Industry News, Ad Nauseum
I’ve become weary from covering the U.S. Auto Industry, particularly the plight of the Big 3 automakers – General Motors, Ford, and Chrysler. I checked my article summaries for November 2008 and saw that a disturbing pattern had emerged: about three-quarters of the articles written thus far have discussed the misfortunes of the industry, clearly a balance that I want to correct.
After this article, I won’t be touching on auto industry financial troubles all that much, perhaps in passing to underscore why this manufacturer is selling cars at employee pricing or why that manufacturer is cutting back on production. I think that you (and I) would much rather discuss engine displacement, horsepower, cabin configuration, electronic gizmos and other nifty stuff then to dwell on those things that we cannot change.
But, before I move on I want to share with you some of my observations related to the industry. To that end, last week ended with a flurry of activity as I posted an article – GM’s Simple Solution: Move Production to China – which elicited a number of strong responses from readers, but none of those comments appeared here.
Instead, when I submitted the article to Digg and asked people to leave their comments, boy did they ever follow through! And, these comments were nearly universal and passionately against helping GM work their way out of their current financial plight with federal assistance.
What’s more, many people blamed the unions for the industry quandary and some took their shots at management. In addition, a number of responders criticized GM for building the wrong types of cars.
I also read the press release from Automotive News (AN) on Friday which was their personal plea to save the industry. Honestly, I wasn’t impressed by either the substance of the article or the layout of the release as AN used mostly one sentence paragraphs outlining the dire consequences of a failure, particularly one involving GM.
There was also one sentence which seemed to be scolding a number of journalists — 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. What an odd sort of thing to find in any so-called press release!
About the same time as getting a hold of the release, I was forwarded a six-page result of a poll that was conducted by Peter D. Hart Research Associates Inc. of Washington, DC and posted on GM’s Fact or Fiction website.
I don’t know if GM paid Hart to conduct the survey or what, but the poll seems to make a compelling case for federal intervention. I’ll let you be the judge of that – I skimmed through their findings as I didn’t have time to give it a full review; I’m heading to Los Angeles for the auto show today and time is of the essence.
What is my personal opinion about the bail out? I’m not sure that it matters, but you can find some of my thoughts on Digg. While there, why not digg the article and add your own comments?
L.A., here I come!
Big 3 Automakers Plead Their Case Before Congress
The U.S. auto industry has run aground, facing its worst crisis in decades. A rising tide of federal intervention is on its way, promising tens of billions of taxpayer dollars as a remedy for what ails General Motors, Ford, and Chrysler.
Tens of Billions of Dollars at Stake
The managers of America’s Big 3 automakers are no dummies, despite having been caught unprepared when the auto industry suddenly and violently shifted earlier this year. When sales of one of the best run car companies such as Honda tanks, then you know that the problems facing the automotive world are much deeper than not having the right product mix.
Wasting no time with the election of Barack Obama to the presidency, leaders from General Motors, Ford, and Chrysler are actively lobbying Congress for more money and they want that money now. Fresh on the heels of a truly dismal October selling period, the leading U.S. automakers are pleading their case, contending that action needs to be taken immediately or there just may not be much of an industry left come Inauguration Day.
Giving the New Commander in Chief a Break
Congress, not wanting to saddle the new president with more than he can handle (good luck with that), is listening and will likely give the executives much of what they want in exchange for ensuring that plant closings and job losses are kept to a minimum.
We’ve been seeing this coming over the past few weeks in many forms as General Motors announced that they would be pushing product introductions back while trimming marketing costs, leasing, and automotive financing. For its case, Ford has said that they will be closing down some plants for an extended period of time in a bid to adjust supply; while privately owned Chrysler has been the most mysterious one of them all – unveiling three vaporware lithium-ion models while simultaneously doing the “let’s get hitched” dance and prance around GM management.
The Best and Worst of Times
Paraphrasing Charles Dickens, “these are the worst of the times for GM, Ford, and Chrysler and they are the best of the times too.”
We already know what the worst of these times are – tens of billions of dollars in losses, multiple plant closings, and hundreds of thousands (perhaps millions) of assembly line, administrative, supplier, and related job losses pending. Double digit unemployment would be the result, a deep recession that would extend into 2010, even beyond.
But, how could these be the best of the times? That’s easy! Use your company’s misfortune, a shifting political landscape, and add in a heavy dose of fear and you make a compelling case for federal intervention now that you have everyone’s attention.
Like House Speaker Nancy Pelosi. Like Senate head Harry Reid. Like the incoming president who knows that the S.S. Change will never float if a real or manufactured or exaggerated tsunami comes crashing down upon him, crushing hope and upsetting fickle American voters who know that 2010 isn’t all that far away, with a flailing economy opening up the distinct possibility of handing the Democrats a stunning defeat ala Bill Clinton and Congress in 1994.
The Timing is Right & Taxpayers Will Have to Pony Up
Thus, if you own an American manufacturing operation, have billions of dollars of assets and loans at stake, millions of jobs hanging in the balance, and you want the federal government to fix your problems, this is certainly a auspicious time to make your case.
How do I expect things to play out? If I were a betting man, I’d put my good money on a massive federal government bail out of General Motors, Ford, and Chrysler, the likes we’ve never seen before and hardly equal to anything that we could have imagined just a few short weeks ago.
Further Reading
Automakers pinning hopes on Obama
Automakers to Washington: It’s Crunch Time
Detroit Pushes Capitol Hill for Bailout
UAW chief urges $25 billion in U.S. auto support
President Obama, Congress, and the Auto Industry
Barack Obama’s ascendancy to the role as America’s 44th commander in chief is already underway with the president-elect meeting with advisers to help him choose his cabinet and to hammer out policy.
The leading issue of our day is the economy, with Obama left with the task of unraveling a mess that has built up over several years but came to a head this past September with the collapse of the stock market. Likely, when all is said and done trillions of dollars of 
taxpayer money will be spent to rescue banks, prop up home mortgages, and bail out much of the American automotive industry, perhaps having an impact on generations of Americans to come.
Heavy Lifting, Obama Style
Obama and the new Congress will be doing a lot of heavy lifting on behalf of the economy in the first few months of his Administration, pushing mostly everything else to the side. Indeed, the brain power that will be tapped to resolve the problems of the auto industry will
have little time to focus on much else, especially if the woes of Chrysler, General Motors, and Ford continue to worsen.
It is too early to tell just what kind of business climate an Obama presidency will help to create, notwithstanding his “Joe the Plumber” comments about spreading the wealth. This famous encounter involving an Ohio plumber revealed a side of Obama that many hadn’t known about previously – that Obama has no problem with taking from the pockets of one group of Americans and giving it to another group. Charges of “socialism” didn’t seem to bother the electorate who helped push Obama to a historic win.
With An Eye To Serving Two Terms
But, as elections come and elections go, what a candidate says on the campaign trail is often different from the policy implemented and for Obama, who has an eye on serving two full terms, his rightward shift likely has already begun.
Will Obama and Congress forsake the auto industry? Probably not, but a wholesale bail out with few strings attached doesn’t seem likely either.
Instead, Obama may go straight down the middle and craft something along these lines:
- General Motors will be allowed to purchase Chrysler, but in exchange for low cost loans, the automaker will be required to keep much of the automaker in tact, at least for the short term. A few factories will be closed from the outset and thousands of workers will be given golden parachutes, but the Obama Administration will stretch out layoffs and plant closings as long as it can. A bulky GM with eleven brands may seem ridiculous, but with government backing they’ll be able to pull it off.
- Ford may gain some key federal assistance as it renegotiates union contracts. Expect the UAW to be surprised that the Obama Administration isn’t as friendly as expected to the union, backing Ford management as the company seeks to find more favorable terms in which to operate. In a bid to save jobs, Congress will readily back whatever Obama plan is drafted — rust belt politicians may chaffe but they’ll have little choice but to go along with whatever is decided.
- Like it or not, the federal government will continue to push for stronger EPA regulations, but instead of offering unfunded mandates – such as requiring higher gas mileage without assistance – the feds will expand hybrid rebates and offer other incentives (or taxes) to compel drivers to switch to buying cars using other fuel sources. Expect virtually all vehicles to have a biofuel capability within the next three or four years.
The Economy, Courtesy Of The Democrats
Of course, if things get truly desperate, look for the Democrat Congress to clamor for even more extensive federal intervention which could put it at odds with the Obama Administration. If Obama goes too far to the left and the economy stalls, he’ll fuel a political backlash in 2010 that will undermine him. Everything that Obama does from this point forward will be under the leadership of the Democrats, something Republicans will quickly seize upon if things quickly worsen.
2009 promises to be a critical year for America’s auto industry, a year when automakers will regroup and move forward, or continue their slide to oblivion. Look for the Obama Administration to play a significant role in reshaping the industry, developing a comprehensive and far reaching plan that will be paid for with higher taxes and fees.
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