Powers and Associates Initial Quality Study. (Consumers just can't get that through their heads.)

Detroit needs breathing room and better management. Detroit is changing and it is making cars that people want to buy: the all-new 2009 Ford Flex, Chevy Malibu and Cadillac CTS, for example. An auto company can be saved with one desirable vehicle. The minivan and the K-car saved Iacocca's Chrysler. The Taurus saved Ford. Way back, the Rambler saved American Motors Corp. The Beetle saved VW. Chevy has the Cruze and Camaro coming soon and Ford has the Fiesta. Good stuff.

Help Detroit.

Ford has great new product and a good leader. The Chevy Cruze, which is being sold in Europe, could put GM back on track. I'm not sure what's left to save at Chrysler. Maybe Jeep, maybe the minivan.

Copyright, Motor Matters, 2008

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