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Home Front Economy
Congress seeks car industry bailout
2008-11-09
Democratic congressmen call on the Bush administration to offer more financial assistance to US automakers in the face of a nationwide recession.
Let Bambi do it and take the heat.
Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi wrote a Letter to US Secretary of Treasury Henry Paulson on Saturday, urging that the government should include the auto industry in the USD 700b bailout plan.

A downward spiral in auto sales resulting from lower purchasing power among Americans - who are more concerned with paying their mortgage and feeding their families than buying new cars - has led to the cut of hundreds of thousands of jobs in the US.

"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's work force," the letter read. "The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its work force," it said.

Officials from top automating companies of General Motors, Ford, Chrysler LLC as well as the president of the United Auto Workers held talks with congressional leaders on Thursday to discuss the prospect of an additional USD 50b loan.

General Motors, the biggest US automaker, said on Friday that about 3,600 workers would be laid off indefinitely beginning early next year as the automaker slows down production at 10 of its assembly plants. The second-largest American automaker, Ford also announced it would slash more than 2,000 white collar jobs.

This is while speculations of a possible General Motors-Chrysler merger, raised last week, would result in the loss of some 200,000 jobs throughout the United State.
Posted by:Fred

#23  Frank G, yeah, they got the trucks right. Problem is....not everyone wants or needs a truck or something built on a truck platform. They were fat, dumb and happy on the profit margin and saw no reason to make decent but less profitable cars. And here we are.

It's not that Americans can't build a good car. Our Subaru Legacy (built in Indiana) is terrific and we couldn't be happier. You can run all the catchy ads you want, I am not going to pay hard earned cash for a bucket of bolts that will barely keep running after my last payment.

If, and that's a big if, Detroit ever got their crap together and built a decent family truckster, the customers will come back. Problem is, they have known that Americans don't believe their product is worth it and have refused to get serious for decades. Tossing cash at them ain't gonna get rid of the rot under the hood.
Posted by: Cornsilk Blondie   2008-11-09 22:35  

#22  #1 seller?

Honda Civic.

Just poassed the F150.
Posted by: OldSpook   2008-11-09 22:26  

#21   was not their fault that gas prices went through the roof, making big vehicles expensive to run. It was not their fault that the housing crisis killed the small contractor business, who buy millions of trucks annually. It was not their fault that the credit crunch has killed sales altogether, even though the "buy now, no money down' has corrupted the entire consumer business.

It's no ones fault. Bad things happen to fat slow people. Now, pork-chops or grease-burger? It's all on me, have all you want, it's free.
Posted by: .5MT   2008-11-09 21:33  

#20  I've noted my beloved F150 truck. I'm happy, the quality's great, at 70K miles. Trouble is, I bought it in Dec 2003 (my Xmas gift to me) - paid off soon, running great, and no reason to replace.

the bitching and moaning about domestic quality is news to me.
Posted by: Frank G   2008-11-09 20:44  

#19  I put a dollar into a vending machine last week and it didn't give me a soda. I think Congress should give me a bailout too. Just a few million bucks would be about right.
Posted by: DMFD   2008-11-09 20:19  

#18  I quit buying Detroit's cars four years ago because I was tired of quality problems and high maintenance costs. The minivan that needed a new transmission every 20 to 30 thousand miles was the final straw, even though I didn't have to pay for the first two replacements. Detroit never quite got the engineering thing right, never quite got the quality thing right, and never quite the customer service thing right. But the UAW members still collected high wages and benefits and the executives still got big compensation packages. I've been hearing them sing the blues for decades. It was never them: it was the imports, it was CAFE standards... hell, it was even seat belts and airbags. I don't want to hear it anymore. Some or all of the biggies need to fold and the survivors need to slash salaries and benefits all the way to the top. After four years with a made-in-USA Japanese company product, I don't foresee ever buying from Detroit again.
Posted by: Darrell   2008-11-09 20:12  

#17  The large SUV/Pickups were a golden goose for the GM and Ford. As long as the F150 and Silverado were the best selling vehicles in America, you cannot blame their manufacturers from trying to protect that market.

Toyota and Nissan have tried to get into that game but the additional capital investment for engines, transmissions, axles, required to build the big trucks has always held them back. Outside of America, Canada, and Mexico, this type of product is non-existent.

Last year GM and Ford sold close to 3 million of the full size truck and its variants. It was not their fault that gas prices went through the roof, making big vehicles expensive to run. It was not their fault that the housing crisis killed the small contractor business, who buy millions of trucks annually. It was not their fault that the credit crunch has killed sales altogether, even though the "buy now, no money down' has corrupted the entire consumer business.

And it was not their fault that consumers bought those large vehicles in droves but now complain they cannot get a multi-purpose vehicle that gets 40 miles to the gallon. GM did not create the Laws of Physics.

Even the NHTSA admits that raising the CAFE limits and pushing smaller vehicles on the driving public will result in higher accident fatality levels.

Disclaimer: As a retired GM engineer who spent close to 40 years building large trucks in a plant that is scheduled to close within a few months, I do have a personal interest in the future success of GM. For over 30 years, we could not keep up with the demand for trucks, working 3 shifts and Saturdays to move the product. Suddenly within 3 months the plant closes. How does anybody can anticipate change of that magnitude.
Posted by: Skunky Glins 5***   2008-11-09 19:17  

#16  CAFE standards, what there is, helped to soften Detroit's downturn. It's the big $40-50K SUV sales that are off 60% while Detroit is adding $15-20K small fuel efficient car plants. If CAFE were 5mph higher, the US auto industry would be in better shape.

This downturn is different that previous. The US auto market is saturated w/ most 2 adult families having 2-4 cars parked at their house. They can go a long time before they have to replace a vehicle.

One bailout condition (while it was "only" $25B) was that new plants must produce vehicles that get 25% better mileage than the ones they are replacing in their class. That's nice, but I think that gives Detroit incentive to produce the same over sized vehicles with smaller engines.
Posted by: ed   2008-11-09 18:13  

#15  My Honda way mainly made at Marysville Ohio. Higher quality than any American car I have owned other than an ancient Fury of my youth.

The US companies are being bled to death by their short-sighted unions.

A bailout will only serve to put money in the pockets of businesses that do nto deserve it and from there into union coffers.


NO to the automotive bailout.

Posted by: OldSpook   2008-11-09 16:56  

#14  The Detroit Lions are 0-8 (prolly 0-9 as of this post). They employed that perennial loser Matt Millen for yrs w/out result (actually the result was the worst NFL record over the past 15 yrs). The Lions are owned by the Ford family, is there any wonder that their NFL franchise is a mirror image of their auto company?
Posted by: Broadhead6   2008-11-09 15:21  

#13  We might also point out that the benefits of conglomeration continue to work just as well today as they did for Freddy Ling. If there were multiple car companies, say Chevrolet, Oldsmobile, Buick, Cadillac, Pontiac and Saturn, and one of them went titzup the others wouldn't be effected. Instead all of the automotive eggs are in one basket, none of them have to compete against the others, and management is not only ossified but in many cases hereditary.

Chrysler going under doesn't really effect Chevy and Ford. None of the "big three" going under is going to effect Toyota or Nissan or KIA, anymore than Daewoo going under effected the rest.

The same applies to the insurance companies, who've been spending way too much time acquiring each other, and to the banks, who've been doing even more of it. It applies to tech companies, to the tire companies -- remember when Kelly tires were domestically produced? -- and to airlines. Single point of failure, as any engineer will attest, will result in catastrophic failure if it goes, and it's always just a matter of time until it goes.

There were good reasons Teddy Roosevelt fought the monopolies, and what we're seeing is lots of them right here.
Posted by: Fred   2008-11-09 12:57  

#12  CAFE standards have nothing to do with their current problems. They make over-priced crap cars with little to no innovation. The SUV/large truck market implosion has been happening in slow motion for the past 2 years. They should have seen the writing on the wall and started making changes then to be ready now. Of course the unions are killing them from the inside as well. Best to let them die now and hope something better arises from the ashes.
Posted by: AllahHateMe   2008-11-09 12:49  

#11  A thought from Neil Cavuto on Fridays show...make the bailout contingent on the executives resigning their positions with NO golden parachutes for cushions 'cause they obviously did not manage the companies well in the past. Implemnt this and see how many executives still want the bailout.
Posted by: WolfDog   2008-11-09 12:19  

#10  We are watching the destruction of not just a couple of car companies, but an entire social system in the Detroit area comprising the automobile companies and their suppliers, the unions, the excessive pay and fringes, and a large group of hide-bound managers running ossified organizations.

It's being replaced by a system of younger, leaner, non-unionized, and more nimble companies in the southern states which pay half the wage and have minimal fringes. These companies are also unfairly subsidized by the states involved - another non-level playing field, similar to foreign competition.

It doesn't appear possible to morph Detroit's social model into the new one. Creative destruction is required, with governmentally mandated 'damping' and safety nets to allow more gradual social adjustment without excessive overshoot and upheaval.

I don't see a government with socialist tendencies being able to manage the transition successfully. Central planning which doesn't involve competitive forces just doesn't work, particularly when the planners (like Congress) are amateurs.
Posted by: KBK   2008-11-09 11:20  

#9  the Chrysler bailout of 79 (signed in 80) did work and the govt ended up making money (in current accounts the profit was $350M on an 'investment' of $1.8B), I'm not sure about in constant dollars) but

- it required substantial union givebacks
- it required executive pay cuts
- it required a new series of better cars (the so called k cars that had 40-75% better mpg than the 79 fleet average)
- it required Chrysler to sell their profitable defense subsidiary
Posted by: mhw   2008-11-09 10:53  

#8  The Japanese are building cars and parts in America. It's not a domestic production issue. It's a combination of the UAW killing the goose that laid the golden egg, senior management who treated the operation as 'how many (poorly engineered and built) units could they push out the assembly line door', and institutional investors who's only interest was immediate return [shades of subprime]. All can join the dinosaurs on a absolutely terrible corporate model that is truly uncompetitive.
Posted by: Procopius2k   2008-11-09 09:28  

#7  Loan 'em $50 billion, merge 'em and call it American Motors.

Shudder. The return of the Pacer and Gremlin
Posted by: Beavis   2008-11-09 08:33  

#6  Then put Romney in charge. That worked well last time.
Posted by: Nimble Spemble   2008-11-09 08:13  

#5  Loan 'em $50 billion, merge 'em and call it American Motors.
Posted by: .5MT   2008-11-09 08:07  

#4  Nationalization of the auto industry is not the answer. Yes imports have taken their toll, but it's a bit late to do anything about that.
Everybody needs a car, I have 3. They either make a car that people will buy or they end up like the Polaroid camera, B&W TV and the Studebaker!

Posted by: Besoeker   2008-11-09 06:48  

#3  Another thing that might help is letting the Big 3 and UAW go BK and letting non-union successors compete in the world market. It has been widely known for 20 years that there would be over capacity in the auto industry. The weakest are dying. Why should I pay for their life support?
Posted by: Nimble Spemble   2008-11-09 04:09  

#2  --- From the Detroit News 7 Nov: "General Motors Corp. and Cerberus Capital Management LP have called off talks about a possible deal to transfer Chrysler LLC's automotive operations to GM."
--- I think way more than 200,000 jobs are at stake. Add in the domestic parts makers dependent on US automakers and also the retirees drawing pensions from them.
--- In my opinion, it's too late for changes in the CAFE standards to help the automakers. One thing that might help within a short time frame is dropping extreme air quality restrictions, the ones that prevent Ford from selling its Ford Transit Van with 2.2L turbodiesel that gets 40-50 mpg in the USA. I'd buy one tomorrow if it were available. Ford does plan to sell the Transit with a 2 L gas engine that gets all of 20 mpg, no thanks, I'll pass on that one. Air quality nationwide should improve due to loss of industrial activity and decreased commuter traffic.
Posted by: Anguper Hupomosing9418   2008-11-09 03:24  

#1  Drop the CAFE standards. Simple. More contrived demtard economic crisis.
Posted by: Last Breath Farm Resident   2008-11-09 00:22  

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