when the status quo frustrates.

Oliver Twist – starring Ford, GM, and Chrysler

You know who I won’t shed a single damn tear for? The electric-car-squashing American auto industry. These are the same people who buried their inexpensive, reliable plug-ins once it became clear people actually *wanted* them (and thus the reduced need for marked-up dealer maintenance that comes with dumping the fragile combustion engine).

null

But as with so many old-fogey corporate institutions right now, the automakers are in peril. And the Democrats want to help:

“In order to prevent the failure of one or more of the major American automobile manufacturers … Congress and the Bush administration must take immediate action,” said Pelosi, D-Calif.

Senate Majority Leader Harry Reid said that Democrats were “determined to pass legislation that will save the jobs of millions” as part of a postelection session. “This will only get done if President Bush and Senate Republicans work with us in a bipartisan fashion, and I am confident they will do what is right for our economy,” said the Nevada Democrat.

When asked why, every politician says jobs:

Michigan Gov. Jennifer Granholm said Wednesday that the crisis in the auto industry is urgent, arguing that “the national economy rests on this.”

“This industry supports one in 10 jobs in the country,” Granholm said Wednesday on CBS’ “Early Show.” “If this industry is allowed to fail, there would be a ripple effect throughout the nation.”

If we were so hellfired-worried about the little guy, I’d ask: what if we took the same tens of billions we’ll almost certainly throw at GM, Ford, and Chrysler (each) and instead invested in each auto industry employee for 1) new job training skills, 2) career placement assistance in the new field of choice, and 3) a 12-month severance package while new work is sought? Seems to me we could go right around the fatcats at the top.

But maybe that’s too simple. Maybe there aren’t enough other jobs and other industries to absorb the auto industry workers. If so, I’d say that we could invest the collective industrial knowledge and personpower into massive new public transportation projects for a a post-oil economy. Let’s bring back the spirit of the New Deal by absorbing the auto industry’s loss as our national infrastructure’s gain.

But maybe this is all too unrealistic, too. That’s cool. I know what thing that isn’t: nationalizing the motherfuckers. You lawmakers want us to have an American auto industry? Fine. Then I want part ownership, along with every other citizen, so we can cut the crap and build vehicle technology for the future instead of the past. We could immediately end all SUV production to save lives on the road and reduce oil consumption, and we could roll out electric cars at break-even prices within 2 years.

If we’re taking ownership in the financial sector, it can be done here, too.

Corporate welfare without national ownership in return is nothing more than the rich stealing from the poor. If an industry is “too important to fail,” then it belongs in the hands of everyone and not a few short-sighted, greedy, stock-slave executives earning tens of millions of dollars to run their company into the ground and steal from us when it craters.

20 Responses to “Oliver Twist – starring Ford, GM, and Chrysler”

  1. Quin says:

    “Please sir, may I have some more?” But just look at their big saucer eyes! How can we refuse that. Don’t worry, what with the Treasury’s unlimited discretion to print more money, they can make it feel like we’re not giving them anything at all.

    Sing it Fagin!

    “In this life, one thing counts
    In the bank, large amounts
    I’m afraid these don’t grow on trees,
    You’ve got to pick-a-pocket or two
    You’ve got to pick-a-pocket or two, boys,
    You’ve got to pick-a-pocket or two.”

  2. Quin says:

    Or, to put it slightly more positively, it would be impossible for me to agree with you more.

  3. Factory says:

    Unsurprisingly, I disagree.

    It never fails to amaze me the way many Americans blithely dismiss the Domestic Auto industry. Here’s a statistic for you. 1 in 16 jobs in the US is directly tied to the auto industry. Here’s another for you, GM has a higher mileage fleet than Toyota (but no one thinks “Sequoia” when they think Toyota). Here’s another, the most consistently high quality vehicle you can buy is ….the Buick Century.

    The EV1 was a lease-only car because the cost for it was astronomical, the range was 20 miles, it took 2 days to charge, the battery was fried after 3 years (at a cost of a midsize car to replace), and they couldn’t even lease the limited number they made (what a high-demand car).

    If it makes you feel better though, the R&D money put into that resulted in the Volt, and E-Flex architecture. This is an electric car (like the EV1) with a gas powered generator (like a Bobcat or locomotive). 40 miles of gas free range at end of battery life, recharge overnight, every system in the car, from A/C to power window modules to stereo, had to be redesigned for low power consumption, etc. This car has been shown in production form, and will be released in a year.

    Oh yeah, and it’s a powertrain concept, which means it’s quite likely you can order a Chevy Malibu with an electric powertrain as an option…..beats the hell out of the EV1 if you ask me. At least it can be used in the winter time…

    Once again, I’m not sure why I care. I mean, if you assume an “auto industry” is simply the factories making the parts and the cars, well, the Canadian auto industry is almost as big as the US (and we don’t have any “nameplates” of our own). I just don’t understand the fervent jettisoning of major industry (and quite frankly, the industrial backbone of your country).

    I mean, even if you disregard the innovations the Big 3 have introduced (assembly line, guardrails, that little line down the center of the road, etc..), that’s a lot of people to throw out of work. As for giving the cash for retraining and such…is that more of the “new economy” stuff? Manufacturing capability is not something it makes sense to export.

  4. Factory says:

    Another take…

    However painful, the cleanest and most effective approach is to allow the Big three to file for bankruptcy. That might open the road to washing out all the crippling union contracts, creating new and economically viable corporations that could re-employ many of their former employees at competitive labor rates.

    Stockholders, of course, would likely lose their investment in the bankruptcy workout. But that too is the nature of a free-market economy. Investors take a risk in expectation of a profit. They can’t always be successful, particularly when impending doom has been on the horizon as long as has the Big Three situation.

    Were the bankruptcy courts to approve such a settlement, the restructured, slimmed-down corporations emerging from bankruptcy would have a far better chance to survive against foreign competition. And their domestic suppliers would be in a sounder position, no longer squeezed by wafer-thin, cram-down prices and attenuated payment schedules.

    http://mensnewsdaily.com/2008/11/09/the-auto-bailout/

  5. Sevesteen says:

    If any of the Big 3 go bankrupt, it does not mean all their factories and suppliers factories will be permanently shuttered. Anything of value will be sold to someone and reused. The parts that are permanently closed weren’t valuable to begin with.

    The main problem here wasn’t caused by anyone in charge of GM now. The problems go back 50 years or more, when generous pension benefits were promised but not funded–Like much of the mortgage crisis, “future growth” was supposed to fund everything. GM got saddled with insane work rules–A system I was partially responsible broke. It took me and 3 different trades to fix it–Me to find the problem, one trade to operate the front panel, another trade to open the cabinet, and a third to install a new plug. If management tried to object, they could trigger a strike. In some cases a strike at one relatively minor parts factory can shut down multiple assembly plants. This happened last year, when an axle company that had formerly been a GM division shut down most GM truck plants for months. GM had to step in and give money to the axle company, so they could re-start their truck plants.

    (Full disclosure: I’ve been working at a GM assembly plant, in a non-GM job for the past 8 years. The plant is scheduled to close very soon.)

  6. Factory says:

    It’s actually not even that simple. The problem is also one of over capacity. The US auto market has shrunk by approximately 25% in the last year, and overall the industry has too much manufacturing capacity as compared to the demand for autos. To illustrate, all of DaimlerChrysler’s production and half of Ford’s could disappear tomorrow, and no one would be short a car.

    As for the plants and such being around…well, that might be said for some of the more modern plants, but there’s plenty of unused buildings in GM (and the other’s) portfolio as it is, adding the rest isn’t going to make them any more used.

    It is a fallacy to think that the other auto makers would buy up Domestic factories and employ workers in the US. Maybe while your dollar sucks, but if it makes sense to move production to, say, Vietnam, they will. When you have no Domestic Auto industry, what are you going to do about it if they do?

    The main problem hitting the Domestics right now is the credit crunch. Unless you’re made of gold, you’re not going to get funded on a new car loan. Domestics tend to draw a lower income crowd, which is a disproportional hit on them, but even Toyota suffered a 27% drop in sales. Honda was somewhere around 31% if I’m not mistaken. Which pales in comparison to GM’s 47% drop in October. Yup, 47% drop in sales year over year, after GM released 3 best in class autos….

    Anyway, I think it’s wrong to take a knee-jerk reaction to losing the industrial backbone of your country.

  7. punkass marc says:

    Factory,

    Did you even read my post? I advocate spending the bailout money on the employees directly. or, failing that, re-employing them in a massive public works project with all of that money. OR, failing that, nationalizing the industry since it’s so all-fired important to America. In other words, in no way does the worker have to be abandoned. Just the corporate jackholes at the top.

    Meanwhile, you want to break unions because THEY’RE the problem? That’s classy. Let’s bail out the execs and then screw the working man you theoretically want to protect. You can’t have it both ways, dude — if it’s about the jobs and the fair wages of those jobs, you can’t go breaking the union. If it’s about the rich getting richer, well, then you look like an ass.

    Good to know you favor corporate welfare, too. Especially with no strings attached. How do you feel about welfare in general? Something tells me there’s a lot of cognitive dissonance going on in that brain of yours.

    Also, remember, the electric car issue was solved over a decade ago with GM’s EV1. They just buried it for profit. So you can take your Volt and stuff it.

  8. Factory says:

    Yes Marc, I in fact did read your post. I am saying that you can’t “retrain” 1/16th of your total labour force…to do what? This is another issue I follow quite closely, by the way, since I used to sell GM, and my roommate sells Hyundai right now. Granted, I’m not an American, but I’m fairly sure I have a better idea of what ails the US auto industry than most…if you disagree, feel free to say so (obviously).

    People talk about bankruptcy for GM (usually chapter 11), but many analysts think GM doesn’t have the cash necessary to restructure (union bust), and the Gov’t ain’t going to help that, so it’s straight to chapter 7. This will destroy the supply chain, since they are nearly as weak as the Domestics, which (since all the automakers use different subsets of the same suppliers) that with the breakdown of the supply chain will come work stoppages at the other plants due to parts availability issues, which will further exacerbate the problems faced by the other automakers. Which will likely lead to Ford going under (GM and Chrysler being gone already).

    A massive amount of already-trained and out of work auto workers will result in precipitous drops in the income of the (non-unionized) Import plants, as well as wholesale exporting of jobs.

    There aren’t a whole lot of analysts that disagree with this, hardly surprising since I didn’t come up with this viewpoint in a vacuum.

    The real shame here is that the biggest reason GM can’t make money on small cars (Union contracted Health Care, etc) is going to be transferred to Union control on Jan1, 2010 (look up VEBA), which along with the introduction of the Volt and several other cars (like the Cruze) will likely return GM to profitability, and save all those jobs and pensions and supplier’s jobs and pensions.

    The biggest, I say again THE biggest problem the automakers have (in general) is the credit crunch. GM had the ability to squeak through, until this mess.

    As to the electric car issue being solved, that’s patently untrue. If electric cars were so desireable, beneficial, and more importantly easy to supply….how come Honda (insight), Toyota (Prius), or any other manufacturer hasn’t come out with one? Especially after GM proved the concept was so profitable and all….

    What I can tell you is this, if you look into the Volt you’ll see that a ton of the research that went into the EV1 was refined and built upon in the designing of the Volt. This technology will bleed over to regular cars too (like OnStar, HID headlights, ABS brakes, Airbags, etc), leading to lower power consumption, much more efficient cars. Look into the electrical load your average car produces, and the energy inefficiency caused by such sometime….it’ll shock you.

    Rick Wagoner is an idiot. Bob Lutz is my “hero”. GM’s management isn’t going to win any awards, but I see no point in destroying an entire industry and putting millions of people out of work, just to prove a point.

    Plus you forget disgruntled Union workers’ role in acquiring that reputation for “shoddy workmanship” Domestics enjoy so much.

    For what it’s worth, the bailout they’re asking for is operating capital, you know, money to meet payroll obligations with?

    Nationalizing the industry is just fine with me….but then, aren’t YOU the one with problems with the quality of Domestic Autos in the first place?

  9. Factory says:

    the words of an analyst…

    “…I say be careful what you wish for – because if GM is allowed to fail, it will take the entire domestic auto industry down with it – meaning thousands of suppliers and dealers in towns making up a cross-section of America will go under too.

    For the record, there are around14,000 domestic-oriented dealers in the U.S. employing approximately 740,000 people with a payroll of around $35 billion – that’s billion with a “B.” But that’s just the dealer side of the equation. When you add in the suppliers and all of the associated businesses that either directly or indirectly depend on Detroit for their livelihoods, we’re talking almost three million people who would be out of work in a matter of just a few months, adding up to a $150 billion loss in personal income.”

    http://www.autoextremist.com/

  10. Erin says:

    It seems to strike Factory as quite fine and dandy that our economy is sooooooooooo dependent on one industry. Where have I heard that before. Oh right, Virginia, circa 1860.

  11. Factory says:

    I’m not sure what you’re getting at here…are you equating support for blue collar workers keeping good paying jobs, which incidentally also helps in areas as diverse as national security, health care, and traffic safety – and R&D dollars spent all willy nilly, plus all those labour wages. Frankly, if having a well run US auto industry (which benefits everyone) means a few incompetent boobs will get a big last paycheque (and when doesn’t it?), then so be it…cost of doing business.

    Sure beats the hell out of the Big 2.8 going under, which benefits no one except vulture capitalists.

    So how does that equate me somehow with supporting the slave trade?

  12. Erin says:

    No, I’m equating your “THE AUTO INDUSTRY IS TOO IMPORTANT TO FAIL” to the Southern whinings of “SLAVERY IS TOO IMPORTANT TO GIVE UP”.

    And I’m pretty sure that “having a well run US auto industry” does NOT benefit everyone.

  13. Factory says:

    What is the benefit of NOT having a US auto industry?

  14. Erin says:

    Why do you consider it an either/or situation?

  15. Factory says:

    Frankly, because it is. Either the Gov’t bails out GM, or in 60-90 days the company will cease to exist (in North America – worldwide they actually make money. In China, Buick is right up there with MB and BMW for instance). If I was on the board, I would be looking at ways to get the company out of hot water, one of the ways is looking to sever the NA operations from the rest.

    GM has enough cash (analysts think) to get through about 2 months at current “burn rate” of about 3.2 Billion dollars per month. If nothing changes (sales or credit wise) GM is insolvent in 60 days. That means in 2 months, 300,000 workers are out of a job, plus all those people in the “jobs bank” are out of income, plus all those retirees are out of luck. The loss of the contracts will force the suppliers out of business, or into serious downsizing, within one or two days.

    Within about a week of that, add another 1.5 million to the unemployment line. Most of GM’s factories are out of date, and therefore less desireable to purchase. Some, like the plant they are building in Flint to produce a new 1.4L turbocharged engine (50 mpg babycakes), will likely be sold to another manufacturer, but the lion’s share will be shuttered for a good long time.

    FORD may survive GM’s collapse, but again, there aren’t a lot of analysts that think so. In any case, should something like that happen, almost everyone agrees that further expansion into a high cost manufacturing country like the US, barring political consideration, is unlikely. Oddly enough, Canada would benefit because under NAFTA and the US/Canada auto pact, vehicles manufactured here in the land of gov’t medicare are still considered “domestically produced”.

    At any rate, and in any plausible scenario put forth, should GM collapse, the US auto industry will pale in comparison even to Canada’s…IF anything remains at all. Of course the imports will continue to use their factories, might even buy up a couple to look like they’re doing something to help the US….again though, drop in the bucket.

    But like I said, the collapse of the Big Three would hurt the US a lot more than anyone else in the world…and would likely benefit Canadians to some degree (UAW with a broken back, production moved to “low cost” Canada), but it’s hardly desireable.

    As for reorganization under Bankruptcy, that boat sailed long ago. You need operating capital to file chapter 11, to run your business while protected from creditors. Usually this means massive layoffs, outright closures of divisions, etc. GM chose not to do this, to reduce their workforce through attrition and buyouts, to spare their workers the pain of losing their job with no warning.

    The only option they have left is insolvency. Put the whole thing on the auction block, and send everyone home. When you consider that GM reduced production at Lordstown (where they make the Cobalt) and dropped 1000 workers (with pay) to reduce production by 25%. The other 2900 still work there. That’s 4 THOUSAND people at one plant. GM alone has over eighty such plants. One design center employs 1,400 Engineers, that have all just been laid off. Want to bet when the rest join them the average wage for engineers will drop substantially?

    The effects would be huge, no one is even making they want to “step up to the plate” for ANY of GM’s assets (not likely to be apparent now anyway). Toyota is about the only company in a position cash wise to buy GM’s assets, but with this outlook, you can be guaranteed they’d only snap up the “cherry” stuff, leaving the rest to rot.

    The point is, GM doesn’t have enough money to reorganize. They would need money from the feds just to do that (likely around 50 billion dollars), and that’s not likely to happen. GM really is in a “sink or swim” position. If they sink….well, that’s bad.

  16. Erin says:

    Therein lies your problem.

  17. Erin says:

    And the point of my criticism. Agriculture can and does exist without slavery. Auto manufacturing can and will exist without a government bailout.

  18. Thene says:

    Factory – it’s funny to think how much a simple transfer of healthcare costs from businesses to government would help the industry out, as it would every other industry in the USA.

  19. Factory says:

    You’ll get no argument from me Thene. Medicare is a key competitive advantage when it comes to locating big business in Canada. Problem is, it simply offloads the cost from one big purchaser (lots of negotiating power if they choose to exercise it) to many little ones – the taxpayer (next to no negotiating power). GM really was trying to be a good corporate citizen in not laying off thousands of workers (relations with the UAW might be a tad more important though), and because of that, they find themselves in a really bad spot.

    Erin, that has to be one of the weakest analogies I’ve seen in a while. First of all, how do you equate government handouts with Slavery? Second, how do you reconcile that with funding for DV shelters (gov’t), paycheques for DMV workers, etc? Third, Agriculture is one of the most heavily-subsidized (read:gov’t handouts) industries in the world, and aside from the Europeans, the US is the WORST offender in that regard. And fourth, how exactly do you suggest GM/Ford/Chrysler “exist” without a government bailout? I’ve laid out both the effects and the causes, plus generally accepted courses of action. You have figuratively stuck your fingers in your ears and said “They don’t need the money, and if they do it won’t be as bad as they say”….

    So Erin, to coin an old advertising slogan….”Where’s the Beef” to your argument?

  20. Factory says:

    An interesting piece of corporate propaganda for those who want to watch…

    http://www.youtube.com/watch?v=72cHfOKoA1c

Leave a Reply