Car Companies Back At The Public Trough
Another assault on the American taxpayer is under way from a couple of familiar faces. Chrysler and GM are back in Washington looking for significant amounts of more money before one would think that they even had time to spend the last billions they were just given. For anyone with half an ounce of common sense this is certainly no surprise if you take into account the performance of these two companies over the past several years.
The CEOs of these companies testified before Congress last year in a successful attempt to get public bailout money from the Bush administration and essentially blamed their woes on the economic crisis that was gripping the country. Their reasoning was that with a little help from the government they could weather the current storm, right their financial ships and then steam full speed ahead into the future and return to profitability on the backs of the great new gas-efficient car models that they were in the process of developing. In other words, this was only a temporary blip in their business cycles and soon Americans were going to really want to start buying their cars again in numbers big enough to make them profitable. To a 10-year old it probably sounded pretty good. To anyone else it was somewhere in the realm of Hans Christian Anderson or the Brothers Grimm.
It’s difficult to tackle a fantasy as large as this one because where do you start? Let’s give it a try by taking into account a bit of historical perspective. First, for an excellent background of the car business in America and Japan read David Halberstam’s book, The Reckoning, which was published in 1986.The book traces the development of Ford and Nissan from their beginnings in the early part of he 20th century and paints a disturbing portrait of the American car industry and its chances, even in the mid-80s, of long-term survival.
To think that the car industry’s problems started in even the last 10 years or so is completely wrong as this book points out. The Big Three were headed for disaster long before this century started. Just to put things into perspective, 40 years ago GM was the largest company in the world. Now its stock is basically worthless and its largest competitor, Toyota, has a market capitalization approximately 30 times larger. The people leading GM for the last 40 years basically, excuse the pun, drove this company into the ground. And Ford and Chrysler’s stories are not much different.
The Japanese have been cleaning their clocks since the late 60s and now rule the roost here in the States. How they did it is too long a subject for this article but the important fact is that they did it and they did it because they had a good long-term plan and the American companies sat on their asses and watched it happen. Corporate arrogance, executive greed, rapacious unions and many other factors came into play but the bottom line now is that American car companies make products that most people do not want to buy and their business models are basically unviable.
One brief example illustrates why American companies, GM in particular, are uncompetitive. About $1,500 of the price of a new GM car goes to pay legacy costs like health care and retirement benefits for its union workers. The same number for Toyota is about $300, even for its workers here in the States. GM workers were receiving about $71 an hour in pay and benefits compared to Toyota’s $47. There also is not enough space here to detail the quality issues between the two manufacturers but just take a look at Consumer Reports if you want an idea of which manufacturer you’d be better off buying a vehicle from (I sold cars for three years – Toyota and Ford – and the differences in quality weren’t even close).
And now, some of the people who have been responsible for destroying GM and Chrysler are again, after only weeks, going back to the government asking for more money. And in six months, or maybe even less, they’ll be at it again because their business models have not changed and can not, if ever, for years. Their main argument: you can’t let us fail. We’re too important to the U.S. economy. Sound familiar? That’s right, the banks have the same reasoning.
And, why these people are even in charge of these companies still is a mystery. I mean, the coach of the Detroit Lions, who went 0-16 this past season, got fired. Why is the CEO of GM, Roger Smith, still leading his company when he’s led the company down the crapper? All the people at all the companies that are asking for government assistance should be cleaned out, no matter what industry they’re in. They have obviously demonstrated that they are unfit to be executives of major companies and yet they are still in place. If you or I were as incompetent in our jobs we would have been fired long ago.
It’s all part of the corporate mentality that has permeated America society which has been led to believe that business leaders are some kind of cultural icons to look up to. Most of them are greedy, self-centered pigs who have led this country to the brink of disaster and are still being allowed to continue the practices that have brought us to this point. That is the subject for a whole other discussion, however.
The question now is should GM and Chrysler, who under the terms of the first bailout they received were supposed to submit a plan to show their long-term viability by the end of March, be given more money? It’s a resounding NO from this quarter. Will they actually get more? Probably, but it’s a tough one to predict. Most people in government are only interested in covering their own butts. It wouldn’t look good if the car industry tanked on their watch. That’s why Bush gave them money in the first place. Will Obama follow suit? It will be interesting to see what he does and at this point I see no clear indication of what will happen one way or another. But if they do get more money, you know who will be footing the bill.
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Just more proof of how the politicians will only work for big business, the public is only required to vote in the latest thief
I think CEO’s of these companies must resign and government must hire CEO’s with successful track records at far less salaries, or other bonuses. This is just to protect the bailout money provided by the government.
lick me where i s**t ford ,,i will never buy another piece of your crap
Like the horse and buggy, cars will become obsolete. With the building of rail for transport, fewer cars will be sold and they will last longer. Pushing money at a problem is not the answer. Keeping jobs in a dying, non-competative industry is folly. The car companies are going to have to retool to meet the needs of a different transportation structure. The folks at the automakers have worked hard and deserve a retirement, but it isn’t up to everyone else to provide it if their management hasn’t used any foresight or already moved to provide what is necessary in the future.
People don’t want shoddy products. Once burned, twice shy. Some of the cars that were coming off the line in the 70’s were garbage and the doors didn’t even close. Whoever was responsible for putting the door on my 1978 Oldsmobile stationwagon poisoned me against U.S. cars.
Japan made inroads into the US market because of the way they paid their benefits and didn’t price it into the sticker. It wasn’t fair for the Japanese government to do that, but had their products not been superior, they couldn’t have taken over the market. They continued to improve the product.
http://www.ted.com/