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So What if America's Big Three Automakers Fold?
Posted by Norski • 12/12/08 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: automakers, big three, economics, jobs, workers
America's news is still flooded by GMC, Ford, and Chrysler's economic woes. And, their asking for huge wads of money to keep them going.
I've got an alternative view of what could happen if the 'Big Three' went away: It might be very tough on the executives who got the companies into this position, but not so hard on the people on the production line.
(more at withoutlosingmymind.blogspot.com/2008/12/so-big-three-collapse-is-that-prob... )
Briefly: For decades, three 800-pound gorillas have been sitting on the American auto industry. They haven't done too well, managing what they have.
Instead of giving them more bananas, so they can keep their seats, maybe it's time for them to leave, and make room for people with newer ideas.
The top Big Three CEOs might have a hard time of it, but new car manufacturers would need people who know how to make an assembly line work - and there would be plenty of them at liberty.
Radical idea? Yes.
Would it work? Maybe.
What do you think?
(Don't be surprised if I don't respond right away: I have to work on something with a deadline.)
User Comments
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I would like to see some strings attached to any bailout, specifically one requiring new management (down several levels) and new blood on the boards of directors. I'd also love to see requirements for verfiable progress on alternative fuel vehicles, with a production schedule, and new marketing strategy. The "Big 3" have been doing the "same old, same old" for decades, now. All of their cars look alike, there is no brand distinction or any reason to give a hang about one brand or another. That's why people aren't "buying American" any more - they haven't been given a reason or a way to tell the difference in 25 years. Give me innovation, interesting and well-thought-out design, let me have alternatives. If the car companies can't defend their reason for existing outside of the number of people that they employ, then they don't deserve to exist. Let people who can make the business work have a shot at it, for once, without having to suck up until they're accepted into the old boys' network. Err, I mean, I agree, Norski. -
What I think a lot of people have confused is what it means to file for bankruptcy, or chapter 11. When a company files for this, it means they are filing to protect themselves so they do not have to close up shop and go home. Filing for chapter 11 means that they obtain the ability to renegotiate contracts that otherwise could not be negotiated for various reasons. I honestly think that a bailout will only put off the enevitable for a short time longer. I am glad that the bailout died in the senate. Allowing the companies to restructure so they can produce cars that will sell AND make a profit (theres a novel idea) will have a far better effect on the economy in the long run.-
Good point. Quite a number of American companies have gone through bankruptcy recently - like Northwest Airlines (2005-07, I think), and Continental (an interesting angle on that at mooreschool.sc.edu/moore/pr/news/EventsNews/Wachovia_lecture_kellner.html). As you point out, bankruptcy can be a time for re-negotiation.
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Why, AG, what a cute little ass you have.
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I see the point: use biotechnology in the next generation of vehicles.
One down side is that this technology has a carbon footprint, too: part of which is semi-solid and smells awful.
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No that's me on the left, it's not my ass
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I see and it's the Big Three CEO's and their friend in Congress taking you for a ride :-)
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If they go they not only take their own employees, but the employees of parts manufacturers, dealerships - and even competition. The same competition your thinking might pick up those employees? Uh-uh, not going to happen. They are trimming production/sales estimates along with the rest of the industry - and most likely jobs if they haven't already.
I don't want to give them (the Big 3) one red cent - but I kind of feel like we might have to - or that we don't really have another choice anyhow. God knows I don't want to be susidizing union retirements and benefits. But can we really withstand such a catastrophic collapse of an entire industry? Perhaps the last vestige of a true production economy we have? I'm not sure.
What bothers me even more though is the amount of pork already being rolled in - and the fact that even the bailout likely won't work. I'm hearing horrifying things about how much of this "bailout" money would actually be used for research & development.
I'd prefer a chapter 11 in everything but name - if that's even possible. The argument I keep hearing against an actual chapter 11 is that no customers will buy products (either vehicles or warranty products) from a bankrupt manufacturer. I'm not sure if that's true or not, but clearly consumer confidence (especially in the big 3) couldn't be any worse...could it?-
You've thought about this, and it's true: from parts dealerships to the corner cafe that caters to factory workers, a lot of people will be involved if the Big Three go down.
About parts dealers, though: there will be a lot of Fords and Chevys being driven, even if the manufacturing company tanks. And, they'll need replacement parts for years. I doubt that Ford, for example, would dump their inventory of spare parts in the lake, if they could sell it to another company.
And, although America has gotten used to having three major auto companies and a lot of imports: I have difficulty imagining that there aren't people among America's 300,000,000 who don't have the background, interest, and drive to start a successful car manufacturing company.
It's been about a hundred years since America had a burst of innovative automotive startups. Maybe it's time to experience that again.
And consider: a new car factory needs people on the assembly line, just like Ford. A collapse of the Big Three would be, potentially, rather bad on executives who don't have marketable skills. I'm not convinced that it would be so disastrous for people who know how to actually produce something. -
I don't doubt there are innovative enough people - I doubt that there's a market for their product.
Even companies in positions of relative strength compared to the Big 3 - with stronger brand recognition/relaibility scores and hordes of cash to back them up - are unable to sell anything in this market. Trust me - I work for their (the big 3's) major competitor. Nothing is selling - no matter how innovative and cost effective.
Your ideas are sound - it's just 10 years too late for them to change. A decade ago if they had axed their senior execs and embraced some form of "lean thinking" approach (along with actual market driven research, design, and development as opposed to market "pushed" R&D&D), perhaps they could've saved themselves (or whatever offshoots of them were begot).
Now? I doubt anyone new will be venturing into the market place. Heck, even "market share" is seen as an impediment at this point in time, which is usually exactly what you want. These days - all that does is flood the roads, showrooms, and auction lots with more of your models, thus driving down residual values and ultimately killing sales.
It's a scary market out there, and as much as I'd like to, I can't picture any scenario without the Big 3 where we (the U.S.) come out ahead.
The execs need to go though - that much is certain. Long before any of their workers are laid off. -
kdawg68,
I do see your point. What bothers me about the bailouts, as presented in the news (which isn't the best way to get an accurate picture), is that there's a very real possibility that the same executives union leaders will be around, except this time with a wad of money.
It would be entirely too easy for them to take the money, and go on with business as usual until they needed more.
And one alternative, having Congress or a federal agency take over management of the auto industry, doesn't seem much better. A few years ago, Congress proved incapable of balancing its own checkbook - a charitable interpretation of the postage scandal. And there are other indications that Representatives and Senators are very good at making speeches, but somewhat lacking in practical leadership skills. -
I agree 100% with your assessment. That's what worries me as well. There doesn't seem to be any real "win" scenario for either the companies or the American people - yet it's equally hard to see a scenario where the fat cats really "lose." It's never them that wind up getting hurt.
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WE WILL HAPPY!-
Not in Minnesota, this time of year.
That's a reduced-size image from my webcam, in central Minnesota. Open-air anything around here is downright chilly for several months out of the year.
Interesting point, though. -
My sight is poor. What am I looking at?
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It's not your vision: it's what happens when a webcam looks out a window at night.
The top half of the image is mostly a view of the corner of South Ash Street and 9th in Sauk Centre. Actually, the streets north and east of the corner.
The bottom half is a set of distorted reflections of my desk and monitor.
I've thought of shielding the camera, but that would obstruct the view from another room - and my wife wouldn't like that. I wouldn't be to pleased, myself.
Thanks for the feedback. I'll want to review that camera setup, now. -
I thought that was the rebel base on Hoth?
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@kdawg: yeah, that was my first guess.
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vintage. like it -
kdawg68,
You're not that far off.
To give you an idea what it's like: National Guard arctic maneuvers were canceled, due to inclement weather, a few decades back. -
It has the same problem as the ass above :-)
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now we're getting somewhere
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Ah, I can see it now.
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I don't have an opinion about this, but I just read an interesting blog post along the same lines as yours, Norski, here: willcriticizeforuninspiredfood.blogspot.com/2008/12/have-you-driven-ford-la...-
Thanks for the heads-up.
Although I'm not quite as pessimistic about the American economy and Big Three engineering. I've never owned anything except U.S.-built cars and vans. It isn't patriotism - the models I got had a good value-to-cost ratio.
And, I think the big problem that American automakers - management and unions - have had is a failure to deal with a negative image problem, consistently design vehicles that the 50th percentile want to buy, and be realistic about operating costs.
The technology is, in my opinion, quite adequate.
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After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!
What I find particularly distressing is that no thought at all was given to the 700 billion bailout of the financial charletans who actually caused the big three automakers the reduced cash flow from sales in the U.S.A. that keeps their lemonade stands from tipping over...
If you give banks (who at the best of times are parasitical vampires who suck the blood out of their customers and communities)700 billion undeserved dollars why would you hesitate to "lend" the big three 15 billion dollars?
Print up some more money and "lend" it to the big three automakers...If you can print up 700 billion dollars why not print up 715 billion dollars ?
When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back $1 billion, plus interest. GM and Ford have never received government aid.-
Assuming that your "...no thought at all was given to the 700 billion bailout of the financial charletans..." statement refers to my discussion-starter - I didn't mention that, because I thought it was obvious, and I've learned that few people, including myself, like to read verbose entries.
I sometimes write them anyway, but that's another matter.
About "...When you ask how many times are we going to bail them out you must be referring to 1980...." - again, assuming that you're referring to my opening statement: I had no specific historical event or situation in mind.
I was looking at the what I believe is the extremely likely possibility that, if the Big Three executives get our money, they'll be back for more when they've run through it.
Unless there's massive, and unforeseen, change. -
@norski
Putting aside your somewhat insulting verbose rhetoric you are missing the point...
The U.S.A. rewarded the financial crooks who stole widows and orphans savings with 700 billion dollars...
Just lend the big three the money...If 700 billion is no big deal whats the problem with 15 billion ? -
I have to agree here. If your printing money to bailout the banks and insurance companies (who probably came before congress on personal jets also), why not just include the big 3?
Generally I wanted to see them all fall, including AIG. It's the only way I can see the economy get back to where average people could afford a living.
On a side note, since this is tax paying money. Do we still have to pay for NSF fees (Looks like they didn't)? How about better interest rate on savings? Can we now stop paying for ATM use.
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If they fold you can expect unemployment in this country to hit 40 to 50% within a year. You will see huge numbers of family own businesses collapse and small towns die. To many industries in this country are dependent on the auto industry, both up stream in material providers to dealers and aftermarket providers.
We will be decades pulling ourselves out of that economic mess if we ever can at all. The first casualty in this war will be the housing market as if it isn't bad enough. Eighty percent of union factory workers in America have a mortgage. The second casualty will be the education system, without a stable tax base public schools will go to pot more so than they have now. Without a decent public education college will be out of reach for most students either forcing the closure of many colleges and universities or they will recruit more heavily in overseas market where the students go home with skills high tech companies are looking for while we have crap. The third casualty will be social services. If conservatives hate paying into the system now just wait to see how much they have to pay in when a third of the country is demanding their food stamps, medicaid, public housing assistance and welfare checks.
These companies need to shape up, but the economic loss of letting them fail is far greater than the money they are asking for.-
I live in a small town myself, and wouldn't want to see it die. Obviously.
I know that the Big Three are important to the American economy. Or, rather, that the automotive industry is important. The Big Three happen to be very nearly the only player in the American market, as far as I can tell.
If this three-way monopoly were to end, with a re-organization that split GMC, Ford, and Chrysler into a dozen or so smaller - and independent - companies, I'm pretty sure that some of them would fail. Particularly if they kept the same policies.
But, some would probably succeed - and without the triumvirate of 800-pound industrial gorillas to squash competition, we might see new companies flourish.
Sorry - but I've been through too many 'and we're all gonna die' crises, from the sixties-seventies food shortage that killed everyone (well, we were told it would) to the crisis du jure, to take worst-case scenarios as anything but that: worst-case possibilities.
I'm a bit more articulate about my views in the post: withoutlosingmymind.blogspot.com/2008/12/so-big-three-collapse-is-that-prob... . -
Car pooling is good or is this under the 'We're all gonna die category'?
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acousticguitarist,
I don't like the way that bus is listing to port - but that photo is a little of both, I'd say.
And, about car pooling: I applaud the theory. On the other hand, some of the worst scares in my life came when I was getting rides from an alternatively-competent driver. -
I am not saying we should bail them out the way they want, only that we can't let the industry fail. Depending on which source you want to use they the auto industry is directly responsible for between 10 and 25 Million jobs in this country either in the supply side or the sales end. A collapse of the industry in this already troubled economy would be disastrous without a doubt.
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bradhart,
I think we're more nearly on the same page than it looks.
TO clarify my position: I- Regard the American automotive industry as very important
- Do not want to see that sector of the American economy collapse
- Do not think that GMC, Ford, and Chrysler as the American automotive industry
- The three conglomerates dominate the industry, by virtue of their size
- The automotive industry is not the Big Three
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Make electric cars so every person will want to own a new car. This will make people want to buy a new car. Make better technology so the cars last longer without thousands of dollars of repairs put into them over the years.
Buying a car is a losing deal. They cost too much money to own over the years. As soon as you buy a new car it looses most of its value already. It is not an investment like buying a house is. You need a good reason to get every person in that showroom.
Me myself, I rather put my money in a bank CD and make money rather than throw it out the window.-
About electric cars - there are some almost-practical ones in the works. (Off the top of recent news - www.informationweek.com/blog/main/archives/2008/12/boston_power_gr.html seattletimes.nwsource.com/html/motoring/2008498626_electriccars12.html blog.oregonlive.com/pdxgreen/2008/12/electric_car.html )
About buying a car - the first one I owned, back in the seventies, was new. Every one since has been a used vehicle. Just about the same operating expenses as a new vehicle, much lower initial cost, and good for many years of operation. Typically, I've bought another vehicle when my needs changed - not because the old one wore out.
I think I understand what you mean about the bank CD.
On the other hand, for someone whose family's second car cost us $500, car ownership isn't quite as expensive as it would be for others.
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Agree.The concept of bailing out is ridiculous.Have they declared dividends to the federal Govt.,when they were making profits,or at least have they paid their taxes honestly without cooking books?They blackmail the Nation raising a hue and cry about "thousands -losing jobs,recession to economy" Does it mean that the more audacious your demands,the more you play with public money,easier would it be for you to pull in more Public money?.Come on,it is business.Take losses as you take profit.Don't do cry baby act.Whose money is it anyway?-
I think it's my tax money.
But there are other opinions.
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They should not be bailed out. In fact no private enterprise should. But the government should keep their nose out of it and quit trying to socialize America. They need to reorganize pension funds and the Unions anyway to compete. Free market will work if given the chance.-
mikermcmillen,
I'm very inclined to agree. A tightly-controlled economy looked good on paper, back around 1900. Russian leaders tried for many decades to make the idea work: and failed.
There's not question that there's going to be a very rough period, when the Big Three collapse. But, I think it will be easier to weather if allowed to happen soon, than if it happens after the current bosses dig the company deeper into the muck.
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It's just hard to sell a product that has not really changed over the years very much. A $15,000 item is going to cost me $64,000 after 20 years to own.
When my TV set broke, I bought a plasma. It was new and had enough changes to make me want to buy it.
Let a new guy with a great idea make a car that will save me money over the long run or cost less than $64,000 to own over a 20 year period.-
"...Let a new guy with a great idea make a car...."
Couldn't have put it better myself.
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i think the big three must be forced to give up on stupid gas guzzlers and be made to ivest heavily in green cars that can be mass produced, hopefully making this infusion of liquidity, if and when it happens, a truly revolutionary one.
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Good points, although if Congress keeps its fingers out of the situation, the Big Three will be forced to take your advice.
That, or someone who has been paying attention will replace them - and make a fortune in the process.
About 'green' cars - you might be interested in a link I put in a previous reply ( www.blogcatalog.com/discuss/entry/so-what-if-americas-big-three-automakers-... ).
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Well, look at that: an electric car; with decent acceleration; made (mostly) in America.
(Hybrid Technologies' MINI-E: an Electric Car that You Might Want to Drive! apatheticlemming.blogspot.com/2008/12/hybrid-technologies-mini-e-electric-c... )
Now, why can't the Big Three make something like this? Or maybe they have? -
I've stopped trying to figure out what is going to happen, and have resorted to simply holding my breath
We might save them if we bail them out - or not. I'm thinking, probably not. So either way, we're screwed. (And I'm the optimist in this household )
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