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Myths about the Big 3 automakers

Posted Nov 21 2008, 02:41 PM by Kim Peterson
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The Wall Street Journal and U.S. News try some mythbusting about the Detroit automakers pressuring Congress for a bailout.

The automakers have returned home in failure, by the way, after pleading for help from lawmakers. Democrats said they wanted to see more evidence the companies had a turnaround plan in place, and asked to see a proposal next month. The inability to secure aid will increase the pressure on the companies' boards, the Journal says.

Now, about those myths:

1. Bankruptcy is, actually, an option. In fact, General Motors is already bankrupt, writes the Journal's Paul Ingrassia. It's out of cash and needs emergency help. All that's left is the official bankruptcy filing. Same for Chrysler.

2. Removing the chief won't help. The CEO of GM has said he didn't see the point of resigning, according to the Journal. Well, how about a fresh start after disastrous financial results and a plunging share price?

3. Bankruptcy equals death. It's actually a second chance, according to Ingrassia. The companies could get a fresh start by getting out of cumbersome contracts. And that doesn't just mean union obligations, either. We're talking about commitments with dealers, retirees and others.

4. Mandating bonus cuts or fuel-efficient cars is necessary. Customers are already pushing for more fuel-efficient cars, so the government doesn't need to make that a condition on automakers, Ingrassia writes. And executive pay really isn't much of a problem.

5. A GM-Chrysler merger guarantees succeess. The automakers are putting the best spin on what a merged company would look like, but there's no guarantee. GM has massive problems of its own, much less what it would bring on with Chrysler, Ingrassia writes.

6. The Big Three don't build small cars. They build them -- they aren't very good, according to U.S. News. Domestic cars have a miserable showing in the magazine's quality rankings, while Toyotas rule.

7. The Big Three don't build desirable cars. Think Ford Fusion. Or the Chevrolet Malibu, Cadillac CTS or Saturn Outlook, writes U.S. News' Rick Newman. But when gas prices soared, the companies didn't have much left to offer. GM and Ford can't compete with a good minivan, or a crossover, or a fun little car like the Mini Cooper, Newman writes.

8. Blame the guys asking for handouts. The CEOs of Chrysler and Ford are relatively new, and have to deal with bad decisions made by predecessors. GM's Rick Wagoner has been around for eight years and bears some responsibility. Still, GM's march to failure began even before Wagoner, Newman writes.

9. CEOs should fly coach. They couldn't handle any urgent phone calls that way, Newman writes, and they'd have to whisper to avoid the media and others listening in the next row. But if these CEOs are asking for the people's money, they should take the people's transportation, he writes.

10. Blame the unions. The unions added to corporate bloat, Newman writes, but they have made major concessions since then. If you want to point fingers, point at the expensive healthcare plans that retirees get. And unions are going to have to accept the fact that the cushy job and wage protections of the past cannot exist in today's world.

11. The automakers aren't trying. They've cut costs and closed factories. But they haven't made the major, earthshaking moves they need to, like killing off divisions or demanding universal healthcare, Newman writes.

Comments

 

No one will buy a car from a bankrupt auto company..Bottom line . So to all the pundits and anal-yst i say that your comments are inaccurate! This is a 2/3rds consumer economy . To kill good paying jobs in this recession is not a smart thing to do !We must create good paying jobs , its the only way out of a recession ! Until you have people feeling safe in their employment and future ! The American consumer will not spend!A walmart job is NOT GOING to buy homes cars washers dryers big screen TVs and so on in this 2/3rds consumer economy in the USA...

I still contend that the major part of the solution is to provide a minimum of a $3000 tax credit (rebate or prebate) to anyone who purchases a new vehicle from one of the Big 3 automakers.  This would accomplish the desired depletion of the bloated inventory, help the local dealers, and provide sales tax revenues for state and local governments.

Of course there should be strings attached such as eliminating bonuses, establishing a

strategy for renegotiation of UAW contracts and the like.  This gets the money into the economy and accomplishes far more than these mega-loans could ever achieve by themselves.

I risked my life to escape a socialist country to come to the U.S., once the symbol of capitalism.  But what is happening now sounds a lot like the beginning of socialism to me.  The gradual steps of government taking control of businesses and citizens demanding socialized benefits. It is a grassroot movement, with citizens demanding more and more by contributing less and less and hating / demonizing the "accomplished" or perceived "greedy".  Citizens are tricked into thinking that it the fairest to all if everyone gets the same ration.  I see U.S. going there, it feels like living it all over again.  All it takes is a couple corrupt politicans, which there are plenty, and U.S. and its glory will go down.  I am so sad.

It doesn't make sense to me to keep a business just because we want jobs.  How long will this sustain them. The automakers are poorly run companies with low brand value and so-so products.  They will run into the same trouble again a couple of years down the road.  Let some smart enterpreneurs come along and start up a new company.  There will always be those if we let it happen.  Look at Southwest Airlines.  

Unions are the absolute evil in U.S. losing jobs.  I know many people refuse to believe that, but it is true.  I see 80% of all of my employer's U.S. manufacturing moved or outsourced oversears  - tens of thousands of jobs lost.  And, unions are a big part of the reason.  Our benefits are so good, why do we need unions?  I am just looking at the couple of remaining "non-union" plants and I think they have really good benefits.  

When will we accept that we are confronted with a global economy? Low wages...complemented now by innovation off shore, will continue to challenge the "American Dream" as we have known it. Not all in an industry have a license to survive...only those that manage their destiny responsibly. The "big three" have failed in the latter. As a last chance, give them another opportunity through a bankruptcy filing....that will bring a "sense of urgency" to getting their act together and achieving success.

Look out America...at one time menial task jobs (as viewed by us, such as manufacturing) moved off shore....now technical jobs have moved off shore as well as medical jobs...Why??? because other capable people are willing to do the same job for much less pay. US industry needs a business model that directly compares to global competition....and American lifestyles must adjust accordingly.

Do not kid yourself car markers are only worried about themselves useing the workers as ponds, we want and need money but don,t tell us how to use it and don,t expect us to tell you how were using it. As long as the share holders and CEO,s are taken care off first then let,s worry about the little person next

Here is my solution, LETS DO TO EVERY OTHER COUNTRY WHAT THEY DO TO US in the FORM OF TAXATION. Enough of the Free trade idea that says you can send us anything you want, but we wont buy American Goods. (other than mortgages) CHINA OWNS US TODAY, they own our debt, and we wont do anything about it.

I'm old enought to remember the COLD WAR, we beat the Soviet by our economic stength. NO AMERICAN COMPANIES NO AMERICA

I'm a GM dealer and have read and listened to a whole bunch of opinions regarding this whole financial crisis that our mother house is in. The 11 points made above are about the most sensible I've read. All, are right on the money. Unfortunately the "perfect storm" the auto companies are in demands that the public cash must be accessed or it will get real ugly. Let's be clear,they don't deserve it. They have ignored everyone that have tried to get them back on track. That would include shareholders, dealers, workin' stiffs, Ross Perot, K. Kirkorian, J. York. They, at the top seem to believe that they are ENTITLED to all the luxuries that their corporate culture guaranteed if they were able to climb to the top, hence the private jets (it just didn't occur to them that some folks would find that offensive) Serving their customers became an incovenience and anyone bringing that fact to their attention was scorned or bought out.Upper management don't get it, we all work for the person that pays our salaries..the customer.To bad the public money has to be offered to save the economic chaos that would ensue because they just won't get to learn the lesson they should.Also too bad is the fact that with all this crisis going on, the public will likely avoid GM stores and miss the opportunity to drive some of the finest product GM has ever offered.

everyone should be equal. we should all get the perks congress gets.

work 2 days a week. free flights,food,retirement not pooled in with the commoners. automatic retirement pension etc.

break rules at will.lie cheat steal.

blame everyone else

$25 billion is a good investment to save 3 million jobs. But, without a credible plan and change in management(and the  union contracts) we are just postponing the inevitable. The best predictor of future behavoir is past behavoir.

The current state of the automotive industry is a sad commentary on the American people. At a time when so many different generations of us are living together, we could all learn a thing or two from the senior citizens we now ignore or take for granted.

We American consumers finance our futures to drive around in high-priced, non-essential "luxury" vehicles. We take in mass media advertising from morally bankrupt, disconnected executives whom are all too eager to sell us their next fully loaded status symbol. All to our detriment and theirs.

I'm no exception -- I bought my way into a $475 per month American made car that's worth about 1/4 of what I still owe on it. All the while knowing a cheaper car was what I needed...a better value for my money.

The truly sad part is that, while I can afford to pay for my mistake, so many others can't. We don't respect the value of a dollar and we don't have faith that our leaders do either.

I for one have learned my lesson. A car is nothing more than a means to end. A mode of transport. Until we consumers get our priorities straight -- and hold our leaders accountable to do the same -- our economy and our country will continue to be a shell of what it once was.

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