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Monday, November 10. 2008

Nationalizing Detroit

The piece at the WSJ begins thus:

In the Washington mind, there are two kinds of private companies. There are successful if "greedy" corporations, which can always afford to pay more taxes and tolerate more regulation. And then there are the corporate supplicants that need a handout. As the Detroit auto makers are proving, you can go from being the first to the second in the blink of an election.

For decades, Congress has never had a second thought as it imposed tighter emissions standards on GM, Ford and Chrysler, denouncing them for making evil SUVs. Yet now that the companies are bleeding cash, and may be heading for bankruptcy, suddenly the shrinking Big Three are the latest candidates for a taxpayer bailout. One $25 billion loan facility has already been signed into law, and Senator Debbie Stabenow (D., Mich.) wants another $25 billion, this time with no strings attached.

Sheesh. So do I. If they get it, they'll buy munis with the money because munis are more profitable than Chevys. Read the whole thing.

Posted by The Barrister in Hot News & Misc. Short Subjects at 10:55 | Comments (11) | Trackbacks (0)

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No worries. We'll only have to subsidize them for another 30 years and then, following the British example, we can sell them to successful car makers like Chery or Tata. Or Proton in Malaysia. Can't forget Proton.

The Tata Camaro. Someday, you'll be able to buy one.
#1 Skookumchuk (Link) on 2008-11-10 11:29 (Reply)
Reorganization under bankruptcy is the only solution. With their current structure, balance sheet and UAW reltionship they are worthless to any potential buyer. A large portion of the debt holders and 100% of the equity holders should be wiped out. That's life.
#2 Tom C on 2008-11-10 12:33 (Reply)
First, there is the problem of "non meritocracy". It has been no secret that the local Detroit families of engineers and managers have handed their jobs down to their kids. I say this first because it allows me to bring forward this fact:
"Good politics does not guarantee good design."

In fact I stopped buying US cars in 1977. I have seen no competitive edge in any car they have produced since then. Their cars are as bad in terms of comfort, ease, and reliability as are the busses. THEY (the union) refuse to acknowledge that people value comfort and excellence. How dare those people out there (the ones who don't work for unions). How dare the proletariat demand excellence by buying foreign cars? Well they did dare--the began daring in the late 1960's and once satisfied they have never looked back. If you want to see how badly your money will be spent in Detroit just take a look at Detroit.

Finally, I heard Hannity of Hannity and Colmes brag about his new HYBRID Cadillac SUV. He said that it was a real gas saver: I can't remember if he said he got 21.4, or 24.1 miles to the gallon. That made me laugh. Just had a wonderfully comfortable trip in an all leather interior that handled the road almost as well as a top end luxury car. Part electric and part gas--built in Japan. Average 36 mpg, unless it was going down hill --then it was getting upwards of 60 mpg.
Is this the same blind and ignoranat arrogance we are hoping will once again make the GOP a viable party? You gotta be kidding !
#3 faculty wife on 2008-11-10 12:52 (Reply)
Maybe Hannity enjoys driving something distinctive and powerful. If he can afford the gas, it's his choice...Drive your spam can if you wish and brag to anyone who will listen about mileage...I've got four hundred horses under my hood and will keep it that way as long as I choose. America is built on freedom of choice anyway...
#3.1 Scott Wiggins on 2008-11-10 16:36 (Reply)
"In fact I stopped buying US cars in 1977. I have seen no competitive edge in any car they have produced since then. Their cars are as bad in terms of comfort, ease, and reliability as are the busses."

So, have you done research since 1977 and noted graphs on the competitive edge? That's amazing work on your part. Although, I must say generalizing that all U.S. vehicles are bad is a badly flawed research opinion.

About those 'busses'. What are those? Buses? Those big yellow things that carry children to and from school each day?

-5

`
#3.2 Meta on 2008-11-10 21:49 (Reply)
OBAMA-Nomics in the Obama-Nation.

The foreign car companies aren't doing great either, maybe we should bail out Toyota, Honda, Nissan, Kia and Hyndai while we are at it. There are thousands of US jobs involved with these companies also.
#4 reverendyo on 2008-11-10 13:13 (Reply)
In general, I agree with the sentiment regarding the 2 versions of corporations as DC views them. However, I have a HUGE problem with the current state of auto manufacturing...and I've had this feeling for a LOOONG time.

The problem is this: these firms spent millions, possibly billions, lobbying Congress to reduce emission standards so that SUVs could be built. SUVs were high-margin vehicles, so it was "profitable" for them to build these. Of course, the long slow road to higher gas prices was ALSO evident from about 1989 onward, but Detroit chose to ignore this and avoided planning its future even as Honda and Toyota stole their share of market year after year. Detroit's response? More lobbying.
Furthermore, Detroit chose to ignore the productivity of its own workers (about 10X that of foreign workers) and focused on the cheapness of foreign workers (about 1/4 of US workers) to maintain their "lower cost structure". This, of course, hid glaring long term problems in their solution. While their cars were "cheaper", fewer people had the money to buy them. So they moved into newer fields - finance!
Finance, of course, is a field none are suited for. Lease programs were a disaster in the making. My own experience is a testament to why leases are bad business for the auto manufacturer. AFTER my lease ran out, rather than buy the car from the dealer (or buy a new one), I purchased it directly from the bank HOLDING THE LEASE! At about 20% less than the price the dealer wanted me to pay. Overall, I saved a significant amount of money on the lease versus buy arrangement....and Ford lost quite a bit of potential cash from a return buyer.

Even if I didn't buy, the market for good used cars was heavily inundated due to the lease arrangements. Every year since 1994, these used car supplies were growing, not shrinking.

Add to this the demands (fully justified, in my opinion) by the unions to get better pay and benefits, you had the "perfect storm" brewing. I thought this storm would hit in 2002. It was staved off by record low interest rates.

But chickens do come home to roost. All that lobbying money? Guess who wants it back, but in the form of taxpayer largesse? The guys who lobbied so hard to get rules changed to sell crappy cars!

If Detroit had spent 1/2 the time and money they wasted on lobbying to develop a decent fuel efficient car, they'd have nothing to complain about today.

Instead, they are now in a fix, and they have no good, new models to fall back on.

Let them fail. It will be cheaper for us in the long run. What's good for GM hasn't been what's good for the US in quite some time.
#5 Rick on 2008-11-10 13:56 (Reply)
No Detroit auto maker has had the balls to negotiate with the UAW for a long, long time. I worked the production line at GM for 3 summers in the 80's. I was stunned at how the union, not the management ran the plant. We casually cranked out 55 shitboxes an hour until the plant was closed.

My apologies to anyone who bought a Chevy Celebrity or Olds Cutlass Ciera.

If GM and Ford were smart, they would just get it over with and sell the company to the UAW.
#6 NJSoldier on 2008-11-10 18:26 (Reply)
Ha - now there's a damn thought. I bet things would change faster than you could spit. Or not. And the UAW would continue their merry ride into forgotten history.
#6.1 Luther McLeod on 2008-11-10 22:00 (Reply)
Am I to believe that our liberty is dependant upon our freedom to choose between a poorly crafted, but large, gas hog, or a cheap "spam can"? Is this how we shall build our new GOP--with this kind of reasoning?
#7 apple pie on 2008-11-10 22:47 (Reply)
I would suggest building our new GOP on free market principles. The market should decide their fate.

Letting these decrepit old companies reorganize themselves under bankruptcy law, or let them go out of business is the brave decision.

Since that's bad for the UAW, it won't happen.
#7.1 NJSoldier on 2008-11-11 07:44 (Reply)

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