Bailout or no bailout
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.
I was terribly disappointed in the “plans” the automakers revealed to the government — I believe that despite the consumers’ lip-service to “green” technology, what most of us really want right now is smaller, more fuel-efficient vehicles, not “hybrids” or electric cars. Bring back the VW bug, although with automatic transmission. Look at the traffic on the streets: usually one passenger (the driver) on their way to work or the grocery store. Except in large cities car-pooling just isn’t being done and Americans value their independence so much that we’ll probably never do car-pooling. Too many of us live in suburbs and/or bedroom communities — and with the devaluation of real estate right now we cannot afford to move to the city — and there is no public transportation available to most of us. The auto manufacturers are out of touch with the needs and wants of most of their customer base — and are still setting themselves up for failure even if they obtain their bailout money.
Classof65
So what’s wrong with electric cars? I think that they could be a fine alternative vehicle.
I agree that car-pooling will never work. We have tried that before. It didn’t work.
Thanks for your comments.
Oh Doc, where to begin? I’ll go in order.
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.
Your statement is patently false: there is one industry more risk adverse: banking. I’d suggest that the current crisis in the auto industry could have been averted if the banking industry and the US Government had minded it’s p’s and q’s and not created the credit crisis.
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.
GM hasn’t made the Camaro OR the Firebird since 2002. They’ve only introduced the newest Camaro for the 2009 model year, which would beg the question: can you please define “several”? There are only two other cars out now like the Camaro: The Mustang and the Challenger. One is Ford, the other Chrysler, and the Camaro, obviously is a GM product. Why can’t they compete for sales? Who cares how many cars they sell, as long as the demand requires the supply?
As far as the distinctiveness between brands, are you honestly telling me you can’t tell the difference, just by sight, between a Daewoo and a Cadillac? How about a Hummer and a Buick? That idea is just plain silly, Doc.
What is the difference between Buick and Oldsmobile?
The answer to this is simple: GM stopped making Oldsmobile products in 2004.
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.
What if I want a Saturn SUV? What if a million of my friends want a cheap Cadillac? Are you saying that GM shouldn’t respond to demand with an equal supply, leaving sales dollars on the table? THAT is crazyness.
Build less variety and build better.
This comment is my favorite. According to JD Power, the top three makes for Overall Dependability are Lexus, Mercury, and Cadillac. Two American makes, one Japanese. You can disparage the wide variety offered all you want, that’s a simple supply and demand argument, but don’t tell me that US automakers cannot build cars with quality on par foreign rivals. That argument just doesn’t hold water.
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.
Are you seriously arguing that the Big 3 haven’t made a commitment to the US or to the US work force? The industry that won WWII? The Engine of Democracy? The same industry that is saddled with crippling legacy costs? The same companies that pay upwards of 25 dollars an hour, while their Japanese counterparts pay 17 dollars an hour in their own US assembly plants for the same job?
How about this, then: if the US is REQUIRED to make those commitments, how about the US taxpayer be REQUIRED to support the US auto industry?
Let’s start with you, Doc. What kind of car do YOU drive?
Doc:
re: Electric Cars
That technology simply does not exist. The EV1 was an experiment, and frankly, if failed on practicality tests.
1) Limited range - I wouldn’t want to cross the desert in one of those things. Hell, some people couldn’t even use it to drive to work. And, what happens in cold weather? You know, when your batteries don’t work as well because of the cold? (I fully acknowledge that you might not be as familiar as I am with this issue, as you are from NC via Texas, and I am Michigan born and bred, but trust me, batteries just don’t hold their charge in the cold.)
2) Limited size - What happens when you have 3 kids? Are you going to fit them, all their gear, and your spouse in that tiny car for a ride to Grandma’s? It’s simply not built for families, because the second you start adding seats, you add weight, and limit the range even MORE.
Further, as a doctor, you have to be aware of the amount of damage a large semi would have on a compact car, which is what electric cars would be. Would you want to transport your newborn in one? How about a grandchild?
3) what happens when electric cars are retired to the junkyard, with half a ton of toxic waste on board? Battery fluid is extremely toxic, and would need to be disposed of before the car is recycled into anything. What you you do with a thousand pounds of toxic waste?
For the above practical reasons (and many others, I assure you) the project was scrapped. THAT is what is wrong with electric cars.
I like your analysis, and even thought everything you say may not work I really appreciate the fact you are presenting other views and specially the fact you are making suggestions. So often you see people just complaining but never giving any kind of proposal or idea.
Regarding the brands and the amount of different models, I think is important to focus, at least for now, due to the situation of the economy. There’s a perception about quality that Detroit has to fight. And I think focusing on the development of maybe fewer but really good models of fuel-efficient cars would help a lot. The goal can’t be that the next models are as good as their japanese or corean counterparts, they have to be better because at least in terms of public perception the biggest foreign brands are ahead, and in tough economic times people are even more circumspect about investments.
Forget the bargelike, $40,000 Chevy Volt. Remember the instant commercial success of Mazda’s Miata, a car that combined style with fuel economy and mechanical reliability. If GM wants a car people will fight each other to buy, let ‘em build a high-quality hybrid with that lovely vintage Corvette body style shown in your photo. Or something similar to it. And speaking of old Corvettes, they’re not the gas hogs many people think they are. My reconditioned, souped-up 1985 Vette gets 28 mpg on the highway and 24 around town when driven sedately, better mileage than many of today’s deadly dull Detroit dinosaurs.