How would you fix the auto industry?
 

Are you interested in buying a new car in the next 5 years?

Things aren't looking too good. Did they produce cars that were too good in the 90s, so people like me can still drive a 15 year old car and have no problems with it? Are the unions making them pay the workers too much? Are the pensions and healthcare benefits for retirees the problem that allows foreign car companies to charge less? Is the 2 year lease keeping some people from buying brand new cars, instead buying lightly used cars at a discount? Is the production before sale method and over producing too many cars something that the US auto companies need to change? Or is it a perception of quality issue?

Here's my take on it. No one is producing the car that I want for the price I would be willing to pay. I would like to buy a GM Volt style car, but in a S-10 pickup truck model. And I wouldn't want to pay more than $20k for it. And they shouldn't make the car until I've bought it. This is what the US auto industry isn't doing right. They should have a few models on display at the showroom, but they produce about 2 times as many cars as they should. Then they have to have firesales at the end of the year. This destroys the resale value of the car.

Now, if they really wanted to shake things up, they would go to a perpetual lease style of business. Take a page from the evil cell phone industry. You have to buy the service in order to drive the car. You get every service possible, but you have to pay $100/month, even on a fifteen year old car. This way, the engineers can use stainless steel parts, solid plastic body panels, carbon fiber hoods, roof and trunk and prevent rust and other appearance of aging. The car 20 years from now should look the same as on day one. They can spend the money to put a plug-in hybrid system in it and people don't have to worry about the batteries.

To answer the question as stated;
I would examine what the rest of world has been doing to kick N.A.'s ass.
From stem to stern. I would restructure the executive salary structure so
they get paid when things improve.
If there was any room for vision, I would invest in non-fossil fuel infrastructure
and cars.

There is nothing wrong with the auto industry, just the iconic American manufacturers. Let'em fall, there are plenty companies, American and foreign, to take their place. Any bailout is a waste of money and we will be back in this position again in a few years.

Step one absolutely has to be severing the sick link between the auto industry and the oil industry. That GM is still producing gas hungry, massive SUVs speaks in volumes as to how one industry exerting influence over another can lead to the latter's downfall. 9MPG should be limited to big rigs. No commercial truck or large car should get any less than 17MPG combined.

First off this is the biggest load of bull, and I always feel the person saying it is insulting my intelligence if I don't stuff it into the ground. IF there was a link, the auto industry would be in much better shape. They would have been able to work together prior to any price spikes. Look, it takes about 5 years to build a new model. If they were working together in this vast-white-CEO-conspiracy, they would have started building hybrids so they were in full production in time for the oil spikes. They weren't, and got a large one stuffed up their ass because of it. They have tons of SUV's sitting unsellable, while they lost almost entirely the share of the sedans for the average American. They REACT to the changing oil prices, when oil was $20-30 a barrel gas was cheap and they went accordingly. No one went for the hybrid technology because the average price was $6-10k more per car, it wasn't economically worthy. IF there was a connection between big oil they would have had the technology rolling out with hybrids on the lot. Instead they react only, and because of that they are bottoming out.

/rant off.

I would move the plants from the Unionized-to-Oblivion Illinois/Michigan and move it south. I would tell the employees they get moving expenses paid for, on the agreement the union would not move with them. Cost of living as well as taxes are MUCH lower, as well as true at-will states. Give fair wages and benefits, lower the Manager:Employee ratio, and all-together follow the example of the foreign car plants which are symbols of efficiency and fair wages.

And by Manager:Employee ratio.... I would also make everyone in upper and middle management take a huge pay cut.

I would let them go bankrupt...their assets would be restructured and/or purchased by another company which would produce a better product at a better price and would be able to profit from doing so. I don't support bailing out any industry that has ceased to be competitive.

I'm not impressed with American automobile engineering. European engineering is superior. I wouldn't bail out GM and Ford. Most of their factories will likely be taken over by other automakers who will produce higher-quality vehicles with larger profit margins.

I strongly believe that companies that run themselves into the ground should cease to exist.

The reaction theory assumes the auto industry has no foresight. Obviously this isn't true considering that GM had the opportunity to fill the roads with electric cars, for which there was and is substantial demand, in the 90s and they simply stopped. Don't make me cite a documentary. Ford produced a hybrid vehicle nearly 5 years ago, and it's one of their better selling vehicles. It insults the intelligence of everyone to suggest overtly that auto manufacturers don't consider the interests of other industries. Of course they do. If you don't believe me, ask yourself why so many GM vehicles can run on corn ethanol, which we all know is a horrible idea.

Temporary demand isn't usually enough for a smart, long term industry to invest. It takes a clear indication of continued revenue stream to make an investment in, say, a 9MPG vehicle. Especially a 9MPG vehicle that's functionality can easily be replicated by a 15MPG vehicle.

There are active interconnections between big oil and big auto.
First off this is the biggest load of bull, and I always feel the person saying it is insulting my intelligence if I don't stuff it into the ground. Do you not think that other auto manufacturers in the US have unions? Of course they do, and they're still profitable, even now during our recession. Toyota is unionized. Subaru is unionized. Even Honda is unionized.

I'm sure you think it's a knee-jerk reaction for a liberal to blame big oil, but to have the knee-jerk reaction of blaming unions in the same breath... doesn't that seem somewhat inconsistent?

Things have to change with BOTH the manufacturers and the unions before any real progress will happen.

In the free-market solution, I would let Detroit fail completely, which would destroy both the makers AND the unions, and then within bankruptcy and other protection negotiate new contracts and plans to rebuild.

In the government solution, I would pass legislation both to put General Motors and Ford under direct government control temporarily AND to void all union contracts, and then force renegotiation.

Either way, something involving both sides has to happen.

The amount of money spent by the Big 3 in lobbyists is alarming. What do you think they're trying to accomplish in Washington (hint: it's not make more hybrids).

I think the Oil Companies should take their record billions in profits and loan it to the automakers

Sure, since the automakers are part of the reason for the record profits :p

First of all GM began the Insight program because California had legislated that by 2002 2% of all vehicles sold by a manufacturer be emission free. Ultimately the technology simply was not ready to make a no compromises vehicle that could be sold at a price point consumers could afford. Even now the battery technology isn't ready yet. By the late 90's when it became evident no manufacturer, not even Toyota, could meet the mandate California rescinded it.

As far as ethanol the reason that so many GM vehicles can run on is that they get a credit on meeting CAFE standards on every vehicle that is E85 capable. The CAFE credit was something the corn industry lobbied for. Building in E85 capability costs virtually nothing, just some changes in fuel tank , fuel line and injector materials so they are not corroded by the ethanol, and software changes. GM started building in the capability in around '01 or '02 but didn't give a shit about it until a couple of years ago when Toyota starting winning the PR war with the Prius and E85 was all GM had to fight back with. It was simply done so it would be easier to meet government standards, not out of any benevolence towards the farming industry.

Certainly the Big 3 have made some mistakes in the past but they have made progress. The last UAW contract was a big improvement in improving their cost structure. I don't know what the answer is, if they declare bankruptcy the taxpayers will still be left holding the bag in the form of pensions being transferred to the PBGC. Plus the ripple effect of suppliers going under would mean that even the import brands would have a difficult, if not impossible job of building cars here.
-----Added 24/11/2008 at 02 : 09 : 23-----
The only Toyota plant that is unionized is the NUMMI plant they operate with GM in Northern California. I'm not aware of any Honda, Subaru, Nissan, or any other import manufacturer plants in the U.S. that are unionized. Part of the reason the imports built their plants in the south was to keep the unions out. I don't have the time right now to link to all the sources, but it would be false to say union representation at the import brands is a fraction of what it is at the domestics.

I agree, bailing them out now will only make the situation worse in a couple years down the road. Plus we are potentially facing a total economic collapse if we continue to spend money we dont have.

I say goto Chapter 11 Bankruptcy, I don't know everything about it, but the part I know lets them reorganize their company to allow it another shot at profitability, as opposed to shutting the whole thing down permanently. If the economy was strong and stable and jobs were plentiful I'd say let them burn, but thats a lot of people out of work at the wrong time. Never argue with Wikipedia laconic1.

The US auto industry does not need to be fixed, I am simply reminded of the classic scene in Blade Runner - "...time to die."


Let new more efficient auto manufacturers grow and evolve, too bad the government has made it impossible for a new domestic auto company to develop.

Not according to the leasing rates. The market was more than ready for electric cars, as was demonstrated clearly by the waiting list for EV1s. People fought tooth and nail to keep their leased EV1s when the lease was up. Consumer demand was very high, of that there is no doubt.
The EV1 had a range of 160 miles as of 1996, and that didn't even represent the best battery technology at the time. Home-made electric vehicles have been on the road since the 1970s, and some of them have ranges that exceed most fossil fuel-burning vehicles.
Who said anything about benevolence? The oil industry has great influence both in government and in the market, and they throw their weight around often. The reason that big oil has been so successful, though, is an unwillingness to stand up to them. Ethanol is the same phenomena, only it's the corn industry that's throwing it's weight around. And once again, GM folds under pressure instead of investing in hybrid technology, which even then was obviously the better investment.

I know it seems like only recently that the truth about corn ethanol has come out, but the information has been out there since day one. It only takes one person to ask, "Does it put out more energy than we have to put in to produce it?" For hybrids, that's a yes. For ethanol, that's a no by a factor of 6.

GM lost the PR war because they are still, today, making 9MPG behemoths. I can go and buy a brand new H2 around the corner this afternoon. This is something they should have phased out 4 or 5 years ago in favor of hybrid diesels.
I used to feel really bad for auto industry workers in the US. At some point, though, you have to ask, "We've all known for years that your entire industry was on the edge of collapse, did you even put your resume on Monster.com?" There should be at least some personal responsibility. I've been feeling bad for them for like 15 years now.
I may have been misinformed about unionization at foreign auto manufacturing plants here in the US.

Regardless, there's no reason at all to assume that unions caused the demise of the big three. The unions have made a great deal of concessions recently, including pay decreases ($25.65 an hour really is a small salary for an auto worker).

Maybe I should ask this: did AIG have an union? Did Bear Sterns?

The US automotive industry killed themselves 10-20 years ago when they refused to reinvest their profits into better technologies allowing foreign cars to surpass them in both reliability and mileage.

Let them drown in their own greed.

I wouldn't mind seeing a grassroots auto manufacturer have a chance at the domestic auto spotlight after a collapse of the big three.

Another question to ask? If the money planned to bail out the auto industry was used for public transportation infrastructure instead how much would that improve our public transportation programs?

I believe the new bullet train planned here in California will cost about the same as the proposed auto industry bailout. Imagine a bullet train from New York through Boston, Philly, DC, and going all the way to Raleigh.

Fix it? Why the fuck should *we* fix it? let the market do it's job and everything will work out the way it should.

FWIW, there have been waaaaay more car makers throughout history than most people realize. They get bought out, go under, get asorbed, or just flat out die. I see what is happening now as a continuance of the regularly scheduled program.

PS, it sucks that now that car dealers are willing to deal just to sell a car, I'm not in a position to take advantage of it at this moment.

People in the US have a odd reaction to public transportation. Like it's some sort of evil that they must resist at all costs. Hell most people won't even car pool. You get outside of the US and nearly everywhere you go public transport is the norm. Gas prices in the US are falling, I thinks thats going to turn out to be a short lived fad. Part of me is happy it's come down. I think it provides some relief for families that are in serious pain do to economic pressures. At the same time I'm hoping they shoot back up and cause people to take a serious look at alternate ways of getting around. The US doesn't seem to do anything until forced. Eventually I think they're going to be forced to find better ways to get from point A to point B. Ways that don't include one person hoping in the family SUV and driving 40-50 miles or more to work each day.

Has to the OP I really have no idea. I think they've screwed themselves into a corner by years of mismanagement and poor planning. How to unscrew them or whether we even should is beyond me. I really have a problem forcing the average tax payer, who apparently makes significantly less per hour, pony up billions of dollars in what very well may be a lost cause. At the same time we're spending (or throwing depending on your point of view) billions of dollars into failing banks and financial institutions.

To me the whole thing (the economy) seems like the very definition of "clusterfuck" and I don't think unfucking ourselves is going to be quick nor easy. I see this as an historic time of change. All change is not bad, nor is it good... nor is it pain free.

Auto workers do not make significantly more than the average tax payer. Also, keep in mind that while working in an auto factory, if your co-worker screws up, you could lose a limb or your life. The biggest physical risk a lot of other people have in their job is stapling their finger while at the desk.

Overall, though, I agree with your sentiment, especially regarding public transportation and gas prices. I have no idea why it's so hard for people to use their brains, like most of the rest of the world, and realize that it's good to have a strong mass transit infrastructure.

That article asserts "The average GM assembly-line worker makes about $28 per hour."

I'm not disputing that, I do contend that's still more then the average wage for the average worker.

http://billinman.files.wordpress.com...if?w=520&h=203

From the sources I've found the average wage is significantly less then $28 an hour. If the above is correct the average US worker earns close to half that of the average GM assembly-line worker earns. It doesn't seem right to me that people making less bail out workers making more.

seems to me that the relatively good production wages are a strong argument FOR union representation and not, as you've no doubt been hearing from every remaining reactionary supply-sider on every available "news" outlet, an argument against it. one of the great ideological campaigns of the neoliberal period has consisted in repeating over and over that unions are somehow against the rules and atomized work/lowest possible wages are the norm---this despite the history of actually existing capitalism since the middle 19th century, which the reactionary set would replace with cheesy images of some entrepreneurial idyll...

the problems with the big 3 are structural. on the one hand, they seem to have opted for the classic american trajectory of taking short-term profits and acting as though the Invisible Hand will stroke appropriately in the longer run and "things will take care of themselves"....think about us steel after world war 2 exporting continuous casting along with the marshall plan and choosing to take short-term profits while that technological arrangement was being perfected elsewhere. by the early 80s, us steel was us-x its workforce vaporized and the reagan period in place which worked and worked to convince us all that this sort of shit was normal and not the result of something between short-sightedness and idiocy.

i think the only way to salvage these corporations is through an *aggressive* take-over and a form of economic planning. there are alot of ways this could happen. i also thing that in this context a purge of executives and upper management would be productive for everyone. there's more, but i gotta go.

If the issues that plague the American auto industry were placed in a vacuum separate from everything else in our economic system, perhaps it would make sense to let them take a tumble. But having witnessed what our mortgage mess has done to the global financial market, I think it's foolish to adhere to this type of economic decoupling.

We assume that Chapter 11 is the way out of this mess. I don't see it. Sure it gives them the chance to shed dealers and rip up union contracts (assuming the UAW is just going to lie there and get kicked on), but if major lending institutions are unwilling to extend money to individuals with a decent credit history, what makes you think they'll extend it to a company under bankruptcy? Restructuring is necessary, but it'll be all for nothing if they can't make any money.

I'm loathe to make the UAW a scapegoat out of all of this. The UAW isn't the reason GM stuck with two vehicle platforms for over 20 years, both of them being vastly inferior to anything the competition, both domestic and otherwise offered. The UAW isn't the reason Mercedes-Benz fed Chrysler nothing but scraps from their engineering table, leaving them with two outdated platforms and a diesel engine that's not even available in the U.S. The UAW didn't go on a buying spree, buying up Jaguar, Aston-Martin, Land Rover, and Volvo instead of turning Lincoln and Mercury into marques that could compete with those companies. When sales of the Tahoe, Explorer, and Ram were generating hefty profits for these companies, nobody complained about UAW health care benefits and wages, so why should we complain about them now? It's fallacious to assume that Detroit can't compete with these unions holding them down, when their past performance has shown otherwise.

To turn things around, I think GM would need both the bailout AND a Chapter 11 filing. The bailout would give them the capital necessary to perform the aggressive restructuring the Chapter 11 filing would allow them to do. Buick would have to bow out of the U.S. market, but continue to operate in China where they are a very strong brand. Pontiac would have to be dropped. None of their vehicles are exclusive to their brand, and any performance vehicles they make can be sold by other marques. Hummer, as much as everybody hates them, is a strong competitor to Jeep. They can keep it, but don't expect to sell in huge numbers. GMC should focus exclusively on heavy-duty vehicles, so that means no Yukon or half-ton pickups.

Ford just needs a bailout. Alan Mulally has done a good job of turning that ship around, with plans on bringing many of their successful European models to the U.S., including the Fiesta and euro Focus. The only question is whether he can do it before the clock runs out, that bailout will give them a chance.

Chrysler needs real leadership, which they haven't had since they were decimated by the DCX merger. Cerberus has no interest in the carmaking business and only acquired them to turn a quick profit, which as backfired horribly on them. They need to be separated from Cerberus, and that needs to come before any discussion of a bailout can occur.

Of course, what I find most interesting in all of this bailout talk is the song and dance that the CEO's of all three companies had to go through just to walk out of DC empty handed, while the CEO of CitiGroup can just pick up the batphone to Henry Paulson and get a second bailout, along with another $800B he's throwing into banks to encourage lending. I suppose it's more important to keep people in debt than it is to keep them employed so they can pay off those debts.

The auto industry in the US is already having trouble marketing their product. I believe if they file anything that even smalls (I mean smells, don't you love spell check?) like Chapter 11 they're toast.

As for...

What are the options for them? As I see it laying there and getting kicked around a little beats the shit out of trying to pick the bones of a dead dinosaur. They're going to have to make concessions, IMO. Either that or start practicing the phrases "did you want fries with that" and whatever a Wal-Mart is trained to say.

This is the argument I was attempting to make. Very well put.

The auto industry failing is a problem for the UAW and people with auto-industry pensions.

By squeezing their own bottom line and tossing money at dividends and other 'get the cash out while the cash is good' plans, they can leverage their own worker base into lobbying for bailouts. Because it aligns their worker base with their own interests.

Similarly, when the going is bad, the UAW either capitulates and gives a better contract, or the company goes out of business and UAW members are out on the street.

If the auto industry built a long-term viable reinvestment plan, the UAW could continue to hold profits for ransom with strikes, and continue to drive up wages, until the reinvestment proved fruitless: the dividends of the reinvestment would go to the workers, not the owners. So -- get the cash out, keep the industry lean, beg for money in concert with the UAW when times are bad, and use bad times to push back against the UAW.

Think about it -- if you had 100$, and knew you could either reinvest it to produce future profits. But if you did, that future profit would be stripped by your workers demanding a raise equal to the increase in profits... would you take the money and run, or reinvest it?

Labor union power is proportional to the amount of _damage_ they can cause by ceasing work. The amount of damage you can cause is based off of the operating profits of that work-chain. Increasing the operating profits of the given work chain thus increases labor union power: and if it stays uniformly high, then the temptation to do a strike grows.

Yakk, honestly it's not the unions. Most UAW barely make a living wage, so if salaries drop further you'll see the companies either hire undocumented guest workers or simply leave to find a country with cheaper wages.

And have you ever compared the injury rates between union and non-union auto manufacturers?

Agreed Will. What's sad is the UAW workers are likely going to take a hit when they're probably the least culpable. The union leaders who negotiated for 2 1/2 hour lunches and pay for not working etc... And management that ran these company into the pit the currently reside are probably sitting on enough in the bank that they'll be fine. it's the average guy working that's going to be rear ended here, well him and the tax payers. But all that aside really instead of looking at the average UWA salery and screaming it's too high, shouldn't we be trying to get well paying jobs and benefits for everyone?

I also liked this-

Seems to me this is one of the biggest problems with the bailout as a whole from my perspective. Nothing seems aimed at getting unemployed employed or keeping those employed still employed. It's all been aimed at credit and maintaining peoples ability to keep digging themselves into debt. All this does, for what I can see is encourage people to live in debt. It doesn't help make any real jobs available for real people. Hell even JJ knew easy credit was a rip off... Dyn-o-mite! Indeed.
-----Added 25/11/2008 at 02 : 43 : 29-----
Really? $28 an hour with benefits, with some 28 days off a year sounds pretty livable to me. Last I saw it was around 60K a year with full benefits. 60K a year in the upper mid-west is like 100K or more in places like NY or LA.

No, have some numbers you'd like to share?

How does $28/hr translate to $60k? It's closer to $45k + benefits, which for a family is just about comfortable, but it just qualifies as middle class.
This article sticks out in my mind, but I don't know for sure if it's reflective of the whole situation:
Auto Union and Honda Dispute Safety Record at Plants in Ohio - New York Times

Well lets see...

28X40=1120

1120 a week

52 weeks a years

1120X52=58240

Seems a lot closer to 60K then 45K

I shall go read.

http://www.tfproject.org/tfp/tilted-...ml#post2563501

this is a good post to keep in mind as you dive into the comparative game honda/detroit.

gotta go.

28$ an hour with retirement and health benefits is barely a living wage? And overtime?

At a 2000 hour-a-year number, that is 56k. Plus quite good benefits.

Heck, I think GM is at close to 3 retired workers per active worker. Think about that for a second -- that is a huge liability, especially if the markets aren't being friendly to your pension plan.

Ah, I am in the habit of doing (X)40hours x 4weeks x 12months. Fuzzy maths. Yours is closer.

Of course the $58k is before taxes. Having never made $60k a year before I'm just guessing, but wouldn't that end up somewhere around $51-52k a year?

I have know way of even beginning to approach that without knowing if we're talking about single, married, married filed jointly and the spouse is employed ... gez the list is endless.

I always assumed we were discussing gross income. But even if we're talking about 50k + benefits I'd say that's a livable wage.

Now some of the stuff in the article you previously linked...

I'm not sure what to make of some of it. Some of it sounds like they earn every damn dime, which could be true. But I've worked with people who bitch about every little thing. I swear I worked with a guy who got pissed at management and started filing union grievances for everything. He got dust in his eye one day. Someone stressed him out another, had to go home due to high BP. He filed one because the grass was too green, wish I were making that up. Made everyone else's life awful. I've also worked with people who will continue on with broken bones for days, even weeks, without uttering a peep.

Without more info I don't know what to make of the work situation at a plant, union or not. I do know given the current employment climate I think I'd be inclined lean toward continuing to working with the broken bone.

The UAW is willing to make concessions. We've seen that with the last round of negotiations with the creation of VEBA, the union-managed health care fund which will take a lot of money off of the books of the carmakers.

But you have to play it smart. If they file for Ch11 and then come in the next day and just rip up their collective bargaining agreement they will strike. Sure, they run the risk of being made the bad guy out of all of this, but I don't think they'll hesitate throwing a monkeywrench in their recovery efforts if it means the lose out big time.

I don't think they'll like it either if their agreement is voided out while the board of directors gives the men up top another seven figure paycheck.

I'd offer a $5000 tax credit for every $15,000 spent on a US made car. The tax credit can be taken all at once and applied to the 1040, taken as part of the loan, or taken in part over 3 years. Then, I''d tell the auto industry that ALL parts and labor MUST be made and done in the USA to which the government will give credit to the industry and absorb some of the pension plans. T

For housing, I'd offer a $20,000 tax credit for every $50,000 spent on housing. The same here, taken at once, applied to the loan or taken over a period of 10 years.

Then, I'd tell the banks and auto industry that's the best and ONLY thing we'll do.

I have a suggestion. Let's have the UAW buy GM and Chrysler, fire white collar people and run the company from perspective of doing what is right for their union members. What do you think they would do different? People have assumed existing management is incompetent so the UAW can't do any worse, or can they? They could use the value of their pension fund, perhaps with some government backing. I would love to see it. For far too long the attitude has been "us vs. them" when the reality is that "they" competed on a global stage against, Toyota, Nissan, BMW, Mercedes, etc. The goose that lays the golden eggs is near death, they should have been willing to make concessions decades ago.

No shit. I'm sick of reading about people who have done nothing but ill for the companies they've manged. I'm using managed here in it's loosest term. Run AIG into the ground? Here's 8 million will you please go away now? Driven an auto company into the ditch? Can we pay you a few million and get you a private jet so you can go beg the tax payers for several billion buck for a tow? Asinine.
-----Added 25/11/2008 at 08 : 40 : 18-----
Interesting ideas but I have no idea if that adds up to recovery. My guess is it's going to take thinking like this on several levels instead of "that's all we can do."