Bailout Watch 72: No Excuses

bailout watch 72 no excuses

Back when The Big 2.8 were fighting the United Auto Workers (remember them?) for contract concessions, the automotive press considered it the battle to end all battles. Once the New Deal was ratified– courtesy gi-normous union bribes and epic deferred costs– the pundits proclaimed themselves satisfied. It was time for Detroit to roll-up its sleeves and compete. No more excuses! Well, it’s been exactly a year since the UAW OK’ed the GM deal and we’re [still] hearing nothing but excuses. Oh, and the sound of your tax money lighting CEOs’ cigars.

Let’s face it: federal loans will do fuck-all to save the domestic auto industry. Even if you’re not a student of TTAC’s Chrysler, Ford and GM Death Watches, the idea that The Big 2.8 will resurrect their fortunes by sharing $25b+ of your hard-earned tax money is completely, utterly, mind-blowingly preposterous. To even CONSIDER this boondoggle, your elected representatives had to ignore a prima facie case that these companies are past saving.

The single most important and [you would think] inescapable fact arguing against the loans: lost market share. In 2004, ChryCo, FoMoCo and The General accounted for 60 percent of all vehicles sold in America. Just three years later, that number dropped by more than 12 percentage points, down to 47.7 percent. J.D. Powers’ most recent stats on consumer preferences indicate that the domestics’ slide into the heart of darkness (or at least relative obscurity) is set to continue, if not accelerate.

Why wouldn’t it? As America switches to more fuel-efficient vehicles (a.k.a. cars), Detroit simply doesn’t have the kind of frugal machines that consumers want to buy. Notice the qualifier: “the kind.” Even if Motown (via Korea, Mexico, Canada, etc.) offered class-leading vehicles, decades of brand dilution, lackluster models and dealer shaftage have created a built-in barrier to sales success. If not for fleets, flag-waving and force of habit, The Big 2.8 would already be dead in the water.

So how can Uncle Sam’s handout– I mean, “hand-up” reverse the curse?

It can’t. Think of it this way: no one in Detroit wakes-up in the morning and says “How can I create a crap car today?” What you see at the dealership is the best they can do. Ford, GM and Chrysler aren’t dying because a lack of funds. (Lest we forget, they were RAKING it in during the SUV boom.) They’re on the ropes because of their greed, sloth, arrogance, stupidity and insularity. Your $25b+ ain’t gonna change that.

Common sense says that The Big 2.8 can’t compete in the future because they haven’t been able to compete in the past. If they could have, they would have. And if they had, or even looked like they could in the future, someone other than you and me would have been happy to lend them the money to do it.

Oh wait! They already did! Look how THAT turned out. GM has burned every stick of furniture in its corporate house– and it’s still paying over $250m in interest on its debt. Ford has hocked everything up to and including its logo. Chrysler is on private equity life support, only a RAM away from total collapse.

Throwing federal tax money at this situation is worse than pissing in the wind; it’s like buying an alcoholic a brewery.

Please do NOT tell me that the plug-in electric – gas Chevy Volt will reinvent the automobile for all time and, by the way, save GM from bankruptcy. Or that a hybrid Chrysler minivan will end our dependence on foreign oil and breathe new life into ChryCo’s rigor-ridden corpse. Or that the Ford Fiesta will usher in a new generation of high margin small cars for the Blue Oval Boyz, and keep Bill Ford from taking the bus to work. Hail Mary, schmail Mary. It’s too little, too late.

While Motown’s planning on using our taxes to try and reinvent itself as a profitable maker of something other than large SUVs and pickup trucks, its competitors are busy reinvesting their profits, creating new and/or improved non-truck vehicles that sell in sufficient quantities (at enough of a price premium) to maintain the profits so they can reinvest enough money to maintain their lead over Detroit and (they hope) everyone else. Funny how that works. Or, in Detroit’s case, doesn’t.

No matter. Detroit’s short-term future doesn’t depend on its near-future products. Chrysler, Ford and GM’s survival now depends on their ability to convince the Department of Energy (DOE) to change the rules for their share of the $25b low-interest federal loans, so they can somehow use the cash to keep the lights on.

Good luck with that. Contrary to popular opinion, I predict that the Department of Energy will not bow to political pressure and hurry their due diligence for Detroit. The Big 2.8 may not run out of excuses. But they will run out of time.

Comments
Join the conversation
2 of 48 comments
  • M1EK M1EK on Oct 01, 2008

    "Considering that I’ve never made this claim" Yes, you have.

    The Fit is made in Japan, and there was an article on this site a few weeks back where even the head of Honda admitted that the company makes very little money off it. and Toyota makes money through volume. It doesn’t make much money on each Yaris and Corolla, and whether it is actually making money from the Prius is a very good question - at least for those of us with a healthy dose of skepticism regarding information contained in press releases.

  • Geeber Geeber on Oct 01, 2008
    M1EK: Yes, you have. The Fit is made in Japan, and there was an article on this site a few weeks back where even the head of Honda admitted that the company makes very little money off it. Um, considering that Honda said so, and you have said that you trust these companies to be always truthful, there's your proof. And please note that it is a well-known fact that profit margins are lower on small cars than on bigger cars. So the head of Honda wasn't saying anything that is "counterfactual" to those of us who understand how this industry operates. This is in contrast to the profitability of the Prius, which certainly could be profitable (I never denied that it could be - I said that I would like to see independent proof), but, given its new and very advanced drivetrain and other technology, will logically cost more to make than comparably sized cars, but still must be sold at a price most people can afford. M1EK: Toyota makes money through volume. It doesn’t make much money on each Yaris and Corolla, and whether it is actually making money from the Prius is a very good question - at least for those of us with a healthy dose of skepticism regarding information contained in press releases. Um, again, that doesn't prove anything, and certainly not the point you are trying to make. They make money through their smaller cars on volume, so they make healthy profits on small cars, but just not if you look at it on a per-vehicle basis. Given that they sell fewer small cars than medium-size and large cars, not to mention trucks, SUVs, minivans, crossovers and luxury cars, it's pretty obvious that they depend on said larger vehicles for a hefty share of those profits.

  • Dave M. I will say this generation styling has grown on me; previously I thought the Fiat version was far better looking. Miatas have always been pure joy to drive.
  • Kendahl A Tesla feature has been free, periodic, over-the-air, software updates that add new features or improve existing ones. Owners brag that their x-year-old car is better today, because of the updates, than it was brand new. Will Tesla start charging for these updates after a few years? Teslas hold their value very well. I suspect losing free updates will do serious damage to that.
  • BklynPete When I was a kid, the joke about Nissan choosing the name Datsun goes like this:Nissan execs were uncomfortable with the World War 2 connotations of their name in the North American market. Seeing how successful VW was over here, they went to VW's most-recent German ad agency. The Japanese told the Germans they needed a new name. The Germans agreed. They asked the Nissan execs when they wanted a review of potential names. The execs said two weeks. The German ad people said, "dat soon?"I will be crucified.
  • Kendahl Modern cars are better mechanically in every way compared to cars from the 1960s. But, and my age is probably showing here, the older ones are prettier.
  • Master Baiter I like the references to Red Barchetta. My fun car is a spiritual cousin to this Miata: 2001 BMW M Roadster--green with tan leather; five speed.
Next