Myths about the Big 3 automakers
Posted
Nov 21 2008, 02:41 PM
by
Kim Peterson
Rating:
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.
