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Dealers
Marty Padgett
The trouble is, no one thinks Detroit is worth saving--at least, no one outside of the Midwest. Bank of America says there's one too many automakers, and that's the most level-headed commentary to come from the talking heads in Congress and on television. Mortgage-industry shill and alleged Sen. Chris Dodd blames the car companies for everything--when CAFE is the real culprit. (Ask Dodd about his preferential treatment for an industry he's actually interested and has a stake in.) As a nation, we've lost respect for an industry that is part of the foundation of industrial America, and some of us are willing to write off what remains to the Japanese, German, and Korean car industry.
There are still ways to fix Detroit, though. Difficult, wrenching fixes but long-lasting changes that could give Detroit a new footing and a new way to compete. It's not quite a nuclear solution noncar guys want: uberblogger Seth Godin would have the dealers wiped out and promises an "orgy of innovation" as a result. It's going to take humbling in the boardroom, in the halls of the UAW, and in your driveways, but it's doable.
So as they caravan to Washington for tomorrow's epic round of fundraising, the leaders of the Big Three bailout mission--GM's Rick Wagoner, Ford's Alan Mulally, and Chrysler's Bob Nardelli--we give you these five ideas that can save the U.S. car industry for future legislators and executives and workers and Americans alike:
Bailout Step One: Pre-Package Restructuring
There's just no other way to get Detroit out from its crushing pension and health care burdens short of bankruptcy--something that may have worked for airlines but probably would kill all the progress the domestics have made on quality and reliability. Even Chrysler CEO Bob Nardelli says Chrysler won't survive a bankruptcy filing--and there's reason to think GM will not, either. The way to go? Cut costs in a prearranged deal that finances a massive right-sizing of all the domestic brands. The UAW has helped costs by cutting future labor costs, but new pay rates coming in 2010 are too far off. Detroit needs pension relief, health care relief, and pay relief. And it needs it today, not in two years. Sorry, Tesla, but vaporware doesn't qualify for this kind of federal funding.
Bailout Step Two: Axe CAFE and Enact an Energy Tax
Why was Detroit singled out with colossally bad CAFE legislation in the 1970s? Because they built shitty cars then. When Congress signed off on CAFE, though, they willingly gave away Detroit market share because they didn't have the stones to enact an overall energy tax that hit every oil-using sector of the economy, from airlines to makers of plastics. Detroit took one for the team--now it's time for every other energy user to take their turn in the barrel.
Bailout Step Three: Don't Give Away More Market Share
Any bailout plan that involves restructuring is going to cause massive pain--first in Detroit, then in the tsunami everywhere else. Suppliers will go out of business, and all domestic car plants could face shutdowns that could cripple production. While the industry works through the implications of the restructuring, Washington has to enact some auto sales cap that keeps import manufacturers from grabbing sales while Detroit's guard is down. It's anti-capitalist, for sure--but we don't need to make another CAFE-sized mistake and guarantee Detroit's demise.
Bailout Step Four: Split Up Chrysler Between GM and Ford
There's almost no business case that predicts an independent Chrysler--so it's time to save the best pieces of the company, its people and its best products. GM gets Jeep; Ford gets the minivans and Viper. Caliber? Done. Avenger/Sebring? Finished. Charger, Challenger, and 300? Probably no place for them in a 35-mpg world anyway. Dodge Ram? Pretty wonderful, but shutting it down would give the F-Series and Silverado some breathing room. Chrysler jobs are spared here, something that can't be guaranteed otherwise.
Bailout Step Five: Streamline GM into Chevrolet, Buick, Saturn/Opel, GMC/Jeep, and Cadillac
GM is Chevrolet and Cadillac; Saturn/Opel bridges the gap between them and Buick is GM's future in Asia. GMC is profitable--and would get more products if it absorbed Jeep. Everything else is a business case waiting to be studied. Take the dramatic situation at hand and use it to prune brands that take too much money and brainpower, and use the moment to shut down the thousands of dealers and car lines GM needs to shut down to focus its business. Detroit Tiger StadiumEnlarge PhotoAfter what was probably the least successful round of begging ever televised, the Big Three automakers are going back to Washington this week in a full-court press for a bailout--yes, a bailout, never mind how it's being couched or gladhanded. GM, Ford, and Chrysler want easy money and low-interest loan guarantees that you and I can't get, so they can hang on to their current business models until the economy turns a corner. That's a bailout by any measure. The trouble is, no one thinks Detroit is worth saving--at least, no one outside of the Midwest. Bank of America says there's one too many automakers, and that's the most level-headed commentary to come from the talking heads in Congress and on television. Mortgage-industry shill and alleged Sen. Chris Dodd blames the car companies for everything--when CAFE is the real culprit. (Ask Dodd about his preferential treatment for an industry he's actually interested and has a stake in.) As a nation, we've lost respect for an industry that is part of the foundation of industrial America, and some of us are willing to write off what remains to the Japanese, German, and Korean car industry. There are still ways to fix Detroit, though. Difficult, wrenching fixes but long-lasting changes that could give Detroit a new footing and a new way to compete. It's not quite a nuclear solution noncar guys want: uberblogger Seth Godin would have the dealers wiped out and promises an "orgy of innovation" as a result. It's going to take humbling in the boardroom, in the halls of the UAW, and in your driveways, but it's doable. So as they caravan to Washington for tomorrow's epic round of fundraising, the leaders of the Big Three bailout mission--GM's Rick Wagoner, Ford's Alan Mulally, and Chrysler's Bob Nardelli--we give you these five ideas that can save the U.S. car industry for future legislators and executives and workers and Americans alike: Bailout Step One: Pre-Package Restructuring There's just no other way to get Detroit out from its crushing pension and health care burdens short of bankruptcy--something that may have worked for airlines but probably would kill all the progress the domestics have made on quality and reliability. Even Chrysler CEO Bob Nardelli says Chrysler won't survive a bankruptcy filing--and there's reason to think GM will not, either. The way to go? Cut costs in a prearranged deal that finances a massive right-sizing of all the domestic brands. The UAW has helped costs by cutting future labor costs, but new pay rates coming in 2010 are too far off. Detroit needs pension relief, health care relief, and pay relief. And it needs it today, not in two years. Sorry, Tesla, but vaporware doesn't qualify for this kind of federal funding. Bailout Step Two: Axe CAFE and Enact an Energy Tax Why was Detroit singled out with colossally bad CAFE legislation in the 1970s? Because they built shitty cars then. When Congress signed off on CAFE, though, they willingly gave away Detroit market share because they didn't have the stones to enact an overall energy tax that hit every oil-using sector of the economy, from airlines to makers of plastics. Detroit took one for the team--now it's time for every other energy user to take their turn in the barrel. Bailout Step Three: Don't Give Away More Market Share Any bailout plan that involves restructuring is going to cause massive pain--first in Detroit, then in the tsunami everywhere else. Suppliers will go out of business, and all domestic car plants could face shutdowns that could cripple production. While the industry works through the implications of the restructuring, Washington has to enact some auto sales cap that keeps import manufacturers from grabbing sales while Detroit's guard is down. It's anti-capitalist, for sure--but we don't need to make another CAFE-sized mistake and guarantee Detroit's demise. Bailout Step Four: Split Up Chrysler Between GM and Ford There's almost no business case that predicts an independent Chrysler--so it's time to save the best pieces of the company, its people and its best products. GM gets Jeep; Ford gets the minivans and Viper. Caliber? Done. Avenger/Sebring? Finished. Charger, Challenger, and 300? Probably no place for them in a 35-mpg world anyway. Dodge Ram? Pretty wonderful, but shutting it down would give the F-Series and Silverado some breathing room. Chrysler jobs are spared here, something that can't be guaranteed otherwise. Bailout Step Five: Streamline GM into Chevrolet, Buick, Saturn/Opel, GMC/Jeep, and Cadillac GM is Chevrolet and Cadillac; Saturn/Opel bridges the gap between them and Buick is GM's future in Asia. GMC is profitable--and would get more products if it absorbed Jeep. Everything else is a business case waiting to be studied. Take the dramatic situation at hand and use it to prune brands that take too much money and brainpower, and use the moment to shut down the thousands of dealers and car lines GM needs to shut down to focus its business.
Responses (17 total)
By Jack #1, Posted: 12/1/2008
I hear people griping about CAFE, but Detroit quickly found the truck loophole and started minting cash on trucks and SUV's, so I don't get the hostility. I do agree with you on a carbon/fuel tax, but in the current economy, raising taxes is going to be a hard sell for the next few years.
The Detroit automakers also have not learned to make a desirable small car profitably. How long did GM keep making the same Cavalier with minor cosmetic changes, and they probably still didn't clear any profits on it. While Honda and Toyota relentlessly improved the Civic and Corolla, not to mention the Koreans.
Every time I would go car shopping, I would look at the domestic vehicle and think about the 2000 dollar legacy costs per vehicle and think , what did they skimp on when designing this vehicle.
I don't see Congress stepping in to control market share, but, maybe they could limit foreign sales increases (temporarily) to cars being assembled at domestic plants, with a certain percentage of domestic content. Of course, then you get into the debate about whether Canada and Mexico are considered domestic.. oy
By ed #2, Posted: 12/1/2008
"Jack
December 1st, 2008 - 10:50 am
I hear people griping about CAFE, but Detroit quickly found the truck loophole and started minting cash on trucks and SUV’s, so I don’t get the hostility."
The CAFE was utterly useless, ask any economist worth his salt. People IGNORED the CAFE and bought small cars when gas was expensive, and when it collapsed in the mid-80s, and stayed low until almost 2005, they responded by buying the automitively illiterate, StupidUglyVehicles they did not need, and drove them 100 miles a day commuting to work.
The ONLY thing that would SOBER these clowns would be, as Marty CORRECTLY suggests, a SERIOUS Tax on GAS, which is FAR BETTER than the RECENT OPEC TAX on Gas, where all the $ leaves the US for the terrorist funding Saudis and other OPEC CLowns.
" I do agree with you on a carbon/fuel tax, but in the current economy, raising taxes is going to be a hard sell for the next few years."
NOT if you BALANCE it with an EQUAL tax cut in INCOME. OR, at a minimum, if you use it to repair potholes etc, creating urgently needed jobs in this economy. As long as you do not waste it on pure PORK projects.
"The Detroit automakers also have not learned to make a desirable small car profitably. "
What makes you think they CAN learn, sometime, to do so? Esp. if they have to sell their POS at heavily discounted prices. DO you know what the average actual transaction price for a CIVIC is? 20,000+! There is NO WAY the US consumer will pay even $15k for a POS CObalt or Aveo if thgey make it in the US
"Every time I would go car shopping, I would look at the domestic vehicle and think about the 2000 dollar legacy costs per vehicle and think , what did they skimp on when designing this vehicle."
Correct. And, a thing that JerkD will never understand, the more $ they waste on UNnecessary Advetising of unnecessary BRANDS (badge engineered clones), BILLIONS of $ over time, is $ not invested in producing a SUPERIOR PRODUCT that is NOT just "almost as good" as the CIVIC or the COROLLA, but LEAVES THEM IN THE DUST as it should, coming from Detroit, where Mass production of cars was INVENTED!
"I don’t see Congress stepping in to control market share,"
That would be a nightmare! I can't imagine these blithering idiots controlling their own bodily fluids, much less... GM market share (!!!!)
" but, maybe they could limit foreign sales increases (temporarily) to cars being assembled at domestic plants, with a certain percentage of domestic content. Of course, then you get into the debate about whether Canada and Mexico are considered domestic.. oy"
Exactly. OY, no matter if that debate ever resolves. OY because you are screwing up with Free Trade and invite our overseas rivals in Europe to also practic eprotectionism and retaliation and tell FORD And GM Europe to GET LOST.
By Geoff Thomas #3, Posted: 12/1/2008
you really missed the thing that needs to be fixed first- and prior to any bailout!
HEALTHCARE!
For years now, the Big Three automakers have been unable to produce cars competitively, largely because they have to buy their employees’ and retirees’ healthcare through private insurance, whereas workers in all other industrialized nations are covered by cost-effective national healthcare plans. Even the foreign manufacturers who produce here undercut Detroit by recruiting a younger, healthier workforce.
Now that the bottom has dropped out of the market for SUVs and light trucks, the Big Three are facing certain bankruptcy and need a bailout, possibly for loans to fund the $51 billion they owe to the VEBAs they promised to set up for their retirees’ healthcare. However, the VEBAs will purchase health insurance through private, for-profit providers, which skim off up to 30% from the top, as compared to Medicare, with only a 3% overhead. Prior to any bailout, it would be far better for Congress to allow the UAW workers and retirees to be the first to enroll in a program based on the Conyers-Kucinich Bill (H.R. 676), an expanded Medicare with no premiums, no deductibles, no co-pays, and no hassles. Like Social Security, the H.R. 676 program would be funded by a payroll tax of 4.5% from employers and 3.3% from employees.
Will this save money for Detroit? You bet. If we’re going to bail out the Big Three, let’s do it in a way that solves a real problem that is strangling U.S. manufacturing: the burden of private health insurance.
By Elroy #4, Posted: 12/1/2008
Everyone talks about getting rid of brands, but brands have value -- if they are executed properly. Toyota and Lexus use the same basic platform but the market perceives them differently.
A Pontiac should not be a Chevy with body cladding!!!!
The G8 epitimizes what Pontiac should be. The base G5 should have the same suspension as the Cobalt SS -- focus on driving experience. Seats/trim should reflect Pontiac focus...Recaro type seats, etc.
Understand there is a difference between a bad idea and a good idea poorly executed.
GM needs managers who understand Marketing!!!
By Marty Padgett #5, Posted: 12/1/2008
"the burden" of private health insurance? I consider it a privilege and I don't want it to become socialized.
By Mike #6, Posted: 12/1/2008
Sigh...there is no such thing as "no premiums, no deductibles, no co-pays and no hassles". Simply put; despite what you've been promised, there is no such thing as "Free" or "No Cost". The medical profession, like you and I, will not work for free. A socialized health care plan will thus require heavy funding to pay for it. Statistically speaking, for every dollar that is sent in to the federal government, 95 cents is spent in beaucracy with only a nickel actually being spent on anything productive. Hence; where can we predictably assume the money will come from? That's right! Extremely heavy taxation with very little oversight, plenty of inefficiencies in an industry that is extremely complicated. Socialized medicine has not worked well for any other nation (ask the folks in Windsor), why do we assume it would work here?
By Ed #7, Posted: 12/1/2008
"Elroy
December 1st, 2008 - 1:28 pm
Everyone talks about getting rid of brands, but brands have value — if they are executed properly. Toyota and Lexus use the same basic platform but the market perceives them differently."
Brands can have either Huge positive value (see Toyota, BMW, Honda and MErcedes) OR even NEGATIVE value (Big 3 POS, YUGO, Hyundai of the 80s and 90s-although it has improved markedly).
I really think the Detroit 3 cannot operate any longer, not the brands of them that have, with good reason, aquired a bad name.
When Acura dropped the Legend brand, it was estimated it lost a billion dollars. I doubt this is the same if GM drops the Buick LACROSSE...LOL. And the LAcrosse is by no means the worse POS Detroit makes
"The G8 epitimizes what Pontiac should be. "
The g8 is an aussie NICHE vehicle, Pontiac will only sell a few thousands of them, they are a huge bargain, but they can't make many more of them, they need to sell many more "bread and butter" cars like the g6 that sell 100,000s every year.
"GM needs managers who understand Marketing!!"
GM needs SUPERIOR PRODUCT, then it will sell itself, after a few years it will take for consumers to have confidence in it again.
By Jack #8, Posted: 12/1/2008
Detroit should show confidence in the quality of their vehicles by providing a 10 Year/100,000 mile warranty.
By Jack #9, Posted: 12/1/2008
Detroit should show confidence in the quality and durability of their vehicles by providing a 10 Year/100,000 mile warranty.
By Lok #10, Posted: 12/2/2008
I agree with Ed. GM needs to come out with a superior product. They have just launched the 2009 Buick Regal in China, which is the Opel Insignia in Europe. I have not yet seen the real car but have seen the photos, the features lists, and the price. This Regal rocks. For the kind of price and features, it beats the Camry, the Accord, and even the Nissan New Teana. It is the only car in this category with 18 inch wheels. If I am looking to trade in my Camry, I would go for it. This Regal is really what you would call a superior product from GM.
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