Put yourself as an executive at GM of Ford. You are in charge of new vehicle design and launch. With Retooling and supply logistics, new models Take 24-36 months to get off the assembly line . How would you have positioned your company to avoid the sudden drop in sales? The competition Honda, Toyota, and Hyundai have a long history of making small cars for their home markets. Due only to market demand they spent decades developing quality profitable small cars. When they came to the USA in the gas shortages of the 70âs they brought the same small cars and had limited success. Over the next 15 years they built much larger cars for the US market. Only then did they start to gain large market share. The US car demand has always been for large cars. The domestic car builders focuses on their strength. Making large mini-vans ,SUVâs and trucks. Fair quality but profits unseen ever by any other car company ever. Only Government mandated CAFE requirements forced them to make small cars which they made no profit. Billions of profits for many years then oil prices spiked from $70 to $150 in 12 months. A sudden market change. A consumer shift from your high profit products into your low or no profit products. It would be hard to forecast such a complete change in the consumer preferences so quickly. Of course the Domestics made mistakes, but for more then decade they made huge profits and are mostly a victim of the quickest switch in consumer demand ever.
The reason to feel sorry for GM and Ford is not because the market changed, not because the their managment sucks and not because they had to change the style of their cars. The reason to feel sorry for GM and Ford is because our own government has literally made these companies go backrupt because of Unions. Unions drastically hurt every aspect of a company directly and indirectly. Unions raise benefits for employee's higher than hell. In order for the companies to stay afloat with all these massive benefits they have to raise the price of their product. By raising the price of their product they get absolutely killed in the market place. Japan auto makers do not have a government that forcefully mandates that these companies have extremely high benefits for employee's. Therefore they can sell cars at a lower price and absolutely kill American competition. The funny thing now is that the same people who killed these companies are wanting to give them a bailout thinking that this bailout will actually solve the problem. Who would these people be? They would be liberals and if you are not suicidal yet they have the majority of congress seats for the next two years and a president that has promised everything when none of it is possible. This country needs a historic collapse just to be logical again.
I don't feel sorry for gm or ford. Their unionized workers have been ran by the mafia for decades. Their Union mobs have stolen votes in every election in MI for decades. The Union workers avg $80 an hour including retirement etc. They make a shitty product and their dealers are borderline criminals. They will screw you over on repairs and consider it standard operating procedures. Bye bye gm, ford et. al.
The domestic car builders focuses on their strength. Making large mini-vans ,SUVâs and trucks. Fair quality but profits unseen ever by any other car company ever. Only Government mandated CAFE requirements forced them to make small cars which they made no profit. ____________________________ It is prudent and good business sense to build on your strengths. You shouldn't try to be all things to all customers. You need to "weed the garden" of unprofitable aspects even if you do have customers buying weeds. If you're mandated to produce an unprofitable product, besides diluting the profit your risk is ever increasing with no way to mitigate it. Hence, eventual failure.
The Big Three lose because their costs are too high. A primary driver of those costs are union driven, such as wages, benefits and jobs. Any bailout would have to be an ongoing bailout or Detroit will go belly up. Ongoing bailouts may consist of taking over obligations such as pensions, healthcare and wage subsidies. The automakers could make executives pay for their own flights and it wouldn't make a noticeable difference. Sure, Bush might hold back the flood of bailouts (a little, anyway). But once Barry and his gang control the Whitehouse and Congress, it's all over. Government will smile with favor on some industries and help them with bailouts, while others are frowned upon and told to suck it up. More than ever before, big companies will not survive without paying some sort of fealty to the federal government.
Wall Street banks and brokerages received 2 trillion so far from the government. That is nearly 100x what the domestic car makers are asking for, as a loan, to try and survive. I agree the union has to go, but am not willing to let a critical manufacturing sector just be flushed away into complete foreign ownership. One day Americans will wake up to realize that their country makes nothing of tangible value anymore, and then what? Countries that make nothing of tangible value are worth nothing. Today, the auto industry; tomorrow, aircraft industry and semiconductors. No country can maintain dominance in military strength and a strong national security without a sophisticated manufacturing base. Honda, Toyota, Nissan, BMW, VW, Daimler - all either started by their governments or deeply subsidized by their governments. America is venting its anger at the domestic automakers over the Wall Street Bailout - when the automakers are asking for a loan, it's nearly 100x less than what U.S. taxpayers have already given to banks and Wall Street courtesy of Hank Paulson and Ben Bernanke, and the automakers actually make things and have the potential for true reform. Break up the unions, and strengthen the job making machine that is the domestic auto industry. It is a wise investment in the future. Do not be pound wise and penny foolish; not when it comes to a pillar of America's economy that aligns with national defense & security.
The downfall of GM is their cost structure. The deal they have with their union does not make them competitive with their foreign counterparts. GM workers making 70 per hour versus 35 per hour for Toyota and Honda. Not to mention for last 20 years or so, Toyota and Honda have made a better product. The American carmakers are always trying to play catchup...
You're exactly right in stating that anger over the wall street debacle is being vented at the auto makers. They're easy to hate. The reasoning seems to be that the economy can survive the hit from the big 3 going under, whereas we couldn't survive a couple big banks going under. Actually I believe it's just the opposite. The big 3 going down will cause much more "long term" harm than a couple of f'n banks going down.