Bail out Detroit? Not without some conditions.

While I did not like the idea of bailing out Wall Street, I really do not like the idea of bailing out Detroit. Yes, the auto industry is a cornerstone of the American economy. Yes, the collapse of GM, Ford, and Chrysler will deal a powerful blow to an already-reeling market. Yes, this will suck.

But if subprime lending got way out of control, at least lenders were selling products people--and Congress--wanted. Detroit has not built cars people want to drive in decades. I am not alone in thinking that Detroit carmakers are prime examples of businesses that are failing because they ought to: they make bad products that nobody wants to buy.

Sure, there are exceptions, but, by and large, American cars are pretty awful. The best GM models barely accomplish average reliability according to Consumer Reports. Many GM models are "well below average in reliability." Chrysler is even worse. Only Ford is getting better; Consumer Reports says that, excluding some trucks, "Ford's reliability is now on par with good Japanese automakers."

Consumers agree. Ford has not made a profit since 2005, which has nothing to do with the present economic meltdown. GM lost $269 million during 2007, and Chrysler lost a whopping $1.6 billion last year.

If this really is a case of "too big to fail," then Congress must impose some strict conditions on the auto industry, including higher fuel economy and emissions standards, limits on large trucks and SUVs, and maybe tire pressure monitors as standard equipment, since properly-inflated tires could save an awful lot of fuel. Maybe some quality control targets, as well. After all, cars that break frequently result in wasted spare parts and extra transportation costs to move all those spare parts around.

In short, Congress will need to do more than just keep the Big Three on life support. It will need to force Detroit to start innovating once again, and return to the novel idea of selling products consumers want.

Comments

[Brian]

Sam,

Tire pressure monitors will be standard equipment, as federal regulations now require them. See federal motor vehicle safety standard # 138. See http://www.fmcsa.dot.gov/rules-regulations/administration/fmcsr/fmcsrruletext.asp?rule_toc=777&section=571.138&section_toc=118991

Brian

[Ehren Bragg]

I must respectfully disagree with your viewpoint. I've spent the last thirteen years working in the automotive industry - mostly for luxury import manufacturers, one of which was owned by a Big Three American manufacturer.

The Big Three have suffered a dramatic loss of market share in the U.S. while their share of overseas markets has seen dramatic increases, particularly in the Russian and Chinese markets. Their products are much more competitive than they've been in decades. Ford Motor Company now has some of the best reliability ratings in the industry.

Where they've suffered the most has been in the cost of manufacturing their vehicles. The United Auto Workers Union has handicapped the Big Three by adding as much as $2,000 per car manufactured in healthcare and pension expenses. This is an affliction that is not shared by foreign rivals who manufacture their vehicles in the US because their newer factories are largely un-unionized. The argument could be made that the Big Three should have been more heavy-handed in negotiations with the UAW in the recent past, but hindsight, as they say, is 20/20.

The Big Three have been cataclysmically affected by the events of the last year, including the downturn in the economy and astronomical fuel prices - much more so than their foreign rivals. This is due to the fact that they relied upon highly-profitable light trucks and SUV's for most of their income. They were making what people wanted right up until people didn't want them anymore. Could they have foreseen the coming disaster? I would argue no - I don't think anyone could have foreseen the gas price bubble. However, I would argue that they should have known better than to put all their eggs in one basket. Greed, after all, is not good.

The risk of a failure by one or more of the Big Three is very real and very, very dangerous. One thing that is not considered is the Big Three's role in our country's defense. Their gi-normous factories have produced airplanes and tanks that helped us win WWI and WWII. If called again, they would help us do the same - but that may not be an option, if they become foreign-owned.

We must think not only of the automakers' employees, but also of those of their countless suppliers and dealers around the country. Big Three supplier have already been decimated by the economy’s downturn and even one of the Big Three falling would deal many a final and fatal blow. There are suppliers headquartered in every state of the union and they employ hundreds of thousands of workers.

Yet another thing to consider is logistics. The parts made by these suppliers have to be transported to Big Three factories. The locomotive and trucking industries and other logistics providers would also receive potentially unrecoverable damage from the fall of the Big Three.

Finally, we must remember that each of the Big Three has dealerships in almost every COUNTY in every STATE of our union. A collapse of any of the brands they sell would bring a corresponding loss of jobs on the retailing side of the business.

Can institutions become to big to fail? Without question. The Big Three would certainly be included in that category, in my humble opinion. Should money be given with NO pre-conditions or qualifiers - NEVER. But we must remember that the people in the driver's seat of these companies know far better than our Congressmen or Treasury Dept Employees how to run their business…and so I would argue that balance is crucial. The Big Three have been wildly unsuccessful and arrogant in the past, yes, but they've finally "found Jesus" and are finally getting it together. Let them succeed and let the American people share in the profits when they do - from both domestic and foreign sales. But please remember that we can't afford to let them fail.

Ehren Bragg
www.arbitrationhorrorstories.com

[Mariya]

Hi Friends,

What best of all, Dollar or Euro? This question worry many peoples.
But only you make your choice! Remember - your love and your personal intelligence make you rich. :)

--
Maria
http://www.mysex-blog.com