By on November 5, 2008

Here it is: the pdf that launches a $25b+ (and the rest) bailout. GM’s FastLane Blog gets out the big guns: a Center for Automotive Research (CAR, geddit?) report that says that millions Americans will be condemned to soup kitchens if the Big 2.8 go belly-up. As always, I invite TTAC’s Best and Brightest to analyze the data– and its reliability– on the community’s (not to mention taxpayers or humanity in general) behalf. It must be some serious shit, because the FastLane folk are downplaying it BIG STYLE (so sue me: I’m an oxymoron): “You see a lot of discussion in the news – and even in the comments of this and other blogs – about the state of the domestic auto industry and what the current economy means for the industry’s future. Some of you have even expressed the belief that this is something GM and the US industry brought on ourselves, and that the domestic industry should be allowed to fail. ‘So what if Detroit goes down,’ the thinking seems to go. ‘It doesn’t affect me.’ However, the reality may very well be that it does affect you.” May? Cowboy-up guys! Anyway, the study reckons that… hang on. Here’s CAR’s background on itself: “To fulfill its mission, CAR maintains strong relationships with industry, government agencies, universities, research institutes, labor organizations, and other major participants in the international automotive community, The Affiliates Program to strengthen those industry ties and build support of ongoing service activities.” Oh, and about CAR’s director David Cole, son of former GM Prez Ed Cole.

“He is also a director of the Original Equipment Suppliers Association, as well as a director of seven automotive supplier companies. In addition, Dr. Cole is a member of the Executive Committee of the Michigan Economic Development Corporation (MEDC) and was recently appointed by Michigan’s Governor to the Strategic Economic Investment and Commercialization Board and the Michigan Renewable Fuels Commission. He was named a co-chair of Detroit Renaissance’s ‘Road to Renaissance’ Project in the fall of 2006. At the University of Michigan he is a member of the Energy Research Council and Mechanical Engineering External Advisory Board. He is also a member of the Denso Foundation Board.  Dr. Cole was formerly a director of the Automotive Hall of Fame and a member of the Board of Trustees of Hope College.”

So no conflict of interest there. Bottom line: if the D2.8 go belly-up, it’ll cost $554.5b to $368.8b in lost income, lost tax receipts and increase in “transfer payments.” Where’s my checkbook?

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16 Comments on “FastLane is CAR...”

  • avatar
    Usta Bee

    It’s just a paradigm shift. Think of all the horse related businesses that went under when the automobile became popular. horse farms and breeders, stables, wagon and carriage makers, blacksmiths, feed stores, tack shops, veternarians, street cleaning crews, etc.

    Then think about the all the passenger railroads and trolley lines that went under when airplane and bus travel became popular.

    While you’re at it think of all the small automobile manufacturers that the Big 3 put out of business by either their sheer size advantage, or deliberate actions to prevent competition.

    Either “The shoe is on the other foot” now, or Karma has finally caught up with them. Having bean counters run eveything and planning your business only as far as the next quarter’s profits didn’t help either. GM selling of part of GMAC really came back to bite them in the butt.

  • avatar

    pathetic attempt to hog the brownie! the doc is only 7 pages (including title page) – methinks the when asking for billions of dollars one should be required to write a page per billion requested – at minimum.

    page 2 paragraph 1: i believe the 732,800 motor vehicle and parts industry workers would be just fine as other car companies would fill in the gap of any loss of auto sales from detroit, which makes the CAR study’s numbers in Scenario 1 and Scenario 2 (on pages 4, 5 and 6) quite bogus.

    page 3 scenarios: ah yes, only 2 possible scenarios in the next 12 months: Scenario 1: production and employment falls by 100%. Scenario 2 production and employment falls by 100% in the next 12 months.

    page 3 final paragraph: nice one CAR! got the international tie-in. once domestics go down, international companies producing domestically suffer eventually leading to their demise which causes global vehicular chaos! merde!

    page 6 final paragraph: “total economic impacts represented here underestimate the full impact of the scenarios.” oops! shoulda done a better job with those scenarios then, CAR!

    page 7 appendix 5: not cool to reference your other non reviewed work (“Beyond the Big Leave: The Future of U.S. Automotive Human Resources,” Center for Automotive Research, 2008,
    page 23.) to support an opinion in this non reviewed work. BAD CAR!

    no bailout for you!

  • avatar

    i believe the 732,800 motor vehicle and parts industry workers would be just fine as other car companies would fill in the gap of any loss of auto sales from detroit, which makes the CAR study’s numbers in Scenario 1 and Scenario 2 (on pages 4, 5 and 6) quite bogus.

    Good point. I’m no scientist, but I heard somewhere that nature abhors a vacuum. Is that still true, or has that law been overturned along with numerous others since last night.

  • avatar
    Captain Tungsten

    they assumed a 20% absorption of D3 workers in their complete collapse scenario. Given that main engineering and design function are still overseas, that seems reasonable.

  • avatar
    Stephan Wilkinson

    Robert, you do know who Dave Cole is, right? I ask only because it sounds like you’re reading some lame resume of his that I doubt he had anything to do with, but maybe you’re totally up on him. Or down on him, I think the kids say today.

  • avatar
    Robert Schwartz

    My analysis published previously here was that, based on Honda’s profile in NA, and, assuming domestic production of about 12 million units that were produced in 2007, the industry would consist of about 80 plants and employ about 170,000 people and have a total cost of about $72 billion. If the “Big 3”, were half of that, they would have 40 plants in North America, 85,000 employees (not including top management) and a total investment of $36 billion.

    What ever happens, the industry will be a lot smaller in the future than it was in the past.

    As we know here, the Biggest problem with the 3 is that the sclerotic bureaucracies that run them are completely incapable of meeting the market as it is today nor as it will change wildly in the future. Only in the bubble economics hot house of the last 25 years were they able to survive their own stupidity.* The bubble burst. There is a cold rain and they have no shelter.

    I am not letting the unions off. They have been as greedy and short-sighted as management. Its just that they never did product development, engineering, or marketing.

    Oh yes, and the Dealers are totally worthless and disloyal to boot. I will weep not a tear for them as they shut down their domestic showrooms.

    So what would I recommend for a bailout plan. I would offer government money but on severe conditions.

    1. The 3 must file Chapter 11 ASAP, waive exclusivity, and agree to allow anyone who will sign an NDA and post a deposit to go through their books and their plants.

    2. The Feds will guarantee the principal, but not fees or interest on DiP financing.

    3. The Feds will buy preferred stock in the companies exiting C11 in an amount that is no more than one half of the cash put up by the winning bidders.

    4. Not a cent can go to any legacy cost, including management contracts. Yes that also include the Union’s hoped for slush funds. Its going to cost a boat load to bail out the pension plans after the C11s. They won’t get anything else.

    *The truth is that Detroit did not invent the SUV craze, it was a random input from the world of fashion. Nor did they manage it well. Fashions go out of style. Prudent men diversify their assets.

  • avatar
    Robert Schwartz

    Oh yeah, btw. David Cole’s father was Ed Cole the manager of Chevrolet, back when that meant something.

  • avatar

    They didn’t factor in all the unemployed journalists when

    1) car companies withdraw their national ads from newspapers and networks;

    2) domestic dealerships remove their advertising


    3) everyone uses ebay or craiglist to trade the now collectable GM/Ford autos, killing the newspaper classified.

  • avatar

    Damn, haven’t they heard of my organization? TRUCK. I’m prepared to certify that every man woman and child in the United States will die if Rick Wagoner has to take a pay cut GM goes out of business, for only half of CAR’s fee.

  • avatar

    More fear mongering for the same old reason… to steal the money from the people and give it to the incompetent.

    Instead of a bailout, Force chapter 11, Free them from the unions and dealers, Break them up by their respective brands, Sell the individual companies and FORBID them to ever merge or sell out to another auto or “holding” company again. How many INDEPENDENT auto makers would that give us?

  • avatar

    As one old-school VW manager (ah, that endless, however long-gone source of wisdom) fancied to say: “I only believe a study I have faked myself.”

  • avatar

    I am offended at all the talk of incompetancies by Big Auto executives. They are by NO MEANS incompetant. They are hard working Americans that deserve compensation for a job well done.

    Of course, that job just happens to be to run 3 strong companies into the ground and drag the American economy and the lives of millions of people (I think we were at 330m last I checked) with it for personal gain.

    These are great men who by proper education and nose-to-the-grindstone work ethic have propelled themselves to be the heads of powerful companies and deserve our respect and admiration.

    Of course, while they payed attention to their ethics teachers, they abused the weaknesses in the systems that expect ethical behavior in industry. Rather than making profits for shareholders and employees, they managed the company finances right into the executive bathroom toilet where it was flushed to their private island bank.

    I am so confused! Should I love the Rick Wagoners of the world or call “OFF WITH THEIR HEADS!”


  • avatar

    Robert Schwartz-you make some good points.
    When an industry matures (vs. stagnates) it becomes more efficient and needs fewer people to do more. The industry was going to shrink regardless of other factors-it can be a sign of health.

    Example: I grew up farming with all the hand wringing about the “death of the family farm”.
    Due to mechanization, increased yeilds etc. the industry shrunk dramatically (from 30m to 3m workers, estimate, between 1930-80, over 500k per year jobs). Yet production increased so much that it covered a growing population and increased exports. And they are hardly a poster child for efficiency.

    We absorbed over half a milliion people from that industry alone, with a growing population into the workforce.
    Most to jobs that did not exist in 1930.
    The problem with thes apocolypic analysis is that they assume a static world view.

    Debt3+UAW=Mutually assured destruction?


  • avatar

    The paper makes a basic mistake which is common to pieces like this — it assumes that the alternative to its (doomsday) scenarios are a continuation of the status quo.

    There are a couple of other basic scenarios that are ignored.

    The first is one in which the automakers are bailed out and the bailout does not work. In that case, little or nothing is gained, but more is lost in the form of government losses, etc..

    A second scenario is one in which the automakers are bailed out and it does work. In that best case scenario, you can still expect the Big 2.8 to shrink. They can’t save themselves without getting much smaller, so job and production losses are going to happen, no matter what.

    The paper also puts all of the automakers into the same pot, as if to imply that each of them are equally likely to succeed or fail, and that they must either rise or fall together. In reality, they are separate companies which cannot be properly assessed unless they are studied separately. It isn’t necessarily an all-or-nothing proposition.

    This is sloppy propaganda dressed up as research. The PhD’s are a nice touch, but the conclusions were reached before the paper was written. Oddly enough, lobbyists and trade associations do an uncanny job of creating “research” that supports their agenda.

  • avatar

    Let’s say Chrysler disappears (Chapter 7, not 11). This is the most likely scenerio, IMHO, assuming no government meddling (like creating American Leyland out of GM and Chrysler combined). Then, there will be a Chrysler-sized hole in the marketplace immediately which will need to be filled. The imports won’t be able to fill it all, and even part of the hole they will fill will be filled by American production. The rest will be filled by Ford and GM.

    Now, there will be a fair number of jobs lost, but the increase in the number of imported vehicles will be minimal. Most jobs lost will not be in production, but in management, engineering, marketing, etc., of the old Chrysler (and salesman and mechanics and whatnot at their dealers). And, most of the jobs lost in production will mostly be due to technology, not imports. That is, an 80-year, inefficient Chrysler plant closes and a brand spanking new Toyota plant opens (in the US), which makes the same number of cars but with half the workers. There will be some increase in imported vehicles (and job losses there), but maybe only a third of the number of vehicles Chrysler made in total.

    That is, Chrysler going poof will save GM and Ford, at least in the short to medium term, since their sales will both increase significantly. GM and Ford need to throw a boat anchor to a drowning Chrysler, not the imports.

  • avatar

    never mind…

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