John McElroy and his colleagues discuss the future of the American Auto Industry.
For those who had technical difficulties during the live chat, thanks for participating in our experiment. We’ll continue to work through problems on our end and hope to give this a try again real soon
The debate about bailing out the Big Three has hit a fever pitch. It seems like everybody wants to weigh in with their opinions, and the louder they rant, the more coverage they get.
Strangely, the media is devoting far more attention to the $25 billion bridge loan for the automakers than it is to the $700 billion bailout to the financial industry. How does that makes us a better informed citizenry?
There are always two sides to every argument, but this discussion shows how much misinformation, misperception and wrong-headed “facts” are being bandied about. So here is my chance to debunk the five most popular myths that I keep hearing.
“The Big Three only build cars that nobody wants.” Oh really? Somehow last year they managed to find over 8 million customers to buy those cars nobody wants. And a good many of those people are not just satisfied with their purchase, they are passionately devoted to them. Corvette, Mustang and Viper have practically created cult followings. F-150, Silverado and Ram owners are the most loyal buyers in the business. Even with all their other vehicles, customer satisfaction has never been higher.
Even though the UAW has made many concessions, like the Jobs Bank it still has a long way to go. What seems perfectly proper to the union is beyond belief for most American taxpayers. And since taxpayers are being asked to bail out the Big Three, they won’t go for union perks and benefits that are better than they get.
Let’s start with paid time off. UAW members average 42 paid days off a year. That includes five weeks of vacation and 17 holidays. In a government led restructuring I’d expect this to get chopped back to about 20 paid days off.
Do you see what’s really going on in the bailout fight for the Big Three? It’s not about the money, it’s about where the money will come from. Actually, it’s all about politics.
President Bush, in one of his last actions as the leader of his party, is trying to force a schism in the Democratic Party. He’s setting the environmental wing against the labor union wing, with the goal of derailing Barack Obama’s Grand Coalition.
Democrats want the Bush Administration to give Detroit’s automakers some of the $700 billion set aside for bailing out the financial industry. Bush says, “No way.” Instead, Bush says the Democrats ought to tap into the $25 billion set aside to help the Big Three to re-tool their plants. House Speaker Nancy Pelosi says, “No way.”
With the automotive market so bleak today, it’s worth remembering how we got through times like this in the past.
Back in 1980, when gas prices soared and the automotive market collapsed, the Big Three were bleeding red ink. Chrysler had to be rescued by the government and it was GM and Ford’s overseas operations that helped them get through the tough times.
But as it always has, the market came back again. In 1982 car sales had fallen to only 10.5 million units. But by 1986, only four years later, they surged by almost 6 million units to an all time record.
It’s worth remembering what happened at Ford. In 1980, 81 and 82, the company lost record amounts of money. But in 1986, only four years later, it went on to record all-time record profits. The point is, we’ve gotten through horrible times in the past, and we’ll get through it this time as well.
Californians buy more cars than people from any other state, but this year it’s losing its luster as an automotive marketplace.
Traditionally California buys between 16 and 19 percent of all new cars sold in this country. But this year that’s dropped to 12 percent. That represents a drop of half a million cars.
And it gets worse. According to CNW Marketing, only 14 percent of Californians are able to afford a new car, down from 30 percent a decade ago. And it says that for the first time since 1984, the number of Californians who say they intend to buy a new vehicle as dropped below the national average.
Asian automakers have enjoyed great success in California, but CNW says the need to succeed in California is losing its luster. It will still be a very important market, that can’t be ignored, but not as important as it was in the recent past.
Last month the CEOs from GM, Ford and Chrysler went to Congress to ask for a bridge loan to help get through the industry downturn. Members of Congress grilled the CEOs over traveling to Washington in private jets and poor management among other things. Congress then asked the CEOs to come back to Washington and submit restructuring plans to convince Congress to give them the bailout money. Click below to see the plans submitted by GM, Ford and Chrysler on December 2, 2008.
John Gambling of WOR NewsTalk Radio 710 in New York interviews John McElroy about the turnaround plans the Big Three will present to Congress on December 2nd. They also discuss whether or not the portrayal and treatment of Detroit’s automakers has been fair compared to other struggling institutions.