American made cars and the bailout

[Icarus]

Now if they can only learn to make an affordable car/truck that can compete in quality with the foriegn models AND convince the American public to buy them, they might be onto something.

I think Ford does that already. But nobody is going to sway your opinion on this, Doug.

-David

 

[normab]

Steve,

You explained the crux of the issue well.

Norma

 

[geekette]

The mgmt saw all that market share going to Honda and Toyota for 20 years. Why didn't they take the cue and formulate a plan to re-tool plants and compete? (

BINGO.

I ran my business into the ground. Help me or the common American worker gets hosed. Oh yeah, and all the retirees we promised to keep paying - do you want the elderly to sink into poverty?

Dang, too bad I wasn't first to market with a not-better mousetrap.

 

[beanie]

I think Ford does that already. But nobody is going to sway your opinion on this, Doug.

-David

I agree .the ford f-150 has been the best selling truck for years . I have owned 2 saturns , a ford galaxy ,a ford Ltd ( my first ! ) , a ford ranger , an odlsmobile ferenza , and now a ford focus and have loved everyone of them . my wife loved her chevy cavalier , her ford falcon , ford taurus , and now her ford escape . we have never owned nor plan to own any other cars that aren't made by the big 3 unless of course they go out of business and we are forced . it will be a sad day and our fathers will be turning over in their graves as thats all they bought and rasied us the same way . no doubt they have to change there ways and the airplane thing was crazy . I just think they opened up a can of worms when they bailed out AIG and wall st and I am torn on this .

 

[rickandcindy23]

Almost every Honda and Toyota car and truck gets 25+ MPG. Most of the American cars don't get that kind of MPG. That is the problem. Why build Hummers and giant SUV's that guzzle gas, if the American people don't want them. What is wrong with making smaller cars and making them more affordable to drive. A company needs to be forward-thinking! For crying out loud, who needs a car that could carry a soccer team?

We rent cars a lot on vacation, at least 8 weeks a year, and since most of the cars are American made Chevys and Dodges, I avoid the little cars, like the Dodge Neons. We rent mid-sized American cars because the gas mileage is no better for a Neon than it is for a Stratus. It's just true. Why give up the luxury of a larger car for the same MPG? We have rented two Neons and both were barely getting 25 MPG. Our last rental was a large car, a Chevrolet Impala, and it got 24 MPG. Which would you rather ride in?

Our Toyota Avalon gets way over 30 on the highway. Going 90 miles to and from our daughter's house, our car gets an average of 42 MPG. We are driving 60 MPH for maximum economy. No American car has done that for us, and we have owned many American cars. From now on, it is Toyota for us. Next time, which is a long way down the road, it will be a Prius or whatever hybrid they are making. I will take a small car to save gas, even if it stays cheap. As long as there is room for a suitcase when we travel.

We have a Nissan truck that it 12 years old and has 180K miles, and it hasn't had a single mechanical problem.

American automakers need to figure out what people want and act quickly! I wonder what they do make per hour? What a crazy notion, that they might make $75 per hour for working an assembly line. GEESH!

 

[T_R_Oglodyte]

A

American automakers need to figure out what people want and act quickly! I wonder what they do make per hour? What a crazy notion, that they might make $75 per hour for working an assembly line. GEESH!

What difference does it make if they figure out what people want if they have to charge 10% more for the same product? I don't think the problem is that the US auto companies haven't been able to figure out what people want. The problem has been that their cost structure is too high.

+++++++

Think this through a minute. Let's say that you're selling refrigerators, and that every full-size refrigerator you build and ship costs you $300 more than your competitors. The market for full-size refrigerators ranges from simple models selling for $700 to large deluxe energy consuming units selling for $5000.

If you've got that $300 disadvantage, and you try to sell $700 refrigerators that you have to price at $1000 to be profitable, you're not going to succeed. You're either going to sell at a loss, or you're not going to sell refrigerators.

What then is your option??? You focus on selling larger units, for which a $300 price difference isn't as significant. When the refrigerator costs $3000, a consumer will be much more likely to buy a refrigerator based on the differences in features than the difference in price.

I submit that is exactly the situation in which the US automakers have found themselves. They haven't developed cheap fuel-efficient vehicles because they put themselves in a situation in which they couldn't compete in that market.

********

To add an additional note of reality, now let's assume the government adopts rules that require you, as a refrigerator manufacturer, to sell a certain number of refrigerators in all size ranges, including sizes in which you lose money on every sale.

What do you do then if you're a refrigerator manufacturer? Don't you start to pay even more attention to wringing profitability out of those high end refrigerators from which you do make money, so that you can maintain profits while you're forced to subsidize sales of the cheaper units?

 

[ricoba]

What difference does it make if they figure out what people want if they have to charge 10% more for the same product? I don't think it's a matter that the US auto companies haven't been able to figure out what people want. The problem has been that their cost structure is to high.

That is concisely the problem.

 

[Kal]

The events that severely hurt Detroit were first the high price of gasoline then followed by the sub-prime collapse of the financial industry. Otherwise, Detroit would have merrily built and sold giant pick-up trucks and huge SUVs. Then suddenly the wheels came off the auto industry.

It's interesting to note that this is not limited to Detroit, but also to foreign brands. The west coast is a MAJOR trans-shipment way station and there are foreign brands parked at the docks as far as the eye can see. Port facilities are searching for more land just to park the cars. Nothing is moving because the number of dealers have severely decreased across the nation AND no body is buying anything.

The difference is cash flow. Detroit has a huge overhead even if they shut the doors while the foreign brands have control of their bottom line. With this economy it will be a long time before automobile sales pick up. Even then, buyers don't have discretionary funds to continue to buy Detroits favorite design - big pick-ups and huge SUVs. It's a Catch-22 that won't go away until Detroit has totally new design line in the dealer's show room. What will that take? 3-4 years??? The taxpayers are not going to give them a free ride for 6-months much less many years.

Then too, the foreign brands are very smart and will do whatever it takes to maintain their market share or more. They're not going to let a "New" Detroit cut into their gravy train.

 

[T_R_Oglodyte]

That is concisely the problem.

And the solution is to let them go through Chapter 11 to shed that cost structure, just as the airlines did.

If the cost structure isn't solved and the government does a bailout, when the bailout is done (if you're an optimist and think that would ever happen) the industry will still not be competitive, it will fail because it's not competitive (or the car companies will come back for another bailout) and all of the bailout money will have been flushed.

 

[Icarus]

Almost every Honda and Toyota car and truck gets 25+ MPG. Most of the American cars don't get that kind of MPG. That is the problem.

I bought my Ford Escape Hybrid in May 2007, when gas was relatively cheap. It even came with a rebate.

How come nobody was buying them when gas was cheap and they had to offer rebates?

-David

 

[dfjkl]

Everyone seems to miss the fact that many of the foreign manufacturers have actually opened up production in the US. ....and on the same token, many parts on "American" cars are actually imported. It's no longer as simple as "this is American." The big 3 have been run so stupidly for the last 10-20 years that this is really no surprise. GM thinking they could just start charging Cadillac prices for it's SUV's out of the blue and thinking everyone was just going to keep buying them was dumb. I like my classic GM's and our Ford truck and my Mercury Marauder...but our last 2 purchases were for daily drivers...and we wanted reliability. We bought a Scion tC and a Mazda 3. So far so good. Scion has a little over 50k and we just put new tires on it, Mazda is @ 32k...original tires sucked and had to be replaced and air conditioning leaves much to be desired...but overall, no other issues.

 

[Icarus]

And the solution is to let them go through Chapter 11 to shed that cost structure, just as the airlines did.

Steve,

What makes you think they will be able to get DIP financing in the current market?

Banks aren't lending money to other banks, even though the Fed guarantees those overnight loans now.

I'm not disagreeing with you about the use of chapter 11 to restructure their contracts, etc, but there's more to it than just saying that they should file chapter 11.


------------

ok, let's see how I can fit this into this thread:

If they were all using Macs instead of PCs, we wouldn't have this cash flow problem.

-David

 

[ricoba]

And the solution is to let them go through Chapter 11 to shed that cost structure, just as the airlines did.

I have a tendency to agree with the Chapter 11 ideas. I thought the Mitt Romney Op/Ed piece in the NYT was quite good arguing in favor of Chapter 11.

But I am concerned that it may not work, and I believe we need to support what manufacturing jobs we have left here in the US. The problem as you have noted earlier is management and labor have both unfortunately screwed up big time and sadly the poor guy or gal on the line is the one who is going to suffer, not the big bosses on either side.

 

[Lawlar]

What Do We Make?

Something to chew on here is that IF American car manufacturers went belly up there would be virtually no "Made In America" products anymore. ...

So that you understand this here is the situation that the company that I work for is in. Just about 1/3rd of our product is sold to US car manufactures. We manufacture manchines that move product. About 1/3 of our product supports companies who support US auto makers. If the first
1/3rd dries up then the 2nd 3rd is just going to cascade into the hole created.

Who is our remaining customer. The US military. If we are not in business then there is no Made In The USA company to provide our product to the US military. Do you really want to rely on Japanese or Chinese made product to keep our military moving?

Both sides of this argument have good points. But these are difficult times and I'm not sure everyone in this country appreciates the trouble we are in.

We really need to remanufacture our industries and stop relying on foreign manufacturers and foreign money. We can't have a prosperous country if our future jobs consist of sales positions at stores selling foreign products (and timeshares).

Bankruptcy is a problematic solution. There is no gurantee of what you will get when, and if, you come out. It is like going through a divorce - there is a judge who is going to make the final decisions. And a bankruptcy can involve a lot of fighting (think lawyers gone wild) between the various groups of creditors/shareholders/labor, etc. And you can't simply cancel the labor contracts and think that the employees will show up and take whatever the new management offers. There is nothing to prevent labor from going on strike.

Remember that the Japanese auto industry was protected by their government for many years. Toyota doesn't have to pay health care benefits to its employees. Our auto industry has not been competing on a level playing field.

Yes, we can let competition determine who will prevail. But I have a bad feeling that our kids and grandkids will be unemployed because their jobs will be shipped off to Asia where people will work for 50 cents an hour.

Jbart74- I welcome your opinions. There is probably a middle ground where the ideas from both camps would be best served.

 

[dougp26364]

I think Ford does that already. But nobody is going to sway your opinion on this, Doug.

-David

The 1998 Mustang I had really was a decent car as far as quality. The Tarrus we had sucked. Rotors turned twice for warping in 30,000 miles, sound system that needed work, two window motors that had to be replaced and a transmission the had to be replaced at 35,000 miles sealed the fate of that car.

I had a Mercury Lynx back in the '80's that was a fix and repair daily. I liked the 1997 Contour but, the wife complained so much about driving a stick that I traded it for the '98 Mustang that was an automatic.

The 1986 Escort EXP had a few issues but, I was drivig 25,000 miles/year.

When we were test driving cars 3 1/2 years ago, Ford just didn't have anything that appealed to us. The Escape drove and road like a truck. A friend of mine did by the Escape and ended up getting a new engine at 15,000 miles. That made me glad I went with the Saturn Vue.

So no, you'll have trouble convincing me that Ford makes a solid product. Past history is a mixed bag as far as I'm concerned. Especially when I know so many people with Honda's and Toyota's that aren't having issues.

 

[ricoba]

So no, you'll have trouble convincing me that Ford makes a solid product.

I know they are not the cars for everyone, but my current Lincoln Town Car and our previous Ford Crown Victoria, are cars that can take a lot of miles, with minimum problems and you end up arriving in comfort.

But sadly, the days of the big V8 battleship boulevard cruisers are soon facing their demise.

 

[Kal]

...you can't simply cancel the labor contracts and think that the employees will show up and take whatever the new management offers. There is nothing to prevent labor from going on strike....

A labor strike might be the best solution. That would substantially reduce overhead costs. After 30 days people on strike would have to purchase COBRA health insurance so that alone would encourage negotiations.

Detroit would not have to manufacture cars they can't sell.

 

[Liz Wolf-Spada]

I just saw an interesting segment on CNN on Toyota's cars in development, high fuel economy etc. Looked fascinating. Honda plans to move ahead with their fuel cell cars.
Liz

 

[craftemp]

Auto Bailout

That gets toward the crux of the issue.

If the automakers file Chapter 11 bankruptcies they can shed the onerous labor contracts that make their labor rates twice the rates paid by Asian automakers in their US factories. A typical mid-sze car built by a Detroit automaker has about $2000 to $3000 of embedded labor cost that would not be there if labor rates were equalized. If you shave $2000 to $3000 off the price of a Detroit car - or add that much back into the car in added features or improved engineering - the U.S. auto industry will get a lot healthier in not much time.

At it's heart, the bailout isn't a bailout of the auto companies. It's a bailout of the United Auto Workers union and a reward for mismanagement in Detroit.

********


This issue is being pushed hard by Democrats because the UAW has been a long and loyal supporter of the Democratic party, and the Party is returning that favor by proposing to use public money to prop up those ill-advised labor agreements. It's just typical political largesse. Almost every politician of every political stripe does the same thing for his or her favored constituencies - one person's tax break is another person's bailout.

In the words of the inimitable Nikita Kruschev: “Politicians are the same all over. They promise to build bridges even when there are no rivers.”

That is my take on this too! I am furious to think that the taxpayer is supposed to bail out the auto makers.. while the unions/workers give up nothing. It is time for the union to give back FIRST and for the CEOs to stop taking 28,000,000 paychecks! Then go to the taxpayer!
I read that the CEO of GM (I think) works in Detroit but lives in California so takes the private jet back and forth every weekend
Where does this end?? When the COUNTRY is bankrupt??? It is time for everyone to be responsible for their own bad judgement and mismanagement!

 

[ricoba]

I read that the CEO of GM (I think) works in Detroit but lives in California so takes the private jet back and forth every weekend
Where does this end??

I believe that is Alan Mulally the CEO of Ford, and I think he flies home to Seattle every weekend.

Of course this isn't just an auto makers thing.

Jay Leno & Barry Manilow fly home every night via private jet to Beverly Hills and Palm Springs respectively, after their nightly performance, then fly back again for the next nights performance.

Then too did you see the big shin-dig in Dubai upon the opening of the new Atlantis Hotel? I think I read that $28m was spent just to fly a bunch of celebs in on private jets, just to party for the night.

While I realize there is a lot of hypocrisy in the auto makers coming with cup in hand to DC for a bailout on private jets. I just think that excess is unfortunately a sign of the times, in all sectors.

 

[rickandcindy23]

Rick, Jay Leno isn't asking for the government (the people ARE the government) to bail him out of his car problems.

 

[ricoba]

Rick, Jay Leno isn't asking for the government (the people ARE the government) to bail him out of his car problems.

Oh, I know that, in fact, I was wondering when someone would point out that I didn't say it.

My point was that excess, has simply become a way of life today, whether that's in the auto industry or entertainment or even in the lives of everyday folks.

What seems to be happening is we as a nation are now in a terrible mess because lots and lots and lots of us wanted (or thought we needed) things we couldn't afford. I don't exclude myself from this. I just think our over spending has finally caught up with us. While not everyone was the cause of the fix we are now in, many of us unfortunately contributed in one way or another.

Speaking of Jay, who I do like, I always find it ironic when he puts himself in the shoes of everyday American's in his humor. Somehow he is able to paint himself as "one of the everyday Joe's" on a salary of $16M++, per year!

 

[rickandcindy23]

Hey, Jay is a good guy!

He stops and helps people on the highway with car problems, and he really is thankful that his comedy got him so far. I have seen him interviewed, and the guy is very humble.

I remember Johnny Carson talking about his trips to Ralph's. Now that was funny!

 

[dfjkl]

That is my take on this too! I am furious to think that the taxpayer is supposed to bail out the auto makers.. while the unions/workers give up nothing. It is time for the union to give back FIRST and for the CEOs to stop taking 28,000,000 paychecks! Then go to the taxpayer!
I read that the CEO of GM (I think) works in Detroit but lives in California so takes the private jet back and forth every weekend
Where does this end?? When the COUNTRY is bankrupt??? It is time for everyone to be responsible for their own bad judgement and mismanagement!

I don't think most workers should really have to give up much. The realities are workers in general have had to give up a lot over the years. Maybe not the UAW as much as a lot of others...but really, if the execs are taking paychecks that huge, a few percent of that can pretty much take care of most worker "benefits." The waste in most of these organizations is solely at the top. GM in particular would have done much better if it retooled for the current market and didn't think every SUV it was selling was a Cadillac. Even Ford has priced most of it's trucks better than GM for the last 10 years. I don't buy that these guys have "security concerns." That is b.s.

 

[MILOIOWA]

Ok, here it goes LOL! First, let me say I am by no means saying that the us auto makers should be bailed out.
I have worked in the industry at the dealership level since 1996. First of all, from then to now I have seen a 30-50% decrease in warranty repairs across the board. meaning that cars in fact are built better now than they have ever been. Also, there are just as many piece of junk Honda Accords, toyota Camry's and Nissan Altimas on the road as there are Ford Taurus, Chevy Impalas, and Dodge Caravans(well maybe more Dodges ) The argument that the us makers should have quit making gas guzzling suvs doesnt hold water because that is what the majority of people were buying-UNTIL the worthless liberal media preached all this mumbo-jumbo about how we need to drive 4 cylinder fuel efficient cars, and along with the high gas prices sent people into a panic mode so they quit buying them. The car makers cannot change their production stratagies overnight and when everyone panics, due mostly to them being sheep instead of thinking for themselves and listening to the media.
Something else I find interesting is that whenever Ford or Gm have a recall it is plastered all over the news. Toyota has just as many recalls if not more, but do you ever read about them? very seldom. This country is the greatest country in the world. However many of the freedoms we enjoy, have also caused most of the problems we face today. No matter how you look at it, no matter why the car makers are in financial trouble, if they go under, then it will trickle down to millions of jobs in industries that you can't even imagine. Did you know that many of the parts suppliers that make parts for the big 3 also make parts for Honda and Toyota? If the big 3 cannot pay their suppliers, the suppliers are out of business and that means you r almighty Toyots cannot get parts to repair them either. There is just soo much more to this that the media will never tell because then there wouldnt be all this drama and arguing over things to sell newspapers.


Oh yeah, whoever said they liked their 97 ford Contour, the Contour/Mercury Mistake is one of the biggest piles of garbage FoMoCo has ever produced!