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November 14, 2006
Smells Like Another Bailout
Those of us who have been around long enough can remember when the feds bailed out Lee Iaccoca and Chrysler during the waning days of the Carter era just before Chrysler gave us the great flaming K cars. (No really, I had a friend who worked at Hertz back then and they always seemed to have at least two toasted Aries pushed up against the fence in the corner of the lot.) Now it's all of them: The big three are back at the White House whining about the mess they've gotten themselves into.
WASHINGTON Nov 14, 2006 (AP)— President Bush told U.S. auto industry leaders on Tuesday he recognized they had "tough choices" to make their companies competitive in a difficult global environment and promised a continuing dialogue between government and industry.Bush, Vice President Dick Cheney and other administration officials met in the Oval Office for just over an hour with top executives of Ford, General Motors and DaimlerChrysler AG's Chrysler Group.
The automakers later told reporters they'd had a good meeting. "The president clearly understands the importance of the business to the United States and the global economy," said Ford Motor Co. Chief Executive Alan Mulally.
The auto executives said they pressed their concerns about health care and trade issues, while making clear that the troubled industry does not want a federal bailout.
Yeah right. And I'm a liberal Democrat.
You can bet that if these dudes weren't looking for a handout and the White House wasn't interested in entertaining the idea of one, they wouldn't be at the White House and the White House wouldn't be touting "a continuing dialogue between government and industry" specifically an industry that has repeatedly screwed itself and now whines about the spot it finds itself in.
It's true that their troubles started with government regulation but they sure didn't end there. Anyone who remembers going from big engines with hundreds of horsepower that got seven miles to the gallon to big smog motors that got the same mpg but didn't have enough horsepower to get out of their own way can tell you that the cars made in the mid-to-late 70s sucked. Remember when Chevy's 454 went from better than 300 horses to 145 or so? Same for the other automakers. Then we had the piss-ass attempts to downsize: Witness the Vega, the Pinto, the Mustang II and the Gremlin -- and who can forget the Chevette? Let's face it: The first way the Big Three screwed themselves is by building crap.
Then there were the unions. The Big Three are as much to blame for letting the United Auto Workers screw them as the UAW is for screwing them. Just a few of these examples of UAW rape of the Big Three that I am personally familiar with. (These are examples from General Motors, but as GM goes, so go the other two.):
* Paying laid off employees some $300 a week beyond their unemployment for weeks on end in the early 80's.
* Bored employees who, in the past, thought their good-paying union job was some kind of entitlement, throwing empty pop bottles into the doors of Cadillacs just for kicks before putting on the door panels.
* Twenty five year employees whiling away the time sleeping in upstairs break rooms all night so that the sound of a supervisor on the metal stairway would waken them and they could pretend they were just on break.
* Thirty year employees retiring in mid-eighties while they were in their late 40s and making $30,000 a year with full benefits. With a minimal 3-4% cost of living that same retiree could be making $50,000+ right now, still with great benefits and still with 10-20 years or more to live. Not a bad retirement if you can get it.
* The notion, born of the huge profits the Big Three made in the 60s and 70s, that they were invincible to the threats posed by foreign competition, building crappy products and making idiotic concessions to socialist unions that turned an hourly grunt job into a cradle-to-grave entitlement.
As most of us who have bought Big Three products since the mid-90s know, they make some damn fine vehicles now. But it took the Big Three too long to wake up and do something right to do it profitably. Now they whine to the President about having to compete against the dominant Japanese automakers while continuing to make stupid concessions to the UAW that result in them paying more for the health insurance per car that goes to their employees and retirees than the steel that actually goes into the car. It's no wonder they are going broke, but it's hardly the President's or the American taxpayer's problem.
There's this little thing called the free market and the wonderful thing about the free market is that it naturally sorts the crappily-run companies from the well-run companies by process of elimination -- even the huge monoliths like Ford and GM. The well-run companies flourish and the crappily-run ones go out of business, just like Ford and GM should if they can't get it together.
Don't think for a minute that this means you won't ever be able to get a Chevy or a Ford or a Lincoln or a Cadillac. Just like Chrysler, these companies will be swallowed up by better-run auto companies or end up merging into even bigger auto companies that have better economies of scale and fewer stupid concessions to make to the UAW. Japanese auto companies operating in the U.S. seem to be able to pay their American employees well and pay for a significant portion of their benefits and do it profitably; it's time the U.S. automakers learned how to do the same thing and did it fast. They've had plenty of time already, we’ve been here and done that before and it obviously didn’t work. Let’em go belly up but don't bail them out.
Posted by Steve at November 14, 2006 09:52 PM
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