Cassandra Watch: Daniel Howes Edition

by Edward Niedermeyer

Published: October 14th, 2008

Like the gas price spike that helped launch the current industry death spiral, nobody saw a possible D3 bankruptcy coming. Well, outside of this little corner of the internet, anyway. But with the mainstream media catching wind of what we’ve been crying in the desert for years now, a number of well-known industry analysts are coming around to the notion that America may not have three big automakers anymore. Jalopnik’s Ray Wert was ahead of the (adjusted) curve, bellying up to the TTAC line (sorta) yesterday. Today, none other than Danny Howes of the Detroit News is playing Cassandra-come-lately as merger and bankruptcy rumors take industry-watchers by storm. To be fair, Howes isn’t blind to Detroit’s sins, and his columns have been taking an increasingly alarmist tone for some time now. But until this week he’s faced the strings and arrows of outrageous fortune with brave face and stiff upper lip. No longer.

In his latest column “One Of The Big Three May Not Survive,” Howes lays down the pom-poms and faces facts: Detroit is screwed, and none of the solutions will be convenient or easy. Howes says a potential GM-Chrysler would be a “neutron bomb,” eliminating thousands of jobs to keep hard assets and cash intact. He notes that “GM needs more brands, more plants and more dealers like it needs another credit crunch.” Finally he concludes “GM’s directors aren’t keen to embrace a Chrysler deal with Cerberus because they realize the remedy for what ails GM won’t come from swallowing a competitor. It’ll come from buying enough time to survive the imminent shakeout because — and I wish I could say otherwise — one of Detroit’s Big Three may not.” Don’t worry, Danny… you’ve tried to say otherwise for long enough.

Edward Niedermeyer

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Joeaverage on Oct 15, 2008

I still think GM is doing some of this on purpose to stop the perpetual bleeding of self inflicted wounds i.e. retiree benefits, franchise laws, UAW rules, etc. They go broke, scare the gov't into changing legislation for them like eliminating franchise laws and union shop rules and eventually in the long term GM crawls back to a reasonable marketshare as a leaner, meaner corporate hunting dog. They can't continue to do business the same way as they have for 75-100 years and they know it. Going broke is the only way they can change the situation they are in. They can't move out of Michigan b/c the UAW agreements prob follow them everywhere. They can't get out from under benefit agreements. They can leave the states with union shop rules but the UAW would likely badly hobble GM at the same time in other GM plants.

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Phil Ressler on Oct 16, 2008
This disaster could have been avoided with clear thinking, absolute honesty, and ruthless leadership. All of which is long gone in Detroit. Poor management and some regrettable products notwithstanding, this disaster could have been avoided if American auto buyers simply bought more of the good D3 cars instead of foreign and transplant alternatives that were either not meaningfully different, sometimes inferior, or at best only marginally better. American consumers who refused to consider and buy from the selection of competitive D3 vehicles over the last decade will soon see the true cost of their decisions. Coping with and paying for the consequences of a broken domestic auto industry will show you how dearly expensive your import purchase was. Unemployment, and all the social costs that go with it, are expensive beyond the dollars. Was your Camry, for example, really worth it, over a Malibu, Taurus or Fusion? Even in a diminished market, Americans can revive Detroit without a government bailout. Their aggregate purchasing power is the dormant tool. Unfortunately, for every CTS-V, there’s a 9-7X. For every Malibu, there’s a G5. And for every G8, there’s a Torrent. While some may disagree with your choices representing undesirable D3 cars, fine. Let's put that aside for the moment. Let the uncompetitive languish. Forget the low-volume V -- more CTS over competing entry luxury models. More Malibu over Accord and inferior Camry. More G8 over Audi and BMW, etc. Americans like to evade personal responsibility for the society and culture that's grown around them. From dumbed-down politics to drug-related crime to coarsening of public behavior -- you name it -- fingerpointing rules our response. Rick Wagoner did it. It's Bill Ford's fault. A dealer once screwed me on a warranty repair. I want to fit in. It's not cool to drive a Ford or Chevy. OK, your prerogative. Here's the bill. It's stunning how blithely so many people fail to see or acknowledge their own contribution to the unfolding calamity. Management of the D3 has been an infuriating problem for far too long, but the market's penchant for holding outdated grudges and unwillingness to embrace the products of management doing something right is an equal contributor to the D3 wreckage. The consumer cannot escape the reality of sharing credit or blame, depending on your point of view regarding the state of the D3. Phil

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