Where's the Outrage?

I would hope that our lawmakers in Congress would not have a knee-jerk reaction to the auto industry. I would like to see some thoughtful discussion on Capitol Hill. Unfortunately,though, for the last 30 years, it appears that Capitol Hill has been a thought-free zone.

It seems to me that there is more to think about than just the auto industry.  As this crisis has unfolded, more and more industries and businesses have come to the American taxpayer looking for handouts. Agriculture and Steel are just two of the industries that could ask for their own multi billion dollar bailout. Add to the mix the $700 billion that we’ve given to the financial industry. The GAO has just released a report that says there’s been no oversight. Congress specifically said that they wanted oversight. What happened? Oversight is a must! This is necessary even if Congress has to create a new bureaucracy to support oversight. Oversight is required.

Rick Newman of US News and World Report has written some excellent articles on Detroit. First, the 10 cars that may salvage Detroit:

EV-1. GM famously spent $1 billion trying to build this electric-powered two-seater in the ’90s, only to scrap the project because of range limitations and other shortfalls. Critics dubbed the EV-1 a huge flop. But hold on: One of GM’s top priorities right now is the Chevy Volt electric plug-in, due in 2010. And much of the technology comes straight from the EV-1. If electric cars catch on and GM ends up a leader, it will be largely due to lessons learned from this failed experiment.

Chevy Volt. Unlike the EV-1, the Volt has a gas engine that kicks in once the battery runs down, so you can’t get stranded away from a recharging outlet. Since it’s a sedan, the Volt will appeal to families, too. Initial sales will probably be low, thanks to a high price tag and wariness over the technology. And it could be years before GM recoups its investment. But if the Volt succeeds, it will help re-establish GM as a technology leader and provide some badly needed environmental cred. The technology will also get cheaper over time, and it could spread to many other GM models.

Ford Fiesta. All three domestic automakers need to recapture small-car buyers who have fled to imports like the Honda Civic that offer better quality and cachet. The European-built Fiesta, due in the U.S. in 2010, will make the case with crisp styling and gas mileage in the mid-30s. Ford could also import the C-Max and Kuga into the U.S. from Europe. If they succeed, “the impact of all three of these Euro Ford vehicles will be huge,” says James Bell of Intellichoice.com. (more… )

Almost a month ago he wrote an article called “The 10 Cars That Sank Detroit”. (If you think hard enough you should be able to come up with six or seven of these cars on your own.)

Ford Pinto. This ill-fated subcompact came to epitomize the arrogance of Big Auto. Ford hurried the Pinto to market in the early 1970s to battle cheap imports like the Volkswagen Beetle that were selling for less than $2,000. Initial sales were strong, but quality problems emerged. Then came the infamous safety problems with exploding fuel tanks, which Ford refused to acknowledge. Message: The customer comes last. “The problems for the domestics really started in the ’70s when they were offering cars like the Pinto up against higher-tech, better-built Toyota Corollas and Honda Civics,” says Jack Nerad of Kelley Blue Book.

Chevrolet Cavalier. GM sold millions of Cavaliers in the 1980s—and decided the thrifty car was so successful the company didn’t need to update it for more than a decade. To milk the model, GM even added some lipstick and high heels and tried to peddle the upgrade as the Cadillac Cimarron—a legendary flop. Honda and Toyota, meanwhile, were updating their competing models every four or five years, and grabbing market share with each quality improvement. A new Cavalier came out in the mid 1990s—then languished for another decade, while GM put most of its money into big trucks and SUVs. GM has since improved its small cars. “But they have to be miles better than the imports for Americans to forget how bad their small cars used to be,” says Jamie Page Deaton of U.S. News’s Rankings and Reviews car-ranking site. Even if they are better, many Americans wonder why they should give Detroit a second—or third—chance.

Chevrolet Astro. While Chrysler, Toyota, and Honda were refining their minivans in the 1990s and coming up with innovations like hideaway seats and electric sliding doors, GM was offering an old, truck-based van gussied up with carpeting and cupholders. “It showed GM’s repeated failure to market competitive products based on styling and packaging,” says Tom Libby of J. D. Power & Associates. The Astro drove like a bread truck, and consumers noticed. It also earned the worst safety ratings in its class. Before long, GM was effectively out of the minivan segment. No biggie—those were just mainstream American families the automaker decided to ignore. (more… )

In my mind, a couple things have to happen before the auto industry gets any money whatsoever. First, Detroit has to take some risks. Nowhere in the United States has there been any industry that has been more averse to risk than Detroit. Secondly, General Motors, Ford and Chrysler have several cars that are almost the same as the Pontiac Firebird and the Chevy Camaro … or the Chevy Tahoe and the Cadillac Escalade. Just make one car and make it right. Thirdly, General Motors has multiple divisions that seem to have no distinct identity — Cadillac, Oldsmobile, Daewoo (why?)… Buick, Chevrolet, GMC, Hummer and a few others. Come on, this is craziness! What’s the difference between an Oldsmobile and a Buick? Let Cadillac do your luxury line and let GMC build all the SUVs. Let Oldsmobile have all the electric cars and give Buick all the hybrids. Let Saturn have the economy cars. Build less variety and build better. Fourth, make a commitment to the United States and United States auto workers. If the United States taxpayer is being asked to bail out the auto industry, then the auto industry must make a commitment to the United States. They must guarantee that all of their workers will be well-paid, compensated adequately for their work — period. Now, if the auto industry and Detroit would like to agree to my four demands… then, and only then, am I interested in discussing a $34 billion loan package.

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