Is it worth saving? I’m not sure. I’m quite conflicted on this one.
On one hand, I agree with Mark Morford that GM, Ford and Chrysler have been woefully inadequate in the last several years and don’t make any cars really worth buying. They’re obsession with the SUV and the big margins they made on them got them drunk and silly… now they’ve got a hangover and we’re supposed to bail them out? NO WAY!!
But then I read articles like this with some really great ideas on ways we can transform the beleaguered auto makers with government intervention because they obviously haven’t been able to do it themselves. Thomas Friedman describes how we got here and where we might want to go from here better than anyone.
Here are some suggestions that have been put out there… and the upcoming Obama administration is probably going to do some or all of these things when they do bail out Detroit. I hope it works:
Stock goes to zero
Existing debt-holders take a hit ($0.30-$0.40 on dollar?)
Money dispensed in small amounts in return for senior convertible debt, pending the meeting of goals
Management and board gone as soon as strong replacements can be found
Union contracts torn up
Company radically downsized
Remaining employees offered new, fair employment terms (pay, benefits) which they can accept or decline at their choosing
Company commits to designing and building cars that people want.
justin
2 comments ↓
I agree with you Justin. My initial reaction is anger, but then I think about the number of jobs & families that would be affected if even one of the manufacturers went belly up.
I watched consumers continue to buy gas guzzlers in the beginning of this year, and I was perplexed. I chalked it up to their short-sightedness.
Me, I purchased a notoriously efficient, dependable car when I was in the market. A 2007 Toyota Corolla that I plan on driving into the ground. I keep up with routine maintenance, and do synthetic oil changes to help prolong it’s life–which I’m hoping will surpass 250,000+ miles.
If I had any confidence in an US automaker producing a car of equal quality all-around, I would have purchased the US car. Except they were more concerned with going in a different direction.
But the issue to me is all of the blue collar workers that will be screwed over if one of the Detroit auto makers goes bankrupt.
http://www.boston.com/news/nation/washington/articles/2008/11/20/bipartisan_group_works_to_revive_auto_bailout_1227203429/?page=1
“My fear is that you’re going to take this money and continue the same stupid decisions you’ve made for 25 years,” said Rep. Michael Capuano, D-Mass.
The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.”
Let’s remember, like Jeff pointed out, that the reason Detroit was so long in the gas-guzzler market is because that market was so large. Let’s remember that Japanese and European car companies got into the SUV business exactly because of the sales figures over the last decade and a half. BMW, Porsch, Mercedes, Honda, Hyundai all came out with new SUV models to compete with Detroit’s Big Three models. The number one selling vehicle in America until very recently was the Ford F150. Demand demanded these vehicles and Detroit was merely practicing business as they saw fit to meet this demand. Now, I’ll agree that Toyota and Honda have a better current business model offering and marketing better and more efficient gas savers. But even Toyota is reeling from its recent marketing push for the Tundra (remember all those cool truck commercials over the first part of the year?). Let’s hope that Detroit can adjust to these gas-saver products in the same way that other companies adjusted to Detroit with SUVs.
I also want to point out that Detroit is finding itself a casualty of other economic woes right now, particularly the frozen credit markets. Not many had the foresight to see the credit markets dry up over night. And restructuring an automobile company takes time…and money. It’s easy to criticize a company when they can’t make instantaneous adjustments to the current market. Is there a larger manufacturing infrastructure than the automobile industry? With automobiles, the market tends to fluctuate much faster and more frequently then can be adjusted to. Gas prices alone can turn a market around in a matter of months as we saw this summer. What Detroit should be learning from all this is to diversify their products more like the Japanese so that they can weather these new drastic shifts in the market. While the big 3 still have a ways to go in efficiency, let’s not forget that the Ford Aspire and Focus, the Saturn (GM) S series, and Dodge (Chrysler) Neon have been around for years. It’s not as though Detroit has not had more efficient products to offer. It’s that SUVs and trucks won the day with consumers.
I agree that there should be some pain with any kind of bailout and that detailing how things will change is important. But I’d venture to say that Detroit knows what it needs to do to continue their survival and that they just lack the loans to do it. If the credit market was better, perhaps they wouldn’t be going to Washington for money. Whatever happens with a bailout, bankruptcy, or a restructuring, we should be careful to not bring in people who know little or nothing about the car industry and expect them to turn things around in half a year. I do like the iCar idea though!
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