Well, the worm has turned properly on government intervention in the auto industry, as General Motors now seems to fear a government takeover more than bankruptcy. Too bad the choice isn’t either-or. Recent 10-Q filings with the SEC indicate that GM accepts the inevitability of a Chapter 11 filing, but describes the ramifications of a possible government ownership stake with fear and horror. “In the future we may also become subject to new and additional government regulations regarding various aspects of our business as a result of the U.S. government’s ownership in (and financing of) our business. These regulations could make it more difficult for us to compete with other companies that are not subject to similar regulations,” figure GM’s professional worrywarts. These still waters of paranoia run deep.
Category: Between the Lines
Even the most even-handed comparison tests reflect a specific set of specifically weighted criteria. Then there are those that aren’t even-handed. Car comparison tests don’t come much more tilted than the “Camaro vs. Genesis” comparison test in the June 2009 Car and Driver.
Let’s begin with the cover, which shows the Camaro nosing ahead of the Hyundai on a track and includes three bits of information on each car. The first, base prices: $23K for the Chevrolet Camaro, $26K for the Hyundai Genesis Coupe. Open the magazine and you’ll find that C&D rejected a Camaro LS for its awful upholstery and mediocre tires. Upgrade to the LT, like they did, and two-thirds of the Camaro’s price advantage goes away. Adjust for remaining feature differences, and the cars’ prices are generally only a few hundred dollars apart.
Next on the cover, fuel economy: 29 MPG for the Camaro, 26 MPG for the Hyundai. EPA highway figures, of course. The city figures are an identical 17. In C&D’s testing, the Hyundai went slightly farther on a gallon of gas.
The third bit of information, horsepower: 304 for the Camaro, 306 for the Genesis Coupe. Not as potentially misleading as the other two bits. And yet, unsaid on the cover: the Camaro is over 300 pounds heavier. The Hyundai has a significantly better power-to-weight ratio.
In the actual comparo, the Camaro wins (as suggested by the cover photo). By a single point. Actually check the details, and you’ll find that, despite the connotations of that cover photo, the Camaro trailed the Genesis Coupe in every track test—acceleration, handling and braking—sometimes by a substantial margin. Moving to the subjective scoring, C&D rated the Genesis Coupe more “fun to drive” by a not insignificant two points. They note a few times that the Camaro feels too big because of its size, mass, and small windows, and that it doesn’t invite precise steering inputs.
So how did the Genesis Coupe lose? First, ride quality—affected by the optional Track Package on the car C&D tested. The buff book notes that they cycled through three Camaro test vehicles before settling on the one they liked best for the test. Why, then, didn’t they also evaluate the Genesis Coupe without the Track Package?
Even the four point spread in ride quality––a huge difference as scoring in these tests tends to go––wasn’t enough to fully erase the Hyundai’s lead in nearly every other category. To give the Camaro a one-point victory, C&D resorted to the score of last resort: “gotta have it.” The reviewers gave the new Chevrolet Camaro a monstrous six-point advantage. That’s 22 vs. 16, out of 25 in a 110% subjective category.
To put it bluntly, the Camaro won this comparison test because, in C&D’s estimation, people want it more. Chalk one up to the power of a name and an effective PR campaign. [ED: Or ad revenue.]
Even if we grant that “gotta have it” belongs in the scoring table at all––and I don’t, since I’d rather a test compare what the cars are like to look at, sit in, and drive and not the model name or the PR––the Hyundai’s 16 is crazy low for a car that offers so much performance for a price in the mid-$20s.
The issue includes one other comparison test, between the BMW 328i, Infiniti G37, Audi A4 2.0T and Acura TL. The TL, the least “gotta have” car in that test, with far more faults than strengths, received a 16. The Infiniti and Audi both received 20s. In the context of these scores, the Genesis Coupe’s 16 doesn’t hold water.
And the Camaro V6’s 22? Yes, there’s a lot of interest in the new Camaro, but generally for the V8. Maybe that’s why they couldn’t go all the way to 25, and so had to dock the Genesis Coupe’s “gotta have it” score to carve out the desired margin?
No disrespect meant to the Camaro. If it handles anything like the Pontiac G8 with which it shares a platform, it’s a fun car, and it looks great. I’ve driven neither car yet myself and have no predisposition in favor of either. In other words, I’m no fanboy or hater.
My focus here has been strictly on the fairness of the test. And this is the most tilted comparison test I’ve come across in a long time. In the end, “gotta have it” is like the “reviewer’s tilt” score used by gamespot.com when reviewing games. It’s being used to ensure that the car the reviewers want to win actually wins, despite what the other scores happen to be.
Props to automotive consultant Maryann Keller for calling for GM to get its shit together, I mean “create a sense of urgency” since 1875, or thereabouts. Kudos for Keller’s willingness to predict a GM C11 early and often. And praise be for loaning TTAC the writing talents of Mr. Ken Elias. OK, so. . . Keller’s column in Automotive News [sub] is suffused with Annie-like optimism for a post-C11 GM. With one a catch. Chevillac’s success depends on the “smaller, leaner and cost-competitive company‘s” ability to secure a champion who can administer strong medicine to GM’s poisonous corporate culture. Before we deal with Ms. Keller’s “if you build it, he will come” theory, here’s a taste of her sunwillcomeouttomorrowism:
Let’s face it: Much of the success of the Japanese auto companies in the United States came about as a result of Detroit’s failures. GM, Ford Motor Co. and Chrysler made it easy for the competition by not matching them in quality, not renewing their product lineups on a timely basis, virtually ignoring the sedan buyer and diverting resources away from North America and even away from auto assembly.
If GM restructures quickly, it can emerge as the low-cost producer in North America and use that position to gain market share quickly.
I don’t see how Chevrolet or Cadillac can become low-cost producers in North America. Does anyone seriously expect Chevillac’s UAW employees to labor for lower wages than their non-union American counterparts? Or, for that matter, Korean or Chinese workers? So where’s the competitive cost advantage going to come from? More efficient factories? Streamlined management? Better marketing? What?
Even if Chevy could undercut its competitors’ costs, gaining marketshare, never mind gaining market share quickly, is so far from a done deal it may not even be possible, never mind likely.
Chevrolet is not a viable automaker. Aside from pickups and a superabundance of dealerships, they ain’t got game. The Volt is an inside joke.The Malibu isn’t stealing significant sales from Toyonidssan. The new Camaro is a niche product. Ditto the Corvette, only more so. The Aveo is a piece of crap. The Traverse surmounts nada. Etc.
In fact, rebuilding Chevy isn’t simply a matter of throwing billions at existing products, or spending billions on creating new ones. It would take at least decade to do something about the brand itself, which is both damaged and virtually meaningless.
In contrast, Cadillac doesn’t need cost savings; it need vehicles that are significantly better than those made by Lexus, Audi, BMW and Mercedes. Cadillac also needs a stronger brand than its German or Japanes competitors. This for the automaker hell bent on building a station wagon, a rebadged SUV-lite, a blinged-out Tahoe and a lower-priced sedan than the CTS.
While MAK’s right that the transplants built their initial success on Detroit’s failures, there’s no reason to think the “usurpers” will now drop the ball. Though MAK tries to make the case:
Ironically, some of GM’s competitors aren’t looking invincible anymore. At ¥100 to the dollar, imports from Japan aren’t profitable. Nissan Motor Co. will lose money this year; and, despite Carlos Ghosn’s magic, it has yet to demonstrate consistent product strength.
Toyota Motor Corp.’s quality is not rock-solid anymore. The residual values of its vehicles are falling, and product proliferation is confusing buyers and dealers. The blind quest to be No. 1 left Toyota with global excess capacity.
Sorry, but Toyota and Nissan are hardly standing still. They’re rectifying their mistakes, readying themselves to keep kicking Motown’s ass. And what of Honda? Hyundai? Ford? Fiat? Just joking.
Anyway, MAK thinks Chevillac’s future comes down to people. True, but what are GM’s chances of finding someone to lead Chevillac to victory?
The GM board of directors bears responsibility for the company’s fate. The most important responsibility of the board is naming and firing the CEO. . .
The GM board deserves a failing grade, and the new GM deserves directors who will be fully engaged. The new board has to ensure that the vitality of the new company isn’t squandered as soon as there is evidence of a comeback.
This would be a good time to mention the fact that a federal committee is in complete control of GM’s Board of Directors. They just fired GM’s CEO, and installed his clone at the helm. How confident does that make you feel?
Not that I’m suggesting that an unelected federal quango made up of bankers and non-auto industry types is incapable of choosing a kick-ass BOD for GM, who would choose the right CEO for the job. I’m saying it.
I never owned a share of General Motors during my 28 years on Wall Street and in the 10 years since. But if bankruptcy delivers a low-cost, competitive company, I’m ready to buy.
And if there’s a clean, low-mileage 2007 Ferrari F360 going for $20k, I’m in. Meanwhile, not.
Motown’s top suits are [still] insulated from “the ownership experience.” They drive carefully selected and prepped examples of their own products lovingly serviced by the company’s top wenches. I mean wrenches. The company replaces these perkmobiles before they can prove the old adage that getting older is not for sissies. The execs don’t experience the slings and arrows of outrageous service departments, nor, for that matter, their competitors’ products. They are the bubble boys, accompanied by buff book writers. In this month’s Motor Trend, the chronically undercapitalized arthur st. antoine offers this: “Full disclosure: At the moment, I don’t own an automobile. There are too many test cars, too little time.” So the st receives a new, carefully selected, meticulously prepped and thoroughly maintained press car EVERY WEEK. A full tank of gas, no insurance, no trips to the dealer (ever). None of the hassles of car ownership AND the unexpressed danger that writing something that takes him off the press car gravy train would costs him thousands of dollars per year. Now, about this month’s column . . .
Despite fessing-up to the fact that he doesn’t spend bupkis on personal transportation, st. antoine trots out a mental list of the cars he would buy—you know, if he had to. This for the benefit of party-goers who annoy him with regular requests for the car that he owns, and car makers, who should let his taste inform their manufacturing choices.
Volkswagen GTI – Our own Justin Berkowitz actually spent his own money on a [non press] GTI, and reported the familiar over-familiarity with his Volkswagen dealer’s service department. To say VW has something of a rep for unreliability and no-fun stealerships would be like saying that there are better places to have a steak dinner than The International House of Pancakes. But such considerations are but nothing to MT’s man, who calls the GTI a “no-brainer.” st. antoine warns that the car . . . isn’t the quickest in its class. “Who cares? Not me whenever I have a GTI for a weekend mountain fling.” Lucky you, then.
Jeep Wrangler Rubicon – Another car with a rep for unreliability. Not that we worship J.D. Powers’ mob, but the Wrangler notched up a four out of 10 for reliability. Safety is also an issue—for some. Not antoine. “I’d stretch to get a Rubicon ($29,315 base) with all the off-roading can-do, then wrestle with the choice of four doors (the roomy Unlimited makes more sense) or two (looks and feels more authentic to me).” Would it be a stretch to mention the gas the Jeep sucks in the name of slow forward progress?
BMW 335i sedan – Not that he’d gamble his own money on the ownership proposition, but st. antoine reminds us that the “Bahaus sledgehammer scores impressively on those depreciation charts used by accountants charging you $200 an hour to show you how much money you can save. So it actually makes some financial sense.” It must be asked: how much sense and what does HE know about it?
Ford Mustang GT Premium – File this one under TMI: “True, the Camaro likely has the edge in handling and modernity [how’s next Thursday for the loan guys?], but the Mustang is just more ‘me’ (feel free to inject ‘rough around the edges’ here). Where’d I put my Ray-Bans?” No offense to Ray-Bans [note to self: test driving glasses], but Ray-Bans?
Lotus Elise – I’m confused. Does the Elise cap st. antoine’s list of cars he’d own if he had to buy it with his current salary, or if he won the lottery? Is he suggesting that it’s a suitable car if he could STILL have access to all those press cars AND had to spend his own money on Lotus’s motorized tea-tray? No matter how you slice it, the Elise is the love that dare not speak its name—except to Motor Trend’s readers. “The cocktail-partiers don’t get this one. They always expect me to make sense.” Well that confirms it: not only does st. antoine not identify with his readers, he doesn’t hang with them either.
Insider gold, indeed. The cozy relationship between the automotive press and automotive manufacturers is a disgrace to both. The car makers don’t get genuine feedback on their cars (which would help them build more competitive cars), and the press don’t give their readers the truth about cars (which would help them buy better cars). Perhaps the upcoming motown meltdown will create a paradigm shift in the autoblogosphere, freeing both maker and critic to realize that honesty is the best policy.
As rumors filter in about GM’s Volt battery program, the faithful must be experiencing a certain amount of restless discomfort. After all, it’s not like this couldn’t be seen coming. Let’s just say that when I asked at SEMA last October the guys from A123 Systems (then bidding on the project) about the Volt battery development program, they took full advantage of the fact that SEC silent periods don’t forbid eye-rolling. Though non-verbal communication can (and in this case, did) speak volumes, we like to get our facts in writing. Which, thanks to the truth-proof wall surrounding the Volt’s development, usually means going through GM’s PR-exercise interviews with reliable Volt boosters and mining them for some kind of meaning. And hey, there’s an interview at Volt cheerleader HQ gm-volt.com which suggests that the Volt’s battery development is being rushed. And engineers are complaining to blogs? Fancy that!
GM-volt.com’s Lyle Dennis sat down with GM’s head Volt honcho Frank Weber for a sanitized-for-your-protection update on General’s moon-shot gambit. So what is happening right now, according to Weber?
We have been using the winter for winter tests . . . Now what’s happening is the true development work that you say OK this is the temperature of the battery, and this is the temperature of the system, and this is what happens when you are plugged in, etc. There are parameters that we call calibration, you have the basic software functionality on those cars defined, and then we start to calibrate it looking at the temperature and when to we start it, what is the true power of the battery at a certain temperature, etc.”
Any of this sounding intelligible or reassuring yet? This is supposed to be GM’s chance to thrill the credulous faithful, and the best Weber can come up with is “start to calibrate?” Don’t worry, it gets worse.
“What you know is what the behavior is for the cars that we are testing, and then you make an assumption for how a component will behave over time and how it will behave under the same situation in several years. This is what we call accelerated testing. This gives you some indication of durability. The piece that is tricky and interesting about the battery is to do a really accurate extrapolation of the true behavior. For a mechanical part this is very simple. For a mechanical part you can replicate its lifetime and find out when it will break. The battery is electrochemical and its more difficult to make those extrapolations. This is part of the learning we have to do, battery learning between the battery supplier LG and us. By the way this is still the element of risk. This is also why we are unable to get the car out any sooner. It is those things that have to be developed now with the components that are representative of the production vehicle. There is no way to do this any faster.”
If GM would just admit that the “late 2010” launch date is toast, this wouldn’t even qualify as spin. But then we don’t exactly live in a world where you can just say “it’s complicated, we don’t know when it will actually be done, now where’s my NSFWing bailout” is it? Or is it? I digress.
In a separate post, Lyle Dennis predicts public test drives this summer, putting faith first in spite of more damningly ambiguous talk, this time from GM’s John Lauckner. Saying “we need an experience where people say ‘Wow’ this is really something special,” Lauckner reveals that GM has “laid out all of the concepts that we want to use and written a lot of the preliminary code,” for the Volt’s “software-driven” driving experience.” Concepts. Preliminary. Wow. Lauckner continues:
“I would say that conceptually we’re most of the way there if not all of the way there, but there’s a lot of work to be done still to make sure that the whole thing operates seamlessly. [GM has to] love this thing a little bit to make sure that you not only get it that it actually works but you get it working in such a way that its completely intuitive. We need the time with the car and we need the time over a wide variety of conditions to simulate certain things, so that we can see just exactly how the car is going to behave and what sort of information the driver is going to get to make sure everything works in as seamless a way as we can possibly make it.”
Love your own product? Really? You’re only going to be asking $40 grand for the thing. And though both executives note its importance, time is the one thing GM doesn’t have. Weber reveals that the engineering freeze on the first true Volt prototypes or integration cars will occur “within days,” and that these integration models will be built and tested sometime later this year. If GM could simply let its executives just say what they hint at (conceptual, preliminary, this thing takes time) and let the “late 2010” date slip, their troops on the ground might not be grousing that the battery system is an “epic fail.” Instead it’s being rammed through and damn the torpedoes. This won’t end well.
Automotive News [AN, sub] does an excellent job covering the industry. Most of the time, AN is an unbiased if largely toothless conduit of autoblogospherical fodder. In other words, they report, we decide. But today’s column by Editor David Sedgwick is, well, appalling. No, really. I am shocked at the depths of disinformation, dissembling and, yes, dishonor to which AN and Sedgwick have sunk. “GMAC’s chief has a chance to earn his millions” begins by asking “Is Al de Molina worth $11.6 million?” The obvious answer has Will Smith written all over it: oh, HELL no. Unless, of course, you’re one of the Cerberus insiders who benefited from the Fed’s last minute rule change. You know, the one allowing GMAC to become a bank when it didn’t qualify for bank status. Oh, and then there’s Uncle Sam’s $6B GMAC bailout. So yes, I guess Al de Molina is worth the big bucks to someone. Sedgwick’s column, on the other hand, isn’t worth the paper it’s printed on.
USA Today’s car coverage is normally a fairly sensible part of a fairly sensible newspaper. But the Motown meltdown has created major distortions in the force. USA Today’s piece “Readers tell us why they stand by their American cars” is odd, from any angle. Clicking on the “enlarge” button of a homo-erotic picture of a guy in combat pants posing in front of a Buick Riviera is only the beginning. Right from the start of the article, it’s clear that scribe Chris Woodyard is so far out of the news loop he might as well check if Elvis is on the moon with him. Either that or he’s having a bad flashback, man. How else can you explain his bell bottom jeans-era take on American cars?
To admirers, the American car is the ultimate expression of freedom, a terrestrial comet skimming across a barren highway.
To detractors, the American car is a fuel-gulping beast, a steel behemoth that symbolizes industrial decline.
Love it or hate it, no other consumer product ignites as much passion or has had such a profound impact on every aspect of American life.
Yet the fate of the American car is unsettled. The nation’s three homegrown automakers — Ford Motor, General Motors and Chrysler — are running on fumes, victims of a miserable economy, changing consumer tastes, a few painful mistakes and the pressure of foreign competition.
A few painful mistakes? I’d would LOVE to see that list. But no, I’ve got to wade through edited sound bites on American car fanatics. To his credit, Woodyard realizes he’s going to have to completely redefine the term “American car” before he unleashes the vox pop– if he’s not going to look like a total ass.
Now the definition of “American car” has shifted to a definition of American car style.
And what is that style?
“A relatively large, easy-to-drive sedan or crossover.
“You can’t find them anywhere else.”
Americans say they would rather buy domestically made products. Three-quarters of 537 car shoppers surveyed on its website by Kelley Blue Book in December said they prefer to buy U.S.-made products.
A third remain loyal to Detroit’s Big 3.
Whoa dude. Nice transition! But you’d kind of hope that a journalist examining an industry hoovering $97b from American taxpayer’s wallets would want a sample size slightly larger than one you could fit into a high school football stadium.
From there… Hey, who asked this guy to write so many words? Words are not Woodyard’s friends. But at least he can find some flag-wavers whose words back-up his uninformed, interminable rant, right?
Give up on the U.S. automakers and you give up on what makes up the “American spirit.” You join hands with the Southern senators, some of whom have never been in manufacturing, in cutting the legs off the backbone of this country.
Speaking of area 51… Seriously though, either Ronnie Schreiber’s brainwashed Madison Heights Dodge Caravan owner Mary Ellen Hoerig, as above, or she’s a great American. Or Wayland’s put words (there you go again) in her metaphorical mouth.
I have always driven a Ford, Chevy, Buick or Pontiac. Mainly because I don’t buy new cars, so I buy an American car because I feel they are cheaper to maintain.
My wife and I feel the quality of the U.S. cars is equal to that of the foreign cars.
Feelings? Nothing more than feelings? Which are way cool when you’re going for non-scientific random samples to back up a pre-existing prejudice. And then, out of the blue, things turn NASTY. “Why I drive foreign cars.” Uh-oh. Who let the dogs out, who?
First, fuel efficiency is important to us as a young family, both as an economic preference, and because we prefer to consume as responsibly as possible. In this respect, American cars have really let us down.
It’s not as if we set out not to buy American. But Toyota and Honda have long outstripped the Big 3, producing cars with responsible EPA gas mileage estimates (while) American automakers were touting the Hummer.
Can someone tell me the advantages of trotting-out uncorrected ignorance on BOTH sides of an issue? No?
We now purchase almost exclusively based on Consumer Reports reliability ratings. So when Honda came out with its first full-size king-cab pickup, we purchased one. With 80,000 miles on our Ridgeline, we have had zero extra maintenance costs.
In tough economic times, my husband and I can no longer purchase based on national pride. We have to have the most reliable, best gas mileage, highest resale option in the class, or we are throwing away money.
And there you have it: another highly contrived piece of non-journalism on the automotive industry that fills the otherwise blank space between ads. There is one remaining question: what does muscle man John Colletti think about American vs. foreign cars?
President Bush’s radio address this morning: “Good morning. For years, America’s automakers have faced serious challenges — burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse — and that the only way they can buy time to restructure is with help from the Federal government.
I’m not going to name names. I’m not going to lay blame. I’m just trying to clear my name.
This is a difficult situation that involves fundamental questions about government’s proper role. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.
I’m sacrificing A for B.
Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay — and I would not favor intervening to prevent automakers from going out of business.
I don’t favor intervening in free markets unless I do.
But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws — and provide a Federal loan to keep them operating while they try to restructure. But given the current state of the auto industry, my economic advisors believe that bankruptcy could now lead to its disorderly collapse — sending our economy into a deeper and longer recession.
A government-aided Chapter 11 is the right thing to do. But we’re not going to do it.
A more responsible option is to give auto companies an incentive to restructure outside of bankruptcy — and a brief window in which to do it. My Administration proposed legislation to achieve this, but Congress was unable to get a bill to my desk before adjourning for the year. This means the only way to stave off a collapse of the auto industry is for the executive branch to step in. So yesterday, I announced that the Federal government will grant loans to auto companies, which will provide help to them in two ways.
This is Barack Obama’s problem now.
First, the loans will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success.
We believe GM and Chrysler can do what they say they’re going to do– minus the bits they say they’re going to do. But I can’t say that. Because if I did, I would be saying I don’t believe them. Which would mean this bailout makes no sense whatsoever. Anyway, like I said, this is Barack Obama’s problem now.
The terms of the loans will require the auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers. If a company fails to come up with a viable plan by March 31st, it will be required to repay its Federal loans. Taken together, these conditions send a clear message to everyone involved in American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy.
Chrysler and GM must pay back the federal loans because that’s what a loan is: something you pay back. Actually, fuck it. If they can’t repay the money, they can declare bankruptcy. At that point, no one’s going to care about a measly $17.4b.
The actions I’m taking represent a step that we all wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our Nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination, and emerge stronger than before.
Who’s your Daddy?
Thank you for listening.”
Jalopnik’s Editor and I have had some major differences of opinion. Ray Wert recently opined that a Chrysler-GM merger made good business sense. I disagreed. When Jalopnik sold “Save GM” t-shirts and claimed it was ironic, I said it was absurd. Today, Wert posted an editorial entitled “The Case for GM CEO Rick Wagoner.” Again, I disagree. The rant is deeply misguided, the logic and conclusions just plain wrong. And in a twist of [yet more] unintended irony, the editorial stinks of the sloth and corner-cutting that’s brought GM to its knees.
“While we’ve been a vocal critic [sic] of GM’s glacial restructuring effort,” Wert writes. “We’ve got to say the automaker probably should stick with the girl they brought with ’em to the ball — no matter how ugly.” This is no argument at all– unless you find the admonition against ‘changing horses mid-stream’ inherently compelling. General Motors has followed this non-strategy– stick with the same tired brands, the same poor products and planning, and the same incompetent management– for the past four decades. To no avail.
So what’s the justification, in Wert’s mind, for backing a loser? “Mostly because we can’t name anyone better who’d understand the product and the bureaucracy of the General.” Obviously, Wert’s inability to name a suitable replacement for GM CEO RIck Wagoner doesn’t preclude the possibility of his or her existence. In fact, it underscores the paucity of imagination suffered by the pro-Big 3 establishment collectively; demonstrating General Motors’ longstanding assumption that if they can’t do it, it’s not possible. Remember when GM said it was nearly impossible to make money on small cars?
Is it really that hard to find an executive that meets Wert’s supposed requirements, understanding GM’s product and bureaucracy? Even I understand GM’s products, and I have no managerial skills above the level of lemonade stand. As for grokking the complexity of GM’s bureaucracy, this is a double-edged sword. Any executive that comes from within GM doesn’t just understand the bureaucracy– they are the bureaucracy. While the FBI recruits mobsters to act as informants because they understand the mafia, it doesn’t recruit mobsters to work as actual FBI agents.
Wert opposes bringing in someone outside of GM because “… to bring in someone completely new to figure out that bureaucracy takes time GM just doesn’t have without tens of billions more in public monies.” But that’s the real issue here. This is public money. And while the taxpayers don’t get stock certificates (perhaps they should), why would we want the same management that carelessly squandered billions of dollars of GM’s privately-raised money? We have no reason to believe that Rick Wagoner’s cronies will be more careful now than they were before.
As for figuring-out bureaucracy, a new CEO doesn’t need immediately understanding of the company’s bureaucracy. They need to keep the company running more than the “two months” that Wert over-pessimistically prognosticates GM has left.
The “better scheme” that Mr. Wert then proffers reads like a sort of class president campaign flyer. “What this automaker needs … [is] an external force moving the current leadership to change quickly.” They also need 1000 mile-per-gallon sports cars. Neither is possible. Neither is orbiting possible. General Motors does not change quickly, and Rick Wagoner has never shown any proclivity for the kind of fast action the company so desperately needs. Hanging-up the phone on Carlos Ghosn doesn’t count as fast business action any more than driving to DC.
Not all that surprisingly, Mr. Wert’s pipe dream plan of adding yet another layer of bureaucracy to General Motors isn’t even internally consistent. Too little oversight of Wagoner, and we’re at the status quo, with public funding down the drain. If a board of independent assessors is going to scrutinize Wagoner’s every decision, why have him there at all? You lose the purported benefits of Wagoner “knowing his way around GM’s bureaucracy.” And in so doing, you actually amplify GM’s traditional problems.
I certainly don’t think Red Ink deserves all the blame for decades of chronic mismanagement at General Motors. But he’s the man in charge of the firm now. The executive who’s been CEO for eight and a half years. Prior to that, since 1992, Wagoner high level executive positions. So he deserve plenty of blame. And he can no doubt survive taking one for the team with the small fortune he’s banked over the past 16 years.
It’s intriguing that GM posted a mea culpa to the Facts and Fiction site a few days ago. But absent major action, it’s meaningless. Mr. Wert can’t sprinkle their support for the status quo with a handful of criticisms and think it properly qualifies his opinions; that is the very definition of an apologist.
The “Case for Rick Wagoner” ignores reality. GM’s CEO is a failure. What’s more, he’s the public face of a company that needs a complete change of direction AND identity. General Motors must ditch Wagoner to tell all the disenchanted former GM owners and all those opposing the bailout that things really are going to be different. For GM, keeping Wagoner would insist on the status quo. For Mr. Wert’s part, he fills the role of accomplice journalist fairly well.
I can’t remember the last time Automotive News [sub] unleashed an email alert for an editorial. Hell, I can’t remember the first time they did it. As in this is it: the first time. You see how stunned I am? Well, no prizes for guessing which side of the bailout issue Crain’s boys fall. They unleash the argument that’s become the de facto Detroit defense: a bailout sucks, but not bailing out Motown sucks even more. They fucked-up but YOU will suffer. So YOU should pay. NOW. BEFORE IT’S TOO LATE! Hysteria and hyperbole? You don’t know the half of it. Well, not yet anyway…
“If Congress thinks a bailout of General Motors is expensive, it should consider the cost of a GM failure. Let’s be clear. The alternative to government cash for GM is not a dreamy Chapter 11 filing, a reorganization that puts dealers and the UAW in their place, ensuring future success. No, even if GM could get debtor-in-possession [DIP] financing to keep the lights on (which it can’t), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation.”
Dreamy? Like “Oooh. Danny Zuko is so dreamy?” Find me anyone who argues that a GM Chapter 11 wouldn’t be a painful process for all concerned. And who says GM can’t get DIP financing? Shouldn’t we explore the possibilities of government assistance after a GM Chapter 11? Painting the bailout issue in black and white terms is the worst kind of yellow journalism, and does the automaker’s chances of long-term survival no service.
Especially when there is no plan on the table. No goals. No time lines. No strategic outline. Nothing. In that sense, “this” GM turnaround has about as much chance as the last (existing?) one, which was also bereft of publicly declared targets. As far as AN’s concerned, never mind. Pay no attention to that man behind his $15.5m curtain. It’s time to piss or get off the pot. Do or die.
“GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close. Frogs will fall from the sky. Boils shall fester on the skin of small children. And lo the Earth shall be cleaved in two and swallow the city on the river as the whale swallowed Jonah.”
Only the whale didn’t swallow Jonah. (And I made-up those last three sentences.) GM filing for Chapter 11 isn’t necessarily what professional courtesans call a “hard stop.” Even if GM loses half its market share, that’s still a Hell of a lot of cars and trucks. Someone will build them. Why not a post-C11 GM (i.e. Chevrolet)?
“Criticize Detroit 3 executives all you want. But the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards.”
So what IS the issue? Like the automakers AN seeks to suckle, their unnamed writer just can’t seem to focus.
“The $25 billion in loans that Congress approved to partially fund improvements in fuel economy? Irrelevant. Dead automakers do not invest in technology.”
The switch in logic reflects Detroit’s inability to stay on message (hint: jobs, jobs, jobs). You bastards wanted us to build clean, fuel-efficient cars and liberate American from its oil addiction and save the God damn polar bears? Well we can’t do that if we’re DEAD, can we?
AN is also surprisingly conflicted on who’s in and who’s out on the death-defying bailout.
“Each of the Detroit 3 is in crisis. But Ford, which borrowed big two years ago and thus has more cash today, may skip a bailout and the strings attached. Cerberus, which bought Chrysler last year, doesn’t deserve money. Government cash might help sell Chrysler to a strategic owner.”
Yeah, that’s a thorny one. Does Ford really need the dough? And why stuff government money into Chrysler when its owner is Mr. Moneybags himself? Anyway, AN is looking out for you!
“The taxpayer needs protection and an upside. GM’s top management may need to go. Government-as-shareholder deserves a big voice. Those details can be worked out.”
May? You see that mangled piece of charred rotting flesh hanging off your shoulder? We may have to amputate. “Details?” We don’t need your stinking details! Just give us the money before we die all over you. After all, no matter what you i-dotters and t-crossers say…
“…the stark fact remains: Absent a bailout, GM dies, and with it much of manufacturing in America. Congress needs to do the right thing — now.”
Call me crazy, but handing $25b to the same people who got GM into this mess– without knowing exactly what we’re getting ourselves into– is not the “right thing.”
And now it’s time to send our email alert. Just as we have for the last five years.
David Cole is the man whose industry and union-funded Center for Automotive Research carried-out a study of the economic implications of Detroit’s meltdown. The result has become the de facto standard for “this is the serious shit that will happen if we don’t bailout Motown’s mismanagers with federal tax money” argument. So much so that the mainstream media uses the figures without attribution. TTAC has exposed Cole’s blantant self-interest in this matter. Our Best and Brightest have examined CAR’s study and exposed its deep methodological flaws. While there is no doubt that a GM, Ford and/or Chrysler bankruptcy filing would create an economic catastrophe for tens of thousands of workers and hundreds of communities, exaggerating the impact for political gain is deeply immoral. And just plain wrong. Giving Cole an uncontested platform to promulgate his propaganda is, if anything, worse. And yet that’s exactly what The Detroit News has done…
The DetN is so happy to let Cole mislead the general public that the headline AND strapline say the same damn thing: “Letting automaker fail costs more than price of loan automaker” is immediately followed by “fail costs more than price of loan.” You know, just in case you can’t be bothered to read Cole’s dietribe [sic]. Which begins by blaming the same government his people seek to suckle.
“The popular complaint is that the domestic auto industry got itself into this mess, and it should suffer the consequences. But the reality is the Detroit Three wouldn’t have cash flow problems if the federal government hadn’t caused the financial crisis, in part, by ensuring that Americans who couldn’t afford a home suddenly could buy one. The resulting subprime mortgage crisis helped lead to the credit crunch, which has caused a dramatic decline in auto sales.”
The meme is clear: the financial crisis is the cause of Detroit’s disaster. The fact that all the other automakers doing business in the United States who aren’t HQ’ed in Motown are in no danger of going belly-up is, apparently, irrelevant. The inconvenient truth that GM’s former captive finance unit GMAC is up to its eyeballs in the subprime mess doesn’t get a look in. Or the American automakers’ obvious willingness to lend money to car buyers whose credit scores mirror a minor league baseball player’s batting average. But wait! There’s more! More federal complicity in Detroit’s dilemma!
“The federal government also contributed to the auto industry’s problems with its lack of a realistic energy policy. The price of this hit home this summer, when the price of gasoline spiked to $4 a gallon and caused a massive shift in the types of vehicles consumers would buy. Now that the price of gas is below $2 in some areas of the country, there will be far less demand in the short run for the fuel-efficient vehicles that the government wants the automakers to sell in greater quantities.”
How fucked-up can one argument be? Seriously, I’m sitting here at the keyboard, schnauzer at my side, lost in the maze of Cole’s rhetorical obfuscation. Are the feds to blame for not having an energy policy that kept gas prices low? Or for having one that did, then didn’t, then did? Did the federal Corporate Average Fuel Economy regs force automakers to make the fuel-efficient cars that would have saved their ass if they’d hadn’t gorged on SUV and pickup truck profits (assuming they could make competitive small cars if they really wanted to) a good idea then, but wrong now? Or wrong then AND now?
Cole’s willingness to blame CAFE for Motown’s misery shows where his sympathies lie– if such evidence were needed. It also shows that Motown’s propagandist-in-chief is no strategist. Criticizing the Dems’ legislative darling child will not win Detroit any friends in Washington. No siree Bob.
“If GM, Ford and Chrysler had to shut their doors, according to our center’s calculations, the economy would lose nearly 3 million jobs in the first year. That is because the auto industry has the highest jobs spinoff of any manufacturing enterprise. For example, for every auto assembly factory job, there are another eight to 10 jobs outside of the plant.”
This rhetorical technique is called reductio ad absurdum. You make a claim, show how it leads to an absurd or ridiculous outcome, and then conclude that the original claim must have been wrong– as it led to an absurd or ridiculous result. If Detroit’s automakers file for Chapter 11, there is no way on God’s green earth that they will simply shutter their doors and be done with it; they will continue making and selling vehicles. It may be a fraction of previous production, but it will not be zero. To suggest so is the dictionary definition of disingenuous. Of course, Cole’s got that one covered.
“Critics have said it would be better to let the automakers file for bankruptcy and get their financial houses in order. The problem with this approach is that industry experts know that consumers won’t buy expensive products from a bankrupt company. That still leads to serious decline in sales and to 2 million lost jobs very quickly.”
Don’t you hate it when an industry expert quotes unnamed industry experts to prove that he, an industry expert, is right? Perhaps Mr. Cole should conduct a study on consumer attitudes towards buying from a bankrupt GM, Ford and or (yeah right) Chrysler, focusing on price. Because at some price, ANYTHING will sell. And he might want to ask “If the your car warranty was backed by the federal government…” Nope. Checks cashed. Blinkers on. Two million jobs? Where’s the data? And define “very quickly.” Fuzzy logic uber alles.
“In addition, the very low level of current sales and surprisingly low inventory of vehicles are creating a pent-up demand for new vehicles once the credit crunch subsides and the economy improves. The market promises to shift from the buyers’ market of the past decade to a sellers’ market where fewer financial incentives or discounts will be needed to sell a vehicle with the industry’s reduced manufacturing capacity.”
Baseless conjecture. Dataless drivel. Crap. In fact, you could say that the domestic automakers’ build ’em fast, pile ’em high, sell ’em cheap strategy over the last ten years created an automotive “bubble.” That burst. TTAC may not be a credible source of industry expertise in Mr. Cole’s eyes, but we called the sales meltdown (sub 12m units). And plenty of us hereabout don’t see a recovery until the tail end of 2010. And even then, vicious competition from the transplants guarantees that America will ALWAYS be a buyer’s market.
“…the government needs to give the Detroit Three a bridge to this brighter future. A bridge loan now would be far less expensive than letting one or more of the domestic automakers fail.”
Or not. In fact, funding the automakers without letting them pass through Chapter 11 would be a bridge to nowhere. And a complete waste of money. Our money.
Senator and president-elect Barack Obama held his first post-election press conference on Friday– the same day that Ford and GM revealed their respective arterial sprays of red ink and third degree cash burns. Rather than highlight those stats and go for the close, bailoutwise, Obama played his political cards close to his chest. The exact text of his remarks are extremely revealing, in that politicians don’t really reveal anything unless they absolutely have to kinda way. “The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil.” Translation?
Obama’s opening salvo reveals that America’s next President expects Detroit to stop messing with Democratic promises to improve America’s vehicular fuel efficiency, buckle down and build fuel sippers.
The implication doesn’t exactly plow new political ground. Lest we forget, Detroit and Washington have been at loggerheads regarding Corporate Average Fuel Economy (CAFE) regulations since they were first introduced in 1975. For CAFE’s most recent update, Motown [once again] lobbied Democrats to keep the standards as low as possible, then cried poverty when it was clear they’d lost the fight. The Department of Energy loans were designed to assuage Motown’s sore-headed losers by providing access to $25b to do what they’re legally obliged to do.
Bottom line: any new federal money for The Big 2.8 will come with the same old strings attached. In case you missed the point…
“I would like to see the Administration do everything they can to accelerate the retooling assistance that Congress has already enacted.”
Retooling = building more fuel-efficient cars. As TTAC has highlighted, federal foot-dragging is not Detroit’s enemy. The regs for the $25b Department of Energy loans have been written with unprecedented haste. In fact, they’re more or less done. The more part is that they’re done.
The less part is that Detroit can’t use the money for anything other than which it was intended (fuel efficient cars not corporate liquidity). What’s worse, GM, Ford and Chrysler don’t qualify under strictures regarding financial viability. Obama’s message was code: tacit clearance for Congress, the DOE, President Bush, someone, anyone to pervert the legislation’s original intent and current restrictions.
Does Barack Obama know that the situation is well beyond retooling? If he does, he ain’t admitting it. And if he doesn’t, his economic advisers might want to write a memo on that one. STAT.
“In addition, I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States.”
Weather the economic crisis. Now that’s what Detroit’s talking about! The first part of the statement is a not-so-clear signal to Motown (plausible deniability rules) that financial assistance will arrive via the Troubled Asset Relief Program, another economic relief stimulus bailout pork barrel package, and whatever clever shit the Obama administration and Congress can devise (tax credits for loan interest, etc.). But the second part of that statement… again with the fuel-efficient cars.
Clearly, Obama doesn’t want to be seen using taxpayer money to help Detroit build more SUVs, pickup trucks or automotive gas guzzlers. Which puts Motown in even more of a bind than before. Before, they could meet CAFE regs by balancing production of small, relatively fuel-efficient, uncompetitive, unprofitable small cars with sales of large, gas-guzzling, competitive, profitable trucks. Reading between the lines, Obama’s not going to let one red cent of public money sustain that mix.
So Detroit’s being painted into a corner: build competitive, fuel-efficient cars or fuck off and die. But what are the chances that GM can build these fuel-efficient machines and sell them in enough quantity at enough of a profit to make enough money to pay off their existing loans PLUS the federal assistance? Teen-tiny. Ford. Slim. Chrysler. None.
“I have asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.”
Translation: Obama is not throwing the weight of his political victory– assured in no small part thanks to Motown/UAW-friendly states– behind a wider Detroit bailout (under some sort of new economic stimulus passage). Not yet.
For Detroit, that’s an industrial-size mixing bowl of not good. Without Obama’s unqualified support, and soon, they’ve got a real PR mountain to climb. On a more general level, the same “lack of urgency” that put GM, Ford and Chrysler where they are today could ruin their chances in the political sphere. If so, it’s game over.
Paul Ingrassia’s essay in The Wall Street Journal takes a stab at a question which has preoccupied me for years. How the hell did the American automotive industry, which once was the model of industrial might for the world, become a sickly embarrassment? Generally, blame is apportioned amongst these areas: management, labor unions, government, customers and bad luck. Ingrassia comes down pretty hard on management, with a supporting role for the unions.
Ingrassia opens by pointing out the scant media attention paid to the opening of Honda’s new 200k-Civics-per-year factory. The Indiana opening stands in stark contrast to Motown automakers’ seemingly endless factory closings and layoffs (i.e. paying union workers not to work).
“This situation doesn’t stem from the recent meltdown in banking and the markets. GM, Ford and Chrysler have been losing billions since 2005, when the U.S. economy was still healthy. The financial crisis does, however, greatly exacerbate Detroit’s woes. As car sales plunge — both in the U.S. and in Detroit’s once-booming overseas markets — it’s becoming nearly impossible for the companies to cut costs fast enough to keep pace with the evaporation of their revenue. All three companies, once the very symbol of American economic might, need new capital, but their options for raising it are limited.”
But how did we get here? Product is the key. Ingrassia provides a good list of American post-war hits including the GTO, Caravan, Taurus and Explorer. All were segment busters– and not a one of them was created in the last 17 years. The Explorer launch of 1991 was Detroit’s last breakthrough product. But why?
“In all this lies a tale of hubris, missed opportunities, disastrous decisions and flawed leadership of almost biblical proportions. In fact, for the last 30 years Detroit has gone astray, repented, gone astray and repented again in a cycle not unlike the Israelites in the Book of Exodus.”
Ingrassia gives the transplants props for making allies out of their US workers. In the 1970s, it was still popular to blame the quality problems of American cars on the workers who built them. Honda tiptoed into these scary waters in 1979, opening of a small motorcycle assembly plant in Ohio. Workers were initially frustrated by their task of building a few motorcycles and then taking them back apart to evaluate quality and figure out how to make it better. But they learned the Japanese way. Motorcycle manufacturing proved to Honda that American workers were not the problem.
By 1982, Honda Ohio was cranking-out new Accords. And they never looked back. Two years later, Toyota opened NUMMI joint venture plant in Fremont, California, which still builds Corollas, Tacomas and Pontiac Vibes.
“Meanwhile, in the same year that Honda started building cars in Ohio, General Motors asked the UAW for wage concessions to help ease the company’s financial straits. But on the same day that UAW members voted approval, GM Chairman Roger B. Smith unveiled a new formula that made it easier for him and other executives to earn bonuses. It was a historic blunder.”
Amen to that. Even so, those hit products of the late 1980s and the truck boom of the 1990s allowed Detroit to prosper. But only if you measure success in terms of profits, rather than share. Slowly, calmly, inexorably, the transplants continued eating Detroit’s lunch. By the beginning of the new millennium, Detroit was oblivious to the enemy within its gates. Motown was flush with cash, embarking on a global buying spree.
“In June 2000, GM’s confident new CEO, Rick Wagoner, invited journalists to a resort in Italy’s Alpine lakes to describe a corporate future of ‘fewer cars, more trucks,’ as the Detroit Free Press wrote. Ford’s CEO Jacques Nasser upgraded the décor on the corporate jets and removed the company’s blue-oval logo from the outside of corporate headquarters while the Ford Taurus — once the best-selling car in America — was falling further behind the Toyota Camry and the Honda Accord.”
Easy money in trucks hid the rot within. Who cared that the Taurus had gone from #1 retail vehicle to rental car hell? One Lincoln Navigator made the profits of twenty or more Tauri. But just a few short years later, Katrina sparked the first fuel price run-up in decades. Not much later, the combined forces of growing demand and commodities market shenanigans sent fuel prices in a steep climb which has only recently started to turn around.
Suddenly, the truck boom went bust. The Emperors of Detroit were revealed in all their naked glory. (Well, at least to those outside the gates.) Now, with gas prices are coming down, credit markets have imploded. In these tough time, a Detroit management has long played badly with suppliers, employees and customers suddenly needs all the help it can find. BUT you have to build strong partnerships in the good times to tap into them when the going gets tough. Oops. All those management bonuses for cost-cutting related profits and “hard-headed negotiating techniques” [irony alert] don’t look so good anymore.
What now? Ingrassia gives a slight edge to Ford in the question of who has the best chances to make it out of the nightmare alive; Chrysler is toast already. GM is nearly out of cash. Unfortunately, no one told the feds that only fools rush in.
The dramatic denouement of this sad saga– David Halberstram’s long-predicted Reckoning, will be postponed for the forseeable future. But no matter who– if anyone– emerges from Detroit’s penultimate debacle, the simple truth is that Detroit has no one to blame for their plight but themselves.
The Wall Street Journal’s Business World by Holman W. Jenkins Jr. exemplifies the dangers of always looking at the course through the same binoculars. His “Uncle Sam Goes Car Crazy” (WJS Oct. 22, 2008) rant is an attempt to view Detroit’s troubles through Government is Bad glasses, filtering out all other reasons for the slide. He’s wrong, and in a dangerous way.
We can start where we agree: The American automotive industry is cart wheeling into the stands, parts are flying off and people are scared. Jenkins and I part ways mid-tumble. He believes Detroit has “accrued an almost incalculable baggage of government intervention, which explains why more intervention is needed today.” A traditional free-market loyalist, when there’s trouble, Jenkins’ finger points to big government first, automatically and without much input from rest of the body, it would seem.
First, Jenkins blames GM, Chrysler and Ford’s labor inflexibility on the Prohibition-era Wagner Act, claiming the Government makes automakers dole-out higher compensation than the market dictates. I’ll crack open a 70-year-old bottle of rye and toast laws that never change. Salut.
Labor contracts over the last few years have actually added second and third tier employees, mitigating the effect of Wagner. Not that it should have mattered. The labor laws in Germany are even more stringent and their Big 3 seem to be surviving. (Not that any car maker is raking it in a the moment, but Porsche/Volkswagen, BMW and Mercedes are nowhere near putting their respective bellies up.)
Second, Jenkins bemoans the 50s franchising laws, which certainly add to Detroit’s problems, but wouldn’t if they were moving vehicles, which they’re not. Ironically, if The Big 2.8 had not fended off the government’s attempts to raise fuel efficiency standards for a generation, dealers might have more competitive products to push right now. They’d all be selling more cars and trucks. The number of outlets matters, but to a lesser extent.
Next up, off-shoring vehicle construction, as in Detroit doesn’t do enough. I’m not entirely sure whose job Jenkins is trying to save with this argument; it’s not Joe the Tool and Die guy. Jenkins believes that saving American car manufactures means making cars someplace else. I just assume buy an American made truck, despite the Toyota badge on the tail, but that implies the tack is valid in the first place. Anyway, The Big 2.8 build plenty of cars in other countries. Fuel and safety dictates haven’t hampered that effort in the slightest. In fact, due to a limpid dollar, building in good ‘ole US of A hasn’t been this attractive in years.
Lastly, Jenkins states that American companies build better cars overseas and can’t bring them here, again because of an ignorant, intrusive federal government. I’m gathering he’s never been to a Saturn lot. Maybe he’s still confused by the fact that his Ford Focus doesn’t corner like the one he rented in Glasgow. A choice Ford made all on it’s own.
Yes, there are differences in standards from nation to nation. The differences, themselves, do not prevent a world car. The European Ford Focus is built on the Mazda 3 – Volvo 30, 40, 50 platform, that runs nicely on American highways. Its one of the many things Allan Mullaly noticed when he took charge of Ford. He’s been trying to slim and unify ever since. AND he’s not breaking any laws in the process.
Strangely enough, Jenkins misses the Big Kahuna: mandatory health care. GM, Chrysler and Ford have to offer it to their workers, and It costs them a fortune, adding thousands of dollars to the cost of every Trailblazer, Explorer and Durango rusting on the lot. And, you know, helping people survive cancer, heart disease and other ailments along the way.
A national, single-payer health care system would alleviate these costs and level the field Americans play on against Japan, Germany and Korea, as the Chinese stretch out on the side lines. “Socialized Medicine” is beyond Jenkins’ scope, though, regardless of how good it looks as applied to this industry. Government is never the answer in Business World.
“The only thing wrong with corporate longevity,’ Jenkins writes, “are the legal encrustations that accumulate.” To which I say: build better cars and customers will buy them.
There are times when you’ve got to put the binoculars down and take in the full course. Even when you may not like what you see. Laissez faire is a fine ideology; it should never be confining. There are times when other strategies need apply, like… now (for example). One of the world’s foremost authorities on business issues got it wrong four out of four. I expect better of the Journal. With industry leaders getting this kind of advice through their headsets, it’s no wonder the American automotive industry’s spinning off the track.
The mainstream media suffers from “opinion inertia.’ Once the press corps adopts a certain angle on a story, its superglue city, facts be damned. To wit: TTAC’s been slamming Chrysler for horrendous product quality, bizarre model choices, asinine marketing and a bloated, piss-poor dealer network since… ever. Meanwhile, our colleagues have been playing the underdog American automaker meme. Post Cerberus purchase, they’ve been ignoring Chrysler’s failed products and telltale gaffes, such as CEO Bob Nardelli’s infamous “operationally bankrupt” admission. But now that rumors of a GM – Chrysler merger have surfaced, the media’s woken up. And the fangs are out.
Detroit News contributing author Alisa Priddle normally puts her keyboard to use for Car and Driver’s blog, where she’s more PR repeater than news reporter. In September, she parroted “Chrysler shows it has a slew of electric vehicles in the pipeline, including a Chevy Volt competitor, and they’re coming to a road near you soon.” Not only was this blatant press release regurgitation, it was also patently false. “They” weren’t going into production; a fact that Priddle acknowledges later in the article (only one, at best, would be produced).
And now, Priddle pens “Chrysler, GM deal confronts obstacles,” which would better be titled, “WTF are these asshats thinking?” “Statements that Cerberus bought Chrysler for the long haul are falling on deaf ears,” Priddle writes. “Especially with the financial tiff that has broken out between GMAC (which is 51 percent owned by Cerberus) and GM, which is now paying dealers an incentive for sales financed outside GMAC.” Well, someone’s ears are open, now.
Co-writer David Shepardson is also a recent convert to the growing “Chrysler’s up excrement creek” camp.
In an August 6, 2007 column called “Controversial CEO,” Shep responded to CEO Nardelli’s critics. “But Nardelli improved the company [Home Depot] by several measures. Sales jumped from $46 billion to $91 billion in 2006, while profits doubled to $5.8 billion.” Shep quoted the usual (anonymous) sources, happily reporting that “A person close to the situation said Cerberus was deeply impressed with his financial performance. ‘If we get anywhere near what he has accomplished previously, we’ll be delighted,’ the person said.”
Now Shep’s taken off his rose-colored glasses and begun chronicling the folly of the mix ‘n match “too big too fail” theme. “Among the hurdles to any deal is whether Congress would agree to provide financing to help a merger. Congressional aides said any kind of money would likely include strings.”
Detroit News columnist Daniel Howes is also showing his ability to eviscerate a hometown hero. His October 2007 column “As Toyota falls, Detroit Big 3 rise” gives way to today’s “GM hasn’t learned bigger isn’t better.” “Forget the back-channel spin from those with self-interested agendas rationalizing the boss’s current negotiating position. Would this mega-deal, another stunning blow to Michigan’s wobbly economy, make sense to Joe the Autoworker and others not drinking the Kool-Aid of the moment?
In yesterday’s post on the Wall Street Journal blog, Heidi N. Moore asked “What If the U.S. Auto Makers Don’t Survive?” That’s a sharp turn from her June 10, 2007 post on Chrysler’s rosy prospects: “The honeymoon at Chrysler clearly isn’t over: Chrysler CEO Robert Nardelli couldn’t be happier about Chrysler getting rid of Daimler and public shareholders in one fell swoop.”
Clearly, the press has “reassessed the Chrysler situation,” working their way towards acknowledging Former CEO of American Motors Corp and current professor at University of Michigan Gerald Meyers’ assertion that “there is no economic justification for the existence of the Chrysler Corp.”
And now that press is beginning to face that uncomfortable reality, they’re showing remarkable insensitivity towards their former champion, newfound object of ire.
The current media group-think is, simply put, Chrysler’s going away. Get used to it. Whether through a merger or a sell-off, tens of thousands of jobs, hundreds of suppliers, thousands of dealers and tens of thousands of customers will soon be S.O.L. Chrysler’s presumed recovery has become Chrysler’s presumed oblivion. But is that necessarily true?
Even before day one, TTAC warned that Cerberus bought Chrysler to strip and flip the company. But before Chrysler is laid waste, someone in the media should stop for a moment to consider an alternative. Assuming the U.S. government is going to bailout GM, perhaps they should start by practicing on Chrysler. Where’s the talk of a Chrysler “intervention?”
The fact that a Chapter 11 reorganization isn’t part of the mainstream media discussion about Chrysler’s fate shows that the wolf pack press shares the same ADD and lack of imagination as Chrysler’s protagonists. In that sense, just like voters and their politicians, a story gets the coverage it deserves. We here at TTAC will continue to think independently, even as Chrysler is dismembered by greed, arrogance and indifference, on all sides of the story.