WSJ: How Detroit drove into a ditch

Great article from the Wall Street Journal's Paul Ingrassia that summarizes how and why the US auto industry fell to pieces. My favorite part was this telling excerpt:
In Detroit, amid worker alienation and the "blue-collar blues," Chevies, Fords and Plymouths rattled, rusted and rolled over -- and those were the good ones. The Ford Pinto's gas tank was prone to explode into flames when the car was hit from the rear, making the Pinto the poster product for corporate callousness. In 1978, after three Indiana girls burned to death when their Pinto got rear-ended, Ford became the first company to be indicted for reckless homicide. The company later was acquitted, but public opinion judged the Pinto guilty.

For all the Pinto's infamy, perhaps no car better captured America's decade-long haplessness than the pug-ugly AMC Gremlin, which debuted in 1970 and died -- mercifully -- in 1980. The Gremlin's shape, fittingly, was first sketched out by an American Motors designer on the back of a Northwest Airlines air-sickness bag. On Aug. 20, 1979, 18-year-old Brad Alty, fresh out of high school in Mechanicsburg, Ohio, was driving his Gremlin to work when the car broke down. He was two-and-a-half hours late to his first day on the job at a new motorcycle factory that Honda Motor was opening in central Ohio.

For the next few weeks, Mr. Alty and his 63 co-workers did little but sweep floors and paint them with yellow lines. Then they started building three to five motorcycles a day. And at the end of each day they would disassemble each bike, piece by piece, to evaluate the workmanship.

How Detroit drove into a ditch

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  1. This story makes it hard to support a bailout. Rather, let’s give a nationwide face-palm at labor, management, and the consuming public. Failure wasn’t befallen by chance but earned, over time.

  2. #2 – Earned over time by everyone in the entire country?. Labor, management, and the consuming public pretty much takes care of everyone.

    The article (yes, I did read it) struck me as knee-jerk anti-organized labor. Other than an anecdote about Ford union bosses refusing to meet some management reps over welding efficiencies, the writer presents no evidence that the woes of the US auto industry are the fault of the unions, yet lays the lion’s share of the blame at their feet. How lovely, just like when some Republicans tried to blame the mortgage meltdown on 70’s anti-redlining legislation.

  3. Kay – The article (yes, I did read it) struck me as knee-jerk anti-organized labor.

    From the WSJ?! Say it ain’t so!

  4. Why did it take this long for people to acknowledge that the American auto industry was in *serious* trouble?

    And, no. They don’t deserve a bailout. Let the companies die, and make sure the assets stay in American hands.

  5. Agree with Kay. Just identifying that a couple union reps at single Ford plant are a little jumpy these days (can you blame them?) does not prove anything. Labor has given so much back to all three of these companies. What the WSJ fails to mention, of course, is the huge capital base the European and Asian companies have developed, greatly aided by government pensions and universal health care. The UAW did not design the Pinto, and you can’t blame them for this debacle either. I’ve worked with these auto workers; the reason they’re losing their loyalty to their bosses is that the bosses show no loyalty to them. When Ford builds cars in maquiladoras, paying poverty wages, the union and its members have every reason to doubt the intentions of management.

  6. I was listening to some chucklehead on NPR talking about how if these companies are not bailed out, U.S. manufacturing is over….

    *chirps* *chirps* *chirps*

    No kidding! Every other business and industry in the U.S. has be adversely affected by overseas manufacturing and somehow the auto industry is special.

    Great. Henry Ford mass manufactured the first consumer car. It’s decades later and the U.S. does nothing but build bigger cars and doesn’t innovate at anywhere near the rate of overseas manufacturers.

    You know why an industry fails? Because it can’t keep up.

    Also invoking patriotism for the purchase of a car is over. Back in the 1980s I remember people being very jingoistic about the nationality of car manufacturers. Now? Who cares!

    U.S. manufacturers and unions need to seriously re-evaluate their purpose in a global economy if they are serious about loss of manufacturing jobs overseas.

    PS: Also flying to Washington, DC in private corporate jets and claiming poverty is clueless.

  7. The UAW does not design vehicles or analyze markets. They carry lunch buckets and do physical labor. Don’t confuse them with the cretins who have killed an industry.

  8. Anybody know what percentage of the money made in states that have the auto-industry is generated by the auto-industry? How many workers would be laid off if these industries fail? And how much of the local economy (businesses, schools, etc) would collapse? I think that would be ultimately, the main reasoning behind a bailout, It’s probably cheaper to save these companies than to save entire states.

  9. @#11 POSTED BY BUDDY66:
    I would tend to agree with you because both of my parents were factory workers. But you know what I’m hearing more and more from people I talk to about this? Unions need to face their role in this mess. Politically that sounds anti-Union, but it isn’t. The reality is they have taken more and more without giving more and they need to pitch in as much as anyone else.

    There’s a solid reason why jobs are going overseas. And unless everyone involved in U.S. manufacturing faces this reality, nothing is going to change.

  10. I don’t lay the blame solely at the feet of organized labor, but they should have woken up to market realities long ago. As I understand it, American small cars were selling until credit dried up, so they might have been okay if their car sales hadn’t gone into the ditch. It’s not that American car companies completely conceded the practically sized car market to foreign companies (I’ve owned and loved two Ford Escorts), but they really should have been studying those markets a ~lot~ harder in the decades since the competitors first got a toehold here with the first gas crisis (gee, that sounds familiar). And apparently they never realized that with a good reliable smaller profit margin auto sold to a young customer, you can gain a future customer for your larger more profitable models later on down the line. But, American business quit being about investing in the future a loooong time ago in the name of quick and difficult to sustain profits in the current quarter.

  11. FWIW, the whole real estate boom is partially due to non-Union workers getting paid squat to do work that others overcharge for. Like everything in American society there are extremes: Low cost foreign labor on one side, and over-priced domestic workers on the other.

    Something needs to be done to rebuild the middle class. A true middle class. That’s the ultimate solution to tons of these issues.

  12. Speaking of chirping crickets, they were heard on the Hill yesterday, when the Detroit 3 CEOs were asked if they would be willing to work for $1/year salary a la Lee Iacocca.

    Toyota’s CEO makes less than $1 million per year, which, like the Detroit 3s executive compensation, was never mentioned as a factor in the WSJ article. Go figure.

  13. Oh and FWIW, I’ve been slowly re-discovering the toy/novelty manufacturing history of Brooklyn, NY. Ben Cooper costumes? Made in Sunset Park. Spalding balls? Made in Prospect Heights. Tudor Metal Products who made Electric Football games? Downtown Brooklyn/Fort Greene.

    The list goes on and on, but every town in this country has some historic piece of manufacturing that has disappeared.

    Did any of these companies ask for a bail out? Nope. Did these companies provide lifetime employment for their employees and negatively affected them when they were gone? Yes.

    I’m just tired of certain industries in the U.S. being called “magical” and they “can’t fail”.

    Enough is enough.

  14. #14 fnc:

    “I don’t lay the blame solely at the feet of organized labor, but … they really should have been studying those [small car] markets a ~lot~ harder in the decades since the competitors first got a toehold….”

    Factory workers? Shop rats? “Es no they job, mon.”

  15. Back in the 70s I had a Pinto and my girlfriend had a Gremlin. Later, she had a Chevette and I had a Le Car. They were all pretty lousy, but so were 2 1/2 of the 3 Datsuns I owned around that time.

    Detroit will get a bailout, theyre just negotiating terms & doing the coy dance of brinksmanship.
    It will cost us a lot, but consider the costs of having NO domestic owned auto industry, because that’s the probable option.

    In the mean time, go ahead and take out your frustrations bashing Detroit. It means nothing and does no harm, so if it makes you happy why not?

    BTW, I’m not inDETROIT today. We drove across New York today via Ontario.

  16. @#15

    Jack, you’ll have to help me out here …

    “FWIW, the whole real estate boom is partially due to non-Union workers getting paid squat to do work that others overcharge for.”

    What does that mean? I can’t make any connection between wage disparities and a “real estate boom.”

    “Something needs to be done to rebuild the middle class. A true middle class. That’s the ultimate solution to tons of these issues.”

    What is a “true middle class”? What does it do? What is the difference between a working class person and a middle class person? Which class does a 60G per year auto worker belong to?

  17. “I think that would be ultimately, the main reasoning behind a bailout, It’s probably cheaper to save these companies than to save entire states.”

    Cheaper yet: Have taxpayers pay the union workers for the rest of their lives to do nothing and let the auto companies close down.

  18. Jack, it sounds like you are telling working people to suck it up and make do with less, like they do in China. Is that what you mean when you say we need a “true” middle class – one that relegates manual workers back to poverty? After all, it’s not like factory workers deserve to make a decent living, right? /snark

    IMHO, if we paid everyone a living wage – and that includes factory workers and janitors and baristas – we’d probably end up with much less stuff but much more of the good things.

    Cue libertarians in 1…2…3…

    1. it sounds like you are telling working people to suck it up and make do with less

      Aren’t we all going to have to suck up and make do with less? Is there any other option? I’m applying for food stamps next week.

  19. responsible and well documented estimates of jobs lost as a direct cause of the failure of the Big Three or 2 of 3 are 2,500,000 – 3,000,000. That could turn a recession into a long, deep depression. Those jobs might get ‘lost’ in the long run, but some economists argue tha tsaving them for a while even is a reasonable stop gap measure to avert a real debacle in the larger economy.
    Personally, I think the Big 3, or at least 2 of them can be saved. I just know too many smart, driven, dedicated, educated obsessive auto heads in and adjacent to the industry to think that all of that work and genuine spirit won’t prevail.

  20. @#20 POSTED BY BUDDY66 , NOVEMBER 20, 2008 8:56 PM

    What does that mean? I can’t make any connection between wage disparities and a “real estate boom.”

    If union labor were the be-all/end-all then you wouldn’t have trucks of union laborers driving around to neighborhoods where illegal immigrants are to pick up day laborers for $8 per hour while the guy in the truck is clearing $30. Do you think the real estate boom would have happened if workers who did the real work were really paid a fair wage?

    What is a “true middle class”? What does it do?

    Someone who is not in debt and not a part of the “working poor”.

    What is the difference between a working class person and a middle class person?

    They can both be the same, but nowadays if you are a working class person you’re most likely the working poor.

    Which class does a 60G per year auto worker belong to?

    Is that what an individual starts at? Because if that’s the case that’s twice as much as most police officers. And honestly while it’s hard work, thanks to automation it’s getting easier and easier as each year passes.

    Autoworkers are overpaid. They shouldn’t starve. They shouldn’t suffer. But they shouldn’t be paid exponentially more than others.

    @#23 POSTED BY KAY THE COMPLAINER

    Jack, it sounds like you are telling working people to suck it up and make do with less, like they do in China.

    Sounds like you’re building a straw man.

    Is that what you mean when you say we need a “true” middle class – one that relegates manual workers back to poverty? After all, it’s not like factory workers deserve to make a decent living, right? /snark

    There’s a class between poverty and getting a wage that is out of scale with what you do and based on seniority.

    Is there a true reason that autoworkers retirement packages need to be as high as they are?

    I mean I grew up poor, and buying a new washing machine or a TV set was a big deal. And life could have been better if my parents were paid slightly more. But you know what, making enough money to own an SUV, LCD HDTV and other non-essentials and then complain about being “threatened” is horsefeathers.

    Don’t complain to me or anyone about how “hard” you have it if you somehow actually have to live within your means instead of having two cars.

    What amazes me about some of these comments is that the destruction of the American middle-class is real and has been quantified all over the place.

    @#21 POSTED BY MARK FRAUENFELDER , NOVEMBER 20, 2008 9:00 PM

    Cheaper yet: Have taxpayers pay the union workers for the rest of their lives to do nothing and let the auto companies close down.

    Exactly. I’m proud for all of the positive things organized labor has brought us, but enough is enough.

    Oh as far as crazy U.S. economic stuff and real estate goes how about this: NYC has been transformed in amazing ways since the real estate boom began. But guess what lot in lower Manhattan is still empty and still paying salaries to workers who seem to do nothing but push dirt from one end of the lot to another? The World Trade Center site. Sorry to invoke that memory into this thread, but this country has some crazy priorities and ideas.

  21. @#25 POSTED BY ANTINOUS:
    You know, the last energy crisis in the 1970s people had to ration gas. And World War II people made sacrifices to help a financially strapped country defend itself.

    Now I need to pay money to the government so banks can overpay their staff and a dead-horse of an industry such as the U.S. auto industry can continue to create garbage? C’mon people. This recession is real. It is VERY real. Either suck up and deal with the things one needs to do to balance things out or just get out of the way.

  22. Maybe if there were American hybrid vehicles with competitive pricing and mileage to foreign hybrids then we wouldn’t be in this situation.

    Green energy now!

  23. how hard is it to re-tool to produce cheap, limited speed electric vehicles? Absolutely simple, unadorned A to B wheels?

    Who ever gets there first might have a chance. But somehow I can think of three makers too proud to even consider it.

  24. OK, here’s a mental model for managers (former big time managers): The war is over. You lost. All is in ruins. There IS NO MONEY. Nothing but idle hands and scrap metal. Build.

  25. As if our economy wasn’t fucked enough, the death of the auto industry in America will drag us into a full blown depression. The death of the big three will kill hundreds of other companies in the short term and thousands in the long term. You idiots are cheering the destruction of about 1/10th of our economy. You should beg your senator to vote for a loan.

    1. You should beg your senator to vote for a loan.

      How about a bail-out loan that cannot be used for anything other than line-workers’ salaries, with a provision that prevents the companies from redirecting other monies into the pockets of executives and investors?

  26. @#31 POSTED BY THEMIDDLEROAD

    You idiots are cheering the destruction of about 1/10th of our economy. You should beg your senator to vote for a loan.

    So how about the government bails them out with one stipulation: No more gas guzzlers. Create true alternative fueled vehicles.

    If I have a friend who can’t stop spending money I might bail the out once. But if they blow it and come back, screw them.

    And honestly you’d think the whole Chrysler situation in the 1970s would have taught people something. Not to mention foreign cars pummeling U.S. businesses into the ground.

    Is there a valid reason a GM factory can’t be retooled to be a Honda plant in some government subsidized “Your business is over but we can help you become a plant for these guys…” plan.

    Sorry folks look at the writing on the wall. Rescuing Detroit won’t magically fix anything as long as it’s business as usual.

  27. The Nazgul Trio sat before the purse-guardians and did exactly what when asked if they were flying back in their private jets? If just one had said, “You are right, I am sorry, sell the plane, I’ll take the damn bus back.” In Japan people in responsibility still sometimes kill themselves – in shame.

  28. @Joel #33:
    I don’t have deep details, but sadly I discovered most of that local toy factory info after I moved back to NYC in 2000 and the factories were being sold and converted into luxury lofts. It might be worth it to dig up an old 1970s phone book and then do a search for toy manufacturers then/now. Hmmm. Winter project I think.

  29. Jack @ 26:
    “Is there a true reason that autoworkers retirement packages need to be as high as they are?”

    Err. So they can have a comfortable retirement? Surely the question should be – is there a reason why everyone else’s retirement packages are so shitty? If you can negotiate yourself a decent retirement package then you deserve it.

    Is there a true reason that CEO’s pay needs to be as high as it is? That investor dividends need to be so large? Well…no…of course not. It’s just that these guys are at the top of the pile, so they get to determine their own worth. And screw the little guy because he’s just not worth that much.

    Sounds kind of unfair to me.

  30. There is blame a-plenty to go around. The auto companies wrapped themselves in chains and jumped into the water while the union’s help to hold their heads under water.

    I think everyone can agree that American auto companies deserve a big heaping pile of blame. That said, the unions deserve a big heaping pile of blame as well. I served a brief stint in the auto industry. Let me tell you, working with auto unions sucks. I don’t know how much of this applies to other unions, but the auto unions suck and deserve to die.

    I was an engineer working with various part suppliers. Non-union shops ran a wide range of personalities. Some times you would show up to be greeted by enthusiastic and clearly knowledgeable technicians who would work hard to get the job done, and some times you would walk in to find that no one knew what the hell was going on and the shop was a mess. Non-union shops run a nice bell curve from suck to awesome.

    Union shops universally suck. The first thing you need to know when dealing with a union shop is that you are basically dealing with a bunch of asshole lawyers whose singular goal in life is to do as little as humanly possible. There are certainly exceptions within each company, but as a whole, union shops are all roughly the same.

    First, you will have to go through a litany of things that you can’t do. At a non-union shop, if I am standing around trying to get a machine to run right and a tech yells, “hey pass me that wrench, will you?” I pass him the wrench and think nothing of it. If this happens at a union shop, it is because a union guy is pissed he is working today and is trying to get you in trouble. If you are dumb enough to pass him the wrench, he will promptly report you to the union for violating their workers agreement which says engineers can’t touch tools. This is a pretty common thing that they do to new engineers.

    Second, while there are certainly exceptional individuals, on the whole, in union shops you need to battle people to get work done. I can understand not wanting to work long hours, but once you are there, is there really any earthly reason to avoid working all together? I mean, you are stuck in the place until it is time to go. Why not, you know, work. They will do pretty much anything to get out of working. No one has an ounce of enthusiasm for getting anything done. These shops run with absolute crap efficiency 90% of the time because the human component works as slow as humanly possible.

    I learned when dealing with union shops to quickly find the youngest tech and the most knowledgeable tech. The knowledgeable tech is usually an old guy who knows the equipment well. Getting him to do anything is painful because he is senior in the union ranks and this some how means you don’t have to work, but he often has a huge knowledge base. You grab the youngest tech you can find because the union system has not yet beaten him into being contemptuous of showing up in the morning and he is still under the delusion that merit counts for something instead of just seniority.

    Bah, I could rant forever. My point is that the auto unions deserve to be tossed into the fire just as badly as the auto companies do. Their incompetence combined got them to where they are. The union’s hatred of working and obsessive protection of seniority at the expense of everyone else combined with the auto companies general incompetence should send them both to the flames.

    That isn’t to say I am against a ballout. I am practical enough to see that the entire industry failing at once might be a really bad thing. I am just saying that if justice (instead of fiscal stability) was the goal, I would shove the unions and the big three into the same furnace and let them all burn.

    Fuck’em all. I drive a Honda anyways.

  31. You know, both Ford and General Motors are really successful in Europe these days. Both produce really good cars which in a lot of cases beat the pants off the competition, and in all cases are fully competitive. They sell well and the companies are profitable. That hasn’t always been the case, but it is now.

    Whatever’s wrong with Ford and GM, it’s an American problem. Not a Ford and GM problem.

  32. Like other posters I think that there is enough blame to go around.

    It is disturbing that the Unions do not seem to want to accept any part of the responsibility for this.

    The trouble as I see it (clueless armchair critic that I am) is the greed and inflexibility of both the Unions and upper management – everyone still seems trapped in the 50’s.

    It’s hard to see people out of jobs but it’s harder (for the economy etc) to see people in untenable jobs. Where’s the future here?

    Rather any bailout should go to protect peoples retirements and re-education/job training not prop up a bad/toxi system.

  33. I’d like to pont out to those who bemoan gas guzzler SUVs as bad for the country that governments make public policy. Corporations make profit for shareholders, and in the case of manufacturers, they do it by selling the highest profit products. If you want a bad guy to blame, go find who was holding the gun to your neighbor’s head when they bought a Lincoln Navigator.
    In the first year of the highly successful Navigator’s sales, the profit on that vehicle equaled the entire sales price of a Ford Focus, on which they just about broke even. Now if you were Ford and had shareholders who you were responsible to you’d be criminally irresponsible not to sell as many as possible of the vehicles with the 10K+ profit margin. That’s what corporations do.

  34. I’m surprised no one has blamed the UAW for the death of the Saturn “electric” ten years ago. As I said, autoworkers don’t plan, design, engineer, or sell the product. They just BUILD the goddamn things! I’ll bet not one of you carping union-busters ever punched a clock in an auto factory and bucked an assembly line. In short: You don’t know what you’re talking about.

  35. Yeah. Let ’em fail. Fuck ’em. Those jobs are mainly in the flyover states anyway. They need to get with the 21st century and get one of the millions of tech jobs out there. So what if it’s $10/hr callcenter work? It’s a global economy y’know…winners and losers…it’s their fault for living there and having families and stuff.

  36. If GM goes to Chapter 7 liquidation, will this affect the demand for automobiles? Not significantly. Many of GM’s former employees and suppliers will be needed by other companies to keep up with demand. GM makes 20% of the autos in the U.S. Yes, a lot of people will lose their careers, but the loss of GM would hardly be “devastating” to the nation or send us into a real economic depression.

  37. @Chris: You are right- Ford and GM ARE very popular in Europe. While turning out SUV and truck behemoths and ridiculously ugly luxury cars in the US- they build small, practical, and efficient cars for Europe.

    An odd note I got from watching Top Gear at a friend’s house the other day- apparently Europeans see Hondas as “sad lumbering cars your grandma drives”. It’s odd the different ways Americans and Europeans see the auto industry.

  38. @ Schmod:

    The fact of the matter is, is that the American government probably will never let these companies die, in order to save face. The safe money is on them jacking-up import tariffs in order to increase the demand for American cars. Personally, I feel that we won’t see a complete collapse in the American auto industry in our lifetimes, but that’s just me.

  39. Interesting article. The WSJ apportions blame between management and labor, but characterizes management transgressions as spectacular and symbolic “blunders”, like bad timing of bonuses and separate bathrooms, while labor’s are shown as systematic and destructive. Stupid executives come and go, but the UAW keeps turning up like a soap-opera villain.

    I say Congress should lay down the terms–if the companies want bailouts, cancel existing executive contracts and then fire the top executives.

    Then put the proposal to a vote by the shareholders, though it’s no good if the executives are allowed to vote. I wonder how that vote would go?

  40. I’m with others here, and on other boards- I believe the “Big 3” need to die. Period.

    Seeing their smarmy, unapologetic CEOs at the congressional hearing, even before the whole private jet debacle, did it for me.

    I feel very bad for all of the people it will hurt, but the American auto industry is a poster-child for corporate bloat and greed (and I’m including the corporate management AND the UAW in that).

    At the very least- they should be forced into bankruptcy so they HAVE to restructure, and that restructure would be managed by the judicial system. Handing them money, even under conditions, isn’t going to really change anything. Hell- we handed the Treasury Secretary hundreds of billions of dollars under certain conditions- and he has decided he can do whatever he wants with it anyway. Why should GM, Ford, and Chrysler be any different? That money won’t go to the workers or designers, it won’t go to re-tooling plants, it will go to lining executive and shareholder pockets for another couple of years (just like the “Bail Out” money that went to the banks).

    Americans will still buy cars, lots of them, so a lot of those jobs won’t necessarily disappear. Honda and Toyota, and maybe companies like Hyundai and Tata, will probably buy some of the plants or build new ones in the US to fill the void. Like it or not- at least they know how to run profitable companies that can innovate. Honda, Toyota, and Subaru have plants in the US already, with a motivated (non-union) workforce that somehow manages to do just fine. Subaru has a flagship “zero waste” factory in Indiana that is just amazing.

    The US automakers are a good 10+ years behind Japanese and European car companies when it comes to anything resembling innovation. Their most recent “innovation”, in an attempt to save their floundering SUV market- the “Crossover”. What a joke- a 4WD station wagon. Subaru has been doing that for over ten years. They are even falling back to 50s and 60s body designs. Look at all the station wagons they are churning out now, along with cars like the PT Cruiser and HHR, and I can’t forget- the new El Camino (Ute)! Way to innovate!

    And, why can’t American cars get better gas mileage? Japanese cars of similar size and performance get up to 50% better mileage than their American counterparts. (Google it.) They also tend to last 2x or more longer. I have a Honda SUV (I’m not a complete SUV hater) and a friend of mine has a similar-sized Ford SUV. Both were built and purchased at about the same time. Mine has twice the mileage on it now than the Ford. The Ford is quite literally falling apart (engine and transmission problems, interior trim failing, body/rust issues), and gets 15MPG less than the Honda, which has yet to have a mechanical problem. Both of us are “hard” on our vehicles, so I don’t believe this has anything to do with differences in the amount of care they receive. And I know there are countless other similar examples out there.

  41. I’ve worked both sides of the situation, as a union-backed employee and as a manager in a unionized workplace. Ideally, the union is in place to advocate for workers’ rights and benefits, and to make sure management is fair and impartial in its evaluations and enforcement of standards. Management has to make sure that the work is done according to standards and that employees not meeting the standards are either trained up, reassigned, or eliminated.

    All too often, labor-management relations turn into Monty Python’s argument clinic. Both parties assume the other side is out to screw them, and so hardly anything gets done. The UAW takes that to extremes, but given that they started out dealing with the likes of Henry Ford, it’s understandable. Both sides are at fault in maintaining that adversarial relationship, and that will have to be addressed along with everything else.

  42. Of course the loans need conditions. Still, legislating how to run a business will just end up in disaster, and any government appointed management will probably fuck things up worse. The auto industry is way more complicated than most people think. Every little part in your car involves a significant amount of work, testing, and logistics. The computer industry, a breathlessly complicated industry, is downright simple in comparison.

  43. It doesn’t matter what the terms associated with the bail-out are for one fundamental reason: Congress has no idea how to make the Big 3 independently sustainable and competitive. Plus, with regard to that outcome, many (if not all) Congress members have substantial conflicts of interest which makes them want to secure short-term voting blocs over long-term economic solutions.

    Forcing them to be more green does nothing.
    1. We lack the infrastructure for plug-in electric vehicles.
    2. Purchasing new hybrids is not remotely cost-effective for most consumers without huge subsidies.
    3. This type of heavy-handed regulation and taxation is exactly why we don’t have clean burning 60 mpg diesel cars like you see all over the world. (Incidentally, it’s also why we lost our nuke expertise and are shooting ourselves in the foot burning coal).

    Anyone who claims to know how to create a non-market-based long-term solution to this mess is lying or smoking something. This is why Chapter 11 (and 7 if need be) exists. A competitive marketplace can build the new US auto industry. People like Barney Frank can’t.

  44. @#41: Totally right.

    The reason the Big Three focused soooo much on their SUVs was because they desperately needed the money they earned. The margin on a Prius or Fit, made by an American car maker with its ungodly overhead, is not high enough to justify producing it. They didn’t have the money to do the R&D AND take a loss on every vehicle sold.

    There’s no one thing that killed Detroit. It’s been a non-stop shit storm for 30 years. SUVs were like the last ditch option that everyone knew would fail.

    I live near Detroit and even I don’t think a bailout is a good idea. I do think that the millions of people who are employed by the auto industry need a BIG government sponsored cushion, though, because otherwise you’re pulling the rug out from underneath a multi-state regional economy.

    of the whole region is going to be completely decimated.

  45. Takuan @#29:

    “how hard is it to re-tool to produce cheap, limited speed electric vehicles? Absolutely simple, unadorned A to B wheels?”

    Check out Neighborhood Electric Vehicles (NEV’s) which are basically what you are describing. There are a few manufacturers out there, but an extremely small market. They are federally regulated to 25mph max and can only be operated on roads with a 35mph or less speed limit (+/- 5mph, haven’t checked in a while). Further, the individual states and potentially on down to the county or city level has a say in whether they are street-legal or not.

    An NEV can be made as basically a hopped-up golf cart. Nearly zero commonality with existing cars. Now, if you want an electric vehicle that meets current crash regulations and is legal on all roads, take a base-model mini pickup (like a regular cab 2WD shortbed Ford Ranger) and load it up with about 1,200lbs of golf-cart style lead-acid batteries, a DC series-wound motor and controller. 55mph, 30 mile range, seats 2. Can be built today with off the shelf parts, including pre-made battery boxes, transmission adapters, the works. With a 2-5 year old donor, preferably one with a blown motor, you can build it for $10,000. A factory making thousands of them could probably sell them brand new for that price.

    The trouble? Those batteries need extremly regular maintenance. Treated well, they will go about 10,000 miles before needing replacement. Treated poorly, they will barely go 3,000. Somebody smart needs to make a reliable winter/summer hardy automatic battery watering system for electric cars. Put a light on the dash for “low water”, plus a “limp home” restricted power output mode for when the tank goes dry, and you’ll protect the batteries without much grief to the consumer.

    The other problem? A new Kia or Chevy Aveo is less than $10,000, seats four and goes 300 miles on a tank of fuel. Until the price of the 30 mile 55mph 2-seater comes down to $5,000 or so, I don’t see it taking off. Save 50% and meet 95% of my driving needs? I’d buy one. Tomorrow. Even though my ’99 Chevy Prizm still gets 32+mpg after 112,000 miles. Add a $200 5kW genset to the vehicle and it would serve 97% of my driving needs. Make a 20-30kW tow-behind genset available for rent and it would meet 100% of my personal driving needs. If it were a 6-passenger minivan, it would meet 100% of my whole family’s driving needs with the same basic requirements of 55mph and 30 miles, + genset or + towbehind.

    I’ve ranted about this before, so I’ll quit here.

  46. don’t stop ranting, those are good observations and need to be spread around until they become “common knowledge”, you know,the kind Detroit never seems to have.

  47. #43 POSTED BY BUDDY66

    I’m surprised no one has blamed the UAW for the death of the Saturn “electric” ten years ago. As I said, autoworkers don’t plan, design, engineer, or sell the product. They just BUILD the goddamn things!

    They build things and demand more money and more money without any regard for the level of work they are doing. Has the UAW ever stepped up and said, “You know times are tough and we want this company to survive… We will concede the following for the next X years to keep the industry alive…” Nope.

    In contrast, when NYC was financially strapped NYPD negotiated salaries to allow both sides to be happy. And now they are fighting for increases, but still… BOTH sides made sacrifices for the whole.

    #49 POSTED BY WOLFWITCH , NOVEMBER 21, 2008 7:29 AM

    I feel very bad for all of the people it will hurt, but the American auto industry is a poster-child for corporate bloat and greed (and I’m including the corporate management AND the UAW in that).

    Exactly. I think CEOs are to blame as well as UAW workers. The whole industry is bloated and in dire need of a culling.

  48. If you look at the sodas on the shelves of most American supermarkets, you will find nothing but Coke or Pepsico products. If they died off, the shelves would still be filled with sodas. They would come from smaller manufacturers. Same thing with cars. If we let the big3 die off, it wouldn’t mean that American automtotive industry would be gone forever. Small independent manufacturers could come up to speed very quickly by finding their own private or public investors and achieve economies of scale over time. This fear that wiping out GM and Chrysler would mean a permanent absence of American cars is ridiculous.

    Rather than an expensive bailout, we could follow the lead of other successful automtotive producing nations by implementing temporary protectionist policies until economies of scale improve on the domestic front.

    I would envision that even beloved cars such as the Chevrolet Corvette or the Ford Mustang could be manufactured by licensing the design through 3rd party makers.

    Domestic and Foreign automakers rely so heavily on 3rd party companies for parts and components as it is that they aren’t the only source of automotive manufacturing. Delco, Nippon Denso, could stand to serve a new market of independent makers. Not only that, a clean slate could provide the opportunity to introduce standards like in the computer industry so that more parts could be used interchangeably between automakers and increase efficiencies.

    Let’s not equate the death of old failed companies with the death of American carmaking. it could very well be the needed stop to revive it.

  49. This article is spookily prescient

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQJ3WYNbKv9Q

    “Our militancy at GM drew on the youthful rebellion that was gripping the U.S. Hundreds of us at Fleetwood, black and white, grew our hair long, fueled by anti-establishment fervor that helped end the Vietnam War and sweep Richard Nixon out of the White House. During our 30-minute lunch breaks, we sat in our cars and listened to Jimi Hendrix as we smoked marijuana, drank beer and took Desoxyn and other methamphetamines before returning to the line. Our quality levels and absenteeism rates were among GM’s worst. We didn’t care. ”

    And later.

    “Honda wanted to head off a nationwide boycott of dealerships the union was threatening. Success by the UAW at Honda, the first Japanese assembly plant in the U.S., could have led to union recognition at what are now 18 other factories owned by Asians and Europeans. It was a once-in-a-lifetime chance to help GM by narrowing Honda’s cost advantage.

    The union delegated responsibility to Joe Tomasi, a regional director in Toledo, Ohio. Tomasi, who died in April at 86, earned a Purple Heart in the Battle of Okinawa during World War II. He talked often about how he didn’t trust Japanese people, Fraser says. He was bitter about contract language Honda proposed saying the two sides would avoid adversarial relations, says Leonard Page, then the UAW’s associate general counsel. Put off by Tomasi, Honda management dropped any pretense of cooperating with the UAW. ”

    And finally.

    “George McGregor, president of UAW Local 22 at GM’s Hamtramck, Michigan, plant, worked at Fleetwood during the 1970s. He says the UAW should have used its power to stop GM from shipping defective cars instead of forcing it to hire unneeded workers. “We fucked that place up, and we’re paying for it,” McGregor says. ”

    The Union fucked up. The Management Fucked up.

  50. How many ways to skin a cat? Sure, the Big 3 are simply making product that no aggregate of people without profit- or product-damaging incentives want to buy, largely because the products are inferior, no matter how many pretty people are papier-mache’d (with attractive backbeats) over the flaws.

    The most direct poor decision has to be all the eggs in the SUV basket plan…when every product line is working from the same platform, that business is losing flexibility to adapt. Sure Toyota is hurting in this market like everyone else, but they have enough non-SUV capacity to rapidly respond to new market conditions.

    Turns out Americans want fuel sippers too, and the typical rental car experience has to be the worst introduction to the Big 3’s alternate product lines.

    The Big 3 today are the result of systematic failures, compounded. If the taxpayers are going to be forced into investor role, we should add strong conditions on our money…especially as no one can have any confidence on reasonable returns in any conventional scale of time.

  51. Takuan @#56:

    “don’t stop ranting, those are good observations and need to be spread around until they become “common knowledge”, you know,the kind Detroit never seems to have.”

    http://www.gemcar.com/ is a manufacturer of NEV’s, apparently owned by Chrysler. The E2 starts at $7395, I’ve seen one running around the neighborhood near me. Federally mandated top speed of 25mph, and GEM reports a range of up to 30 miles at that speed. Wikipedia has a good article on NEV’s. The infrastructure to produce these in mass quantities already exists, as they are virtually identical to all the battery-powered vehicles in use at factories, on golf courses, in parking lots, all sorts of places. The Feds won’t let ’em go faster than 25mph, though, because they lack all of the modern safety equipment other than seatbelts, and going backwards on safety would be an extremely hard sell. I don’t live close enough to work to make one of these practical – but I’m working on getting closer.

    To convert an existing car factory over to a simple road-legal EV would not be that tough, the re-design of the car itself is what would be expensive. The pickup is an easy conversion, but isn’t a “great” vehicle. A purpose-built unibody vehicle would be lighter and smaller for the same passenger load, and would be slicker and have more range with less batteries. Cheaper, too, once the sheet metal stamping dies are made.

    Gotta go, I’ve used up my rantage for the day. Go look up “Build Your Own Electric Vehicle” by Bob Brant. It’s circa 1993, but if you’re going DC and flooded lead acid not a lot has changed.

  52. ‘Has the UAW ever stepped up and said, “You know times are tough and we want this company to survive… We will concede the following for the next X years to keep the industry alive…” ‘

    JACK, they’ve done it repeatedly, concession after concession … do your homework.

  53. Takuan @#63:

    “someone please be listening!”

    To my ranting? You sure I won’t give everyone that “glazed eyeball” look and scare ’em off?

  54. At the New Republic, Jonathan Cohn examines the common belief that Detroit autoworkers are wildly overpaid. Guess what: it’s bullshit. In fact, they make barely more than autoworkers in foreign-owned plants in “right-to-work” states.

    The Detroit “big three” definitely have a problem meeting their pension obligations to now-retired workers, and there are a number of ways that this problem could be, with government help, addressed.

    However, the idea that GM, Ford, and Chrysler are being driven into the ditch by crazy union demands is a what is technically referred to by professional rhetoricians as a “big fat lie.” While unions are no more free of fault than any organization run by human beings, in fact the UAW has made concession after concession in recent decades in order to keep the industry solvent. That’s why current workers are making an average of only $28 per hour, far from the $70 figure that keeps being cited in the press and by gasbags like Rush Limbaugh and Bill O’Reilly.

    In fairness, that figure isn’t deployed in this particular Wall Street Journal piece. But honestly, nobody should take the WSJ at face value when they purport to report on labor issues. Promulgating lies about unions is one of the things the WSJ is for.

  55. american steel manufacturing is the template for future us auto; commodity car making goes off-shore, specialty car making stays on shore.

    wrt bailout, bail now and the next recession they will be back in same position.

  56. UAW pensions are going the way of WWII disability payments; the recipients are dying off. If the Detroit 3 (No longer the Big 3) can just hang on a few more years…

    My Mom’s 96, guys; relief is on the way.

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