Thursday, November 13, 2008

Is American Business Not Allowed to Fail Anymore?


The Mark of Quality...Fat , Bloated Inefficient Quality.
It's getting close to bedtime, so I'll be brief. I've been kicking around all of the financial bailout stuff going on for the past month, and it's really starting to get out of hand. Banks, credit card companies.... now Congress (mainly Democrats) is beginning to seriously kick around the idea of bailing out Detroit. Namely GM, Ford and Chrysler.....
Time for a bit of 100% honest analysis here. I'm not the Governor of Michigan, or a Senator who gets $100,000 in contributions every election cycle from the Big Three. I'm just a regular schmuck. A regular schmuck who has spent the past 17 years in the automotive business in one way or another...The Big Three need to either adjust to the future of the automotive industry, or we need to let them die, at long last.....
Yes, its true that 1 of every 10 jobs in American are tied to the auto industry, but most of them aren't for the Big Three anymore. They work for body shops, car rental, independent service, aftremarket equipment, and for other manufacturers - the ones that make money.
Why aren't GM, Ford and Chrysler making money? Partially due to the quality, but they have closed the quality gap in recent years. So what is it? Two things: a bloated budget, and a blindness to see this day coming....
I don't know if they're stupid or arrogant, but The Big Three have been getting their asses kicked for THREE DECADES now. At some point - a generation of workers or so ago - these morons had to see that they needed to pare down, and become leaner and meaner. But they didn't. GM has to charge $1500 PER CAR on the sticker price to pay just for the employee benefits. The new GM SUVbase model is almost $30k, and for $3000 less, you can buy a totally loaded Honda CRV that gets bette gas mileage. You can thank the Teamsters and the UAW for that. They browbeat the Big Three and still do, to the point where their workers will now lose their jobs permanently, instead of making some concessions to save their jobs. If my union rep told me if I gave back 10% of my $47 an hour job to save it, I'd do it - but they never got the chance.
The blindness or arrogance is stunning, even to this day. GM and Ford will never be what they once were. Toyota , Honda, Mercedes and BMW do much better jobs of running an auto company. Since the late 70's , everyone in America has known that someday, those manufacturers would pass GM and Ford. They can become smaller and more profitable if they readjust to being the Number Three and Four car makers in America. But Congress needs to ensure that they make the changes, or there is no bailout. What is the point of bailing out failing corporations if they don't change the bad business model?
So, why is bailing out the banks more important than bailing out Detroit? Simple. the banks give credit to all businesses and all consumers. Congress is just bailing out Detroit to try and save some jobs. Jobs that will be created by other, more efficient people who know how to survive in the 21st Century... But, that lobbyist money goes a long way...
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7 comments:

Ande said...

Mike,

I couldn't agree with you more. I think there would have been a lot better answers than this. I don't think we should have bailed out the banks. At least one and possibly two didn't need the money. They certainly haven't lowered the credit standards that suddenly went out of the roof. When did 700 become a low score?

I do think the money could have been used to help "main street" directly.

There could have been a program to refinance the mortgages at home value, make sure borrowers could really afford the home they were purchasing/refinancing through financial counseling, and then refinance at a fixed rate with requirements similar to an FHA loan. There are programs offered like this today especially for first time home buyers.

Banks would and should take a hit for their part in the mortgage crisis. They wouldn't take a complete hit in this scenario, so this would help them and the home owner.

At some point the gov't could sell those mortgages back to the banks, and voila, you and I, the taxpayer have not just poured billions of dollars into a black hole.

GM and Ford, I am so torn on. I know that the suppliers for these industries would be horribly impacted. I wonder how many of them are still in the US, however. Unlike the banking industry this isn't my forte. To your point though they have spent more than 30yrs falling behind and not figuring out how to be innovative and profitable.

bobby said...

maybe GM, Ford and Chrysler should have made a better product. screw 'em. they brought it on themselves. sucks for the employees, but it is what it is.

pluvlaw said...

Two quotes some up what is happening in this country.

The first is from the great Wall Street raider, former mentor to a young Bud Fox, Gordon Gekko: Greed...is good.

The next is from the illegitmate Marx brother, Karl: Give them enough rope and they'll hang themselves.

Anonymous said...

Recently overheard speculation that it might behoove GM, Ford and Dodge to bankrupt and gain signifcant leverage with UAW.

While UAW might have sacrificed a few shop stewards, the hiearchy survives and apparently does so comfortably.

not a obama fan mg said...

i want a bailout also

bobby said...

this state needs a bailout, or at least the Gamecock football team.

Anonymous said...

Clemson would appreciate a bail out to cover Tammy's golden parachute.