But not everyone is in favor of sending taxpayer money to Detroit automakers who have failed miserably to innovate, upgrade or respond to consumer interests. By almost any measure, the Big Three have failed to be competitive with leaner, more innovative and more responsive Japanese and Korean automakers. Detroit is in this mess in large measure because it insisted on maximizing profits by producing huge, heavy, gas-guzzling SUVs. Other factors, such as labor costs, union restrictions, retiree health care and pension costs, play a role, but, fundamentally, Detroit has missed the boat on how to thrive as 21st century automakers. Japanese automakers are building quality cars successfully and economically in U.S. factories, so it's not just the American labor market that's the problem. Detroit trails in quality of construction, consumer comfort and satisfaction and reliability.
Full disclosure: I drive a 14-year-old Japanese-made car, and my wife drives a 7-year-old car made in America by a Japanese company. The two vehicles combined have more than 200,000 miles on them and remain reliable.
A bankruptcy by GM or Chrysler or Ford would ripple through the economy. Automobile manufacturing is one of the last heavy industries left in America. It would be painful. The question for Congress is whether the pain of bankruptcy would be worse than the pain of having taxpayers subsidize the poor decision-making of Detroit's management. One thing taxpayer dollars should definitely not do is accommodate a merger between GM and Chrysler, which has been openly discussed. The proposal is idiotic. Combining two losing companies does not create a winner; it creates an even bigger loser.
Both GM and Ford have new products in the pipeline that could make the companies more competitive. GM's Volt plug-in electric car is especially promising, if the engineering problems can be resolved. But unless the culture changes in Detroit board rooms, these new products, with or without taxpayer subsidies, will not turn the behemoths around.
Detroit claimed to have learned its lesson in the aftermath of the disastrous oil shocks of the late 1970s, when its giant road hogs were driven from the market by smaller, more efficient vehicles designed to compete against Japanese and European cars. But Detroit quickly shifted to the manufacture of SUVs, taking advantage of Congress' exemption from mileage standards of "small trucks," which conveniently included big, gas-thirsty SUVs.
A bailout of the Big Three might be in the long-term best interests of the country, just as the 1979 loan guarantee for Chrysler proved to be a wise investment, but I'm not convinced yet.
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2 comments:
you're right. We are in the process of getting rid of my old cherokee. It isn't going to make it through a second Chicago winter, so we went out and have decided upon a Hyundai Sonata. Fuel efficient and roomy - that's a great trade off
You place a lot of the blame on the inability of corporate to change. Part of the blame lies with the unions which allowed their workers to continue to have to be paid outrageous salaries and for many of them with nothing to do, except sit in the cafeterias and chill wasting their days! If we bailout the auto makers, we waste our money. I resent having to pay union negotiated salaries. Let them go bankrupt and do away with the unions.
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