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Detroit looks overseas for bailout

Posted Dec 01 2008, 06:59 AM by Douglas McIntyre
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GM has plants in Mexico. Ford has plants in Wales, Germany, Turkey, and Spain. Chrysler has facilities in Canada. Almost all of their suppliers source and build key parts in countries around the world.

Most of the headlines about a shutdown of the US car companies focuses on the three million jobs which could be lost in the US and the hit to the tax base. Lost in the analysis is what happens overseas.

That may be an opportunity to find bailout money if Congress is loath to act.

According to FT,  Sweden's government is considering loaning Volvo and Saab as much as $248 million. The companies are owned by GM and Ford.

The move on the part of Sweden raises the possibility that the money the US auto companies need does not all have to come from the US. If The Big Three were smart, they would be knocking on the doors of sovereign governments which stand to see their economies lose large numbers of jobs. Unemployment costs are expensive and raise the need for more taxes. People out of work hurt GDP as much in Spain as in the US.

American car companies are looking for $25 billion. Sweden seemed prepared to put up 1% of that. Pressed, it might put up more. In nations such as Mexico, the number of jobs at stake is greater. The same is true for many of the EU nations.

Detroit's blackmail is that if The Big Three close down, the ripple effect on the US economy would push the recession much, much deeper. That is not a situation which is unique to America. Detroit's troubles belongs to the world.

Perhaps the checks to save the US car industry will not all come from Washington. Those private jets don't have to be used to fly to meetings with Congress. They could be assigned to a round-the-world trip, barnstorming for dollars (or Króna).

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Comments

 

I sold Chevys for years, owned several, had problems with them all.  I now drive

a Toyota Camry, great car, absolutely no problems with it.  I'd like to help and

buy American, but I do what's best for my wife and I, I can't afford to buy

junk just to help out the American car companies.  

The people here that think our auto manufacturing base should be left to die are idiots! Foreign company's are using strategic plans like used in war to defeat our manufacturing base. What really makes me sad is the lack of interest in learning what the score is even though we live in the information age most people don't have a clue as to whats at stake here. Instead, we drown out the facts with ipods and other devices and everybody wants to be a rock star! Soon we we be a nation of karaoke monkeys working for the fast food industries.

Modfly,

Enlighten us as to what the score is.

How is it that we should bail out our current failed management and Unions? They do not seem to care about the position they have put us in. If they did, they would not have been screwing up even after Japan came in and cleaned our clocks in the 70's.

If you believe in capitalism, do you not believe that a new US company could be formed to compete without the burden of unions or screwy managment? Granted, it would be tough, but doable.

...Just my opinion for what its worth.

The unions are the root cause of the problem. When someone with no more than a high school education earns at least a six figure yearly income, refuses to do any additional work when they have nothing to work on and goes on workman's comp for the smallest problem it becomes impossible to compete. Additionally where can someone receive 90% of their salary when their out of work. Ludicrous!

If these costs were more in line practicing and implementing Lean Manufacturing like most of its suppliers then the OEM's would be very competitive with our foreign counterparts.

PS - I've been to many Toyota ass'y. plants and they do not fire people for missing work. The mentality at these locations is consistent with whomever you speak with. It is very difficult to find cost savings in their designs unlike our Big 3.

dan your not htinking  yeah lets lower everyones wage  take out the middle class alltogether and then no one will own a house or a car where do you think your going with this.  Nowhere fast thats where. employment of any kind with decent wages drives a country cutting wages that started a year and a half ago in many sectors started this economic snowball rolling.  Economics 101 wages must keep pace with commodity prices or else a recession is inevitable.

Of course the Axis Auto assemblers locate in Slaver States. Both ***/German and Japanese Manufactures have used forced labor/slaves to reduce cost and impove  product quality. The Southern Slaver States will gladly do their part to destroy America' strategic industrial base. Senator Shelby, a well known Alabaman,   is  a patriotic rep of  foreign interest.

Over the last 2 decades most American manufacturing jobs have been outsourced/deleted.

When this curent economic storm settles we will be a much poorer place that's controlled by foreign interest and there will be no unions.

Banzai, you'll all drive Honda's and eat whale because the ads say it's green.

GM is a dying relic.  GM's refusal to adapt and conserve both fiscally and environmentally created its own demise.  Allow them to fall by the way side, so that innovation  can replace them.  Someone else will do it BETTER!  From the ashes of disaster grow the roses of success.  THATS the American way.

They have the right to obtain private financing the same as anyone else. If they can do it, good for them. I am strongly opposed to their bail out and the continued bail out of failing American busunesses. What they do other than that is up to them.

I'm European, working in Japan for a US company (not automotive).  What do I see here?  Mostly Japanese cars, quite a lot of European ones and very few US ones.  Talking with my Japanese colleagues, why buying a European car?  Mostly because it's different.  They're also a bit expensive, it shows you're successful.  Why then not buying an American one?  Quality in general, they're scared.  I guess some manufacturers (that includes some European ones, by the way) forget that most people expect their car to be reliable.  Features and gadgets come next.  I guess some (most?) top executives are rewarded for too short term results.  It is easy to cut cost and get short term benefits by outsourcing or removing part of you quality system.  Long term, you loose customers.  If you've got a good car, you might buy the same brand again, if you've a bad one, you'll surely go and look somewhere else.  And if it's better, you'll never go back to the first one.  If it's worse, you'll go back to the first one.  So today's quality impacts your sales in 10 years.  By then, today's executives will be retired, so why would they care?  That will be someone else's problem.  Long term vision is or is not part of the enterprise culture, depends how you build it, what are your criteria to give promotions...etc.  You can sell a made in USA car - with a premium - and make profits if you meet your critical customers requirements.  The 'plus' might be after sales service, delivery lead time.  Which is a good reson to make car where you sell them, another one being to avoid currency exchange rates fluctuation side effects...no exchange rates risks.

This is not actually as black and white as it seems. Most foreign governments who are offering money to GM and Ford are offering it with restrictions. In Germany for example they have offered help, but the the precondition that no jobs are lost and that not one single cent goes to Detroit. So Opel gets the money, but can only spend it in Germany on their already profitable factories. That doesnt help GM in Detriot at all, but it protects Opel should GM go bankrupt.

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