CE Week #14: “Is This Detroit’s Last Winter?”
“The American people made Ford Motor Company what it is. We have nothing the public did not give us. No surplus exists for personal benefit — every surplus is provided for future use. The future is here, and we are going to do our utmost — risk everything, if necessary — to use this surplus which the public, through its dealings with us, has provided, to see if we cannot make what the country needs most — work, jobs.”
— Henry Ford, Feb. 11, 1932
This is the thanks you get for creating the middle class, Henry. In the throes of the biggest auto swoon since 1931, the headmen of Detroit go hat in hand to Washington to try to keep their once mighty industry upright for a couple of months and are treated as if they had invented the four-wheel-drive subprime mortgage. AIG torpedoes the entire economy and gets a $150 billion handout; Citigroup takes risks no sane manufacturing company would even contemplate and is rewarded with a $20 billion federal bailout. And the car guys?
The Detroit Three recently presented detailed restructuring plans to Congress — an application for loans and credit lines to tide them over until the economy rebounds. U.S. auto sales were down more than 30% in October — even Toyota wasn’t spared. Detroit wants $34 billion to shelter 3 million jobs and $300 billion worth of business. The first time the companies came calling, on Nov. 19 and 20, Congress blew a radiator. “Even though all Americans want this industry to succeed, I cannot support a plan to spend taxpayer money to bail them out” is the way Spencer Bachus, the ranking Republican on the Committee on Financial Services, got the House hearings going. The incoming Administration is not holding out much hope that Congress can find a solution in the coming weeks. Instead, it is looking at what options — and pots of money — will be available once Barack Obama takes office.
What the CEOs of the Big Three have discovered is a nation suffering Detroit fatigue. Americans may not know squat about collateralized debt obligations, but as a nation we have been defined by car worship. We are angry at our car gods — who for too many years made too many clunkers — because we have owned the Dodge Aries K cars, Mercury Montereys and Chevy Chev-ettes they produced. So the citizens and the pols are irked to have to throw these companies a lifeline, even though they probably should do it for the good of the economy. An out-of-business GM (or even a bankrupt, reorganized one) is more than just a dead factory here and there. “There are real risks of cascading bankruptcy and then supply-side seizures,” Columbia economist Jeffrey Sachs warned Congress, meaning that the ability of all car companies simply to make cars would be in jeopardy. The negative feedback in the supply chain would hurt partsmakers and dealers and even extend to retailers, restaurants and banks. But others argue that bankruptcy is exactly what GM needs, despite the dislocations.
GM, which is burning $2 billion a month, requested $18 billion in loans and credit lines — $4 billion for December. For that money, it will slash the number of plants it runs, the number of brands it makes and the number of dealers who sell them. It proposed cutting its hourly manufacturing costs in half. CEO Rick Wagoner agreed to work for $1 a year. GM’s business is going down fast because consumers are already shying away from a potentially bankrupt company — which is part of GM’s argument for immediate funding.
Ford, which is in much better fiscal shape, asked for a standby credit line of $9 billion. The privately held Chrysler is going to need a $7 billion bridge loan, and it’s willing to give equity to the government.
Importantly, all three companies promised to make money by 2012, even in a worst-case scenario of selling just 12 million cars and light trucks annually — 4 million fewer than in 2007. The key is a revamped portfolio more heavily weighted to smaller cars and crossovers, as well as to hybrids and electrics that are far more efficient than the current fleet. That’s crucial because Detroit currently loses money making cars in North America. You see the problem.
Most of these plans were on the drawing board before the global financial collapse made the situation more dire. This, in essence, is a last-chance opportunity. If Congress provides cover, the Detroit Three can try to rescale their manufacturing capacity to their respective market shares — or even below. GM, for instance, has lost 7 market-share points, falling to 22%, in the past 10 years. It plans to slash costs by an additional $7 billion by 2012. “It’s all about survival,” says Van Conway of Conway MacKenzie & Dunleavy, a crisis-management and turnaround firm in Birmingham, Mich.
(See the 50 Worst Cars of All-Time here.)
(See TIME’s Pictures of the Week.)
Resizing the business will alter the number of nameplates that the Detroit Three market and the number of dealers that sell them. GM will sell or close Saturn. Pontiac and Saab could end up joining Oldsmobile and Plymouth in the hood-ornament graveyard because the cost of supporting a brand with a small market share doesn’t make sense, nor does maintaining a dealership network created for an era when Chevy and Buick could support separate distribution systems. GM plans to reduce its dealer count 27%, to 4,700. “Certainly, having seven or eight brands for 25% of the market is far more than you need,” says Ron Harbour, the partner in charge of consultancy Oliver Wyman’s North American automotive practice.
The Detroit Three, in fact, may have to shrink to two. Chrysler, which burned through $3 billion in cash in its last quarter and has $6.1 billion left, is looking for more partners like Nissan, which is already contracted to build a small car for the company. Chrysler’s owner — Cerberus Capital Management, a New York City private-equity firm — got a lemon when it bought 80% of the company from Daimler for $7.2 billion last year. A merger could be a way out.
End of an Era
No matter what congress or President Obama does, there is one aspect of the industry that is beyond rescue. The Detroit of the American Dream, the Benevolent Manufacturing State — the big-metal, Big Labor, big-brother, bigger-than-its-britches Detroit — is deader than Studebaker.
The Benevolent Manufacturing State was the self-funded, full-employment, womb-to-tomb society — for autoworkers, auto executives, their families and their communities — that Henry Ford began in 1914 when he hiked the prevailing $3-a-day wage to $5. “Fordism” outraged capitalists; Ford viewed it as a way to make cars affordable to working people. His people. The industry sputtered during the Depression, an era that gave rise to the unions, but was revived by wartime production as Detroit’s manufacturing capacity became a vital weapon in the Allies’ arsenal. Detroit reshaped America, spurring a great migration from the South with the prospect of fair employment for blacks.
The Benevolent Manufacturing State achieved its full glory in the postwar period, a largely supply-driven era when Detroit could sell almost everything it made and could afford to give the United Auto Workers (UAW) most of what it wanted. From Linden, N.J., to Lorain, Ohio, to Long Beach, Calif., to be an autoworker was to have it made; to be an auto executive was to have made it. Detroit, says John Plant, the thoughtful CEO of partsmaker TRW, was about more than just industry: “It’s the largest experiment of social re-engineering that any country has ever undertaken.”
The death throes of the Benevolent Manufacturing State, however, have been costly. GM alone has paid out $103 billion in pension and retiree-health-care costs over the past 15 years. “The legacy costs were designed in an era when people retired at 65 and died at 66. We weren’t wrong to give it to them 30 years ago. Now they retire early and live longer,” says Conway.
What is particularly ironic about the Big Three’s situation is that the companies are now as near to their long-sought goal of parity with the Japanese firms Honda and Toyota as they are to collapse. In the past couple of years, Detroit has closed the quality gap. Its cars are competitive on engines and drivetrains and fits and finishes. Some top-class products score well with car rater J.D. Power, such as the Cadillac CTS and Ford’s new F-150. “What exposes us to failure now is not our product lineup or business plan or our long-term strategy,” GM’s Wagoner told Congress. “What exposes us to failure now is the global financial crisis.”
Next year, workers at Ford plants will earn an average $53 an hour with benefits, the result of a breakthrough industry agreement worked out with the UAW in 2007. That’s close to the $49 an hour that workers at the transplants average and far below the $71 an hour with benefits that was the old UAW wage, and that was cited by Alabama Senator Richard Shelby as a reason to oppose any bailout. And the cost differential on enginemaking between Detroit and the transplants will narrow to a couple of dollars by 2011. “You want to just choke these guys [in Congress] and take them through the 60 plants that I’ve been through and see what I’ve seen,” says Harbour.
But timing is everything. So why did it take Detroit 30 years to catch up? “Either the crisis isn’t big enough or the vision isn’t persuasive enough,” says John MacDuffie, a manufacturing expert at the University of Pennsylvania’s Wharton School of Business. Instead, during those years, the domestic auto industry has been a slow leak, skidding from one restructuring to the next, chasing its declining market share as its costs have inflated.
How the Big Three Blew It
Of all Detroit’s failures — the failure to master small cars, failure to cut costs, failure to get tough with the UAW, failure to improve fuel efficiency — the failure to learn, says MacDuffie, is perhaps its worst sin.
Experts point to GM’s interaction with Toyota at the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, Calif., as emblematic of the industry’s learning disability. NUMMI was established in 1984 as a joint venture between the two companies, using GM’s plant, the Toyota production system and the UAW workers who were already there. The plant had been one of GM’s worst; the Toyota system made it one of GM’s best.
Detroiters made the pilgrimage to Fremont en masse to see the miracle of NUMMI. Some dismissed what should have become a model for the entire industry. True, the technology wasn’t that innovative. But Toyota had made the workforce integral to improving the system. Workers were not mere labor inputs. GM had no problem understanding the just-in-time inventory system Toyota used, but executing it required a buy-in from the shop floor so that everyone was dedicated to improvement. The Toyota system, says MacDuffie, “relies on contributions from employees. It feels vulnerable, but your willingness to be open to that vulnerability is what helps you make it work.” In the 1980s and part of the ’90s, the top-down culture of the Big Three could not absorb that kind of deep trust.
MIT senior lecturer Steven Spear, a lean-manufacturing specialist who has worked on production lines at both a Detroit Three and a Toyota plant, says the problem worsened over the years as products and manufacturing inevitably got more sophisticated. Merely upgrading a Toyota, he says, requires 300 man-years of engineering. No single manager can ever understand it. “Figuring out products, markets, customers, designs, systems — what’s inherent about anything complex is that it becomes impossible. You can’t design it perfectly,” he says. What matters, he argues, is swarming problems from every direction to create high-speed, low-cost discovery and learning. And when you extend that open approach to suppliers, the path to lower-cost, better-functioning parts becomes easier too.
Management in a Mess
Detroit’s corporate culture is obviously complicit in the industry’s deterioration, just as it was guilty of creating an unparalleled manufacturing system decades earlier. The Detroit approach has been plan-command-control, stemming from that original control freak, Henry Ford. At GM, a management hierarchy that had been created by GM’s master planner, Alfred P. Sloan, in the ’20s — GM’s first and most successful restructuring — was still functioning in the ’80s. Management’s job was to create the products, design the production system and provide solutions if there were problems. Everyone else followed orders.
Failing to cure themselves of the Not Invented Here disease, Detroit’s bosses resorted to Hail Mary attempts to fix what were long-term issues. “They were constantly looking at buy, sell, hire, fire, looking to be rescued from their predicament,” says Spear. On the buy side, GM CEO Roger Smith acquired Hughes Aircraft, EDS and a 50% stake in Saab. His successors bought the Hummer, 20% of Korea-owned Suzuki and 20% of Fiat with the obligation to buy it or pay to get rid of it. (The latter course was chosen, at a cost of $2 billion.)
Ford’s owners have always had a difficult relationship with the hired help. Henry Ford II fired everybody, says Noel Tichy, a professor at the University of Michigan’s business school — including Lee Iacocca. Jacques Nasser, named CEO in 1999 to reinvent Ford, bought Volvo and Land Rover to create a luxury portfolio; he saw Ford as more than an auto company and tried to overhaul the culture. He was ousted in 2001 by Bill Ford Jr. — great-grandson of Henry — who took back the wheel for a couple of years.
The price of halfway restructurings was steep. In 1985, GM aped Japan’s practice of building global cars — the idea was to share chassis and parts across brands, a strategy that made sense at the engineering level. At the consumer level, it was a disaster. Internal clashes for control removed imagination from design, resulting in look-alike Buicks, Oldsmobiles and Pontiacs. Sales declined; cue another restructuring. The Germans, who have their own auto culture, were no match for Chrysler after they bought the company in 1998. No wonder they gave it back.
Yet there were the occasional hits that demonstrated Detroit’s deep pedigree in engineering and design. Chrysler, desperately surviving on a government-guaranteed loan, created the minivan in 1984. That same year, it launched the first modern sport-utility vehicle, the Jeep Cherokee. Throughout it all, Detroit kept its dominance of the hugely important pickup-truck market — and does so to this day.
But overall, if you build the cars you can make rather than the cars the public truly desires, you have to price them that way and use rebates to move the metal off the lots. “They are building cars that they don’t want to build. They have to build them because they have a fixed cost structure to amortize,” says Nick Gidwani, a former auto-industry investment banker with Sankaty Advisors and now head of the startup auto-sales website CarZen. Particularly after the post-9/11 sales slump, Detroit got addicted to this strategy and used it to move plenty of SUVs.
The ensuing rise in gas prices and drop in sales underscored another weakness. Although gas-eating SUVs found a sweet spot in the U.S., for Detroit to assume a world in which gas prices would remain below $2 a gal. was asinine. In Europe, gas had long sold for more than $5 a gal., and tax policy ensured that it would stay there; the growing BRIC countries — Brazil, Russia, India, China — were driving up demand. Detroit’s response was to lobby furiously against increasing fuel-economy standards instead of building more-efficient SUVs.
What’s Next
The irony about being called on the carpet in Washington is that Detroit actually has a fairly clear idea of where it’s going. Ford, for instance, under the leadership of Alan Mulally, has rationalized the company, dumping Jaguar, Aston Martin, Land Rover and some of its stake in Mazda. Volvo may be next. “We have streamlined all of the brands to focus on Ford,” he says. Ford wants to be able to create small- and medium-size cars around the world from a single global blueprint. The initial product of the One Ford strategy is the much anticipated Fiesta. It was designed in Europe and is due to arrive in the U.S. in late 2009 substantially unchanged. “Ford can win market share in small cars again,” says Harbour. There’s also a new Fusion and a new Taurus, long overdue, and upgrades to other models. As part of its 2006 strategy, called “The Way Forward,” the company has already closed 17 plants and shucked 51,000 workers.
Chrysler is a bit of a mystery. CEO Robert Nardelli has been somewhat scant on details for new products other than announcing an electric-vehicle platform that has so far not impressed anybody. No one would be surprised if Cerberus, Chrysler’s owner, announced some kind of partnership or merger before the year is out.
As for GM, its current crop of autos, including the revived Malibu, is the strongest of the Detroit Three’s fleets in North America, but it is still truck-heavy. Globally, GM is expanding in Russia and China; it is a solid performer in Europe and South America. With the advent of the Chevy Volt in 2010, the company will be in a position to lead the industry into hybrid-electric and then fully electric vehicles. “There’s enough good product in the pipeline,” says MacDuffie. “Judged against the past, it’s really impressive.”
The most important issue is cutting Detroit’s output to an appropriate level. “What we would tell a client who went from 30% to 20% [share] and they say, ‘We’re modeling now at 20%,’ I’d say, ‘Let’s model it at 16%,’” says Conway. Scaling below capacity doesn’t mean you give up on 20% or even 22% share — you can add shifts, for instance, to boost output.
Reducing capacity could also go a long way toward solving Detroit’s revenue problem. Between Detroit and the transplants, there are around 17 million units of manufacturing capacity in the U.S. In 2007 vehicle sales hit 16 million, but about 2 million of those were driven by the combination of easy credit and discount pricing. In a normal economy, the true size of the business may be closer to 15 million units. The Detroit Three simply have to generate more revenue per car and, not incidentally, a profit. Right now, the revenue gap per car is $4,000 vs. Toyota.
The competition hasn’t stood still, of course. Japanese and German makers continue to improve their products, and the U.S. customers they have won over will be hard for the home team to get back. Even as the Big Three have closed the distance over manufacturing, drivetrain and other engineering issues, another has opened up. The transplants have moved on to the sensual: the quality of materials, the look and touch of dashboard knobs, the sound a door makes, the feel of seats. Craftsmanship is the new point of difference. “The Japanese have figured out, How do we reduce friction?” notes Gidwani. “Now they are going to have to catch them in a new area.”
The real catch, though, is whether American taxpayers are willing to give the Big Three the chance.
I wonder what Henry Ford would think if he were alive today. Here is this company that he spent a good part of his life getting up and running and now it is on the verge of going bankrupt and 3 million people may lose their jobs. It is absolutely ridiculous. How did we get to this place of greed where money is everything?
GM is spending 2 million dollars a month. A MONTH…and guess what they want to take out a loan from the taxpayers. We can’t blame Congress for being very leery about this proposed bill. What will happen if the big three don’t turn around for the better even after the bailout; where will we be then?
A merger could be a good possibility. When you think about it do we really need three separate companies making cars that are very similar in style and size? Jobs would be lost, but maybe the outcome would be better than if one, two or three of the companies went bankrupt.
When reading this article I was surprised to hear that the Benevolent Manufacturing State even exists (Ford). I knew that large corporations usually have some sort of benefit plan lined up for employees, but I never imagined it would be that big of a deal. I mean $103 billion in pension and retiree-health-care costs over the past 15 years; that money could save the industries now. I’m sure the plan was an excellent idea when Henry Ford came up with it, but times have changed and maybe the plan needs to be restructured.
I’m sure it is hard for these companies to make a profit when the European cars seem to dominate (considering they seem to be made better) the market.. If anything Americans should buy American cars just to keep our economy afloat and unemployment rates low.
In my opinion we should not bailout the big three. Maybe they need to come up with a better plan besides going 34 million dollars in debt. This could be the wakeup call that these companies need. I do realize this is an outsider’s perspective. I’m pretty sure if I was employed by GM, Chrysler and Ford I would feel a different way because I may be about to lose my job.
My favorite “worst car of all time” is the 1920 Briggs and Stratton Flyer because it looks like a bike [literally], not a car.
Connection: This article links perfectly to gross domestic product (GDP). GDP isn’t just about the money; it is about the number of people employed as well. Think of how the GDP will plummet if three million jobs are lost and the output of cars from the U.S. is no more (temporarily I’m sure). That outlook may make the word recession look like a cake walk.
We have all seen the commercials that auto industries put out claiming zero percent financing till 2000something, and that their car has improved gas mileage. Even though that is wonderful, people want more than 30 miles per gallon and a car that is remarkably cheap. The auto industries, in particular the Big Three, have not produced an extremely gas efficient car. They also have not learned that hybrids and electric cars are the way to go and that the price of these cars needs to be reduced. I find it odd that Chrysler only has an idea for an electric-vehicle when right now they need a strong idea if they want the funding. The auto industries spend so much through the mass media of television, radio, newspapers, magazines and the multiple communications of the internet that they forget that they need to first build a car that everyone would buy before spending the millions on advertising. Money seems to grow on trees for them, well, not at this moment, but “next year, workers at Ford plants will earn an average $53 an hour with benefits.” I think cutting pay instead of cutting jobs would be the better way to go. If Congress ends up giving the big three a chance, the economy may be better off, but inflation will be even greater.
NO CREDIT – Connection?
Just like the article said: people are more prone to buy foreign cars with better fuel efficiency. Why? They are far superior to American-made, and have been for awhile. I know this because I love my Honda and it’s awesome gas mileage.
I scoff at the big vehicles I see driving down the road and tend to imagine little tiny dinosaurs getting eaten up in that monstrous engine. Sometimes I think I can even hear them screaming for mercy. What a shame. Then I sit back in my seat and thank the car gods that I’m not the one paying the gas bill for it.
The Big Three have their own problems, though. It seems they’ve found themselves at the bottom of a large hole that they’ve dug for themselves due to their own stupidity and lack of realization of the times. Before they do anything else, they should stop digging. I think they’ve done this for the most part. They’ve stopped making horribly inefficient cars. Yay! Now all they need to do is get rid of all the cars they still have and produce more economically friendly ones. That would increase jobs and help our economy. They’ve kind of already done this with all of the Hybrids and the small cars running around the country. But they haven’t done it to the extent of inspiring any confidence in Americans. Else they’d have more people buying their product. And they wouldn’t be in the ridiculous state that they are in. But then again, that’s just wishful thinking.
I don’t know. Maybe this bailout would benefit our country. But then again, it could just have the same effect as the Wall Street bailout did. And then there are all the people that would rant and complain that our country is slowing being swallowed by the eerie blackness of socialism. But that might not be too inaccurate. History has shown an odd pattern of socialism in societies that were discontent with their governments. There’d be some sort of a revolution that would thrust the people into socialism or communism. All because they felt that the government was not taking care of their needs. Our country was worried about that during the Great Depression. Maybe, in the worse case scenario, that fate will befall us in this generation.
Though maybe not, too. Our national government seems to have plenty of money to spend bailing previously affluent companies out of disaster. Yet the mood of the people still remains callous. Hopefully they do not lose too much faith in the decisions of our government. Especially now that a new Democratic order is about to come to pass. There’s bound to be some economic response to Obama’s ascension. Our country can only hope anyway. Our economy is based on the faith of the people on the money they have. If they believe it’s worth is still present and spend it, our economy will be well again. If not, then we’ve really only one way to go. Sadly.
(Don’t worry, America! I’ve been doing my part to ensure economic stimulation. The pumpkin pies at Yokes are only four dollars, and I’ve bought my fair share. Though I really shouldn’t have.)
It’s just sad to see such despair in the auto industries of late. Only a while ago, they were booming. Now those days seem so distant, as they have been begging for money from a government that had just done the same thing earlier. People are skeptic. And the companies know this. They have all sorts of ideas for better cars, but if they lack the faith from the people, they won’t have the opportunity to unveil them. Only time will tell.
Connection: In class, we’ve discussed both the housing bailout and the car bailout. Though, until late, the housing one has taking a more pressing stand in our attentions. Now it seems we’ll have to be more attentive to the Big Three Bailout. It directly affects us and our money. We should be very cautious on how we throw it around this time. Also in class, we’ve discussed the reasons for the economic conditions. People are the main determiner of our rise and decline. If people spend more, then our economy will flourish and be well again. But if they repeat what happened just before the Great Depression, then that will only end terribly. So I say this to everyone, just as Kautzman has on several occasions: Go buy something! Anything really. With Christmas so close, perhaps people will help stimulate the economy by buying really pointless gifts. I know I already am on my way to doing that.
This article really makes me appreciate the irony of that Congress is serving up right now. Compared to the recent demands made of them, like a $700 billion bailout of Wall Street, that giving $34 billion to an industry that employs over two million Americans and provides a cornerstone to our economy would be assured. However, Congress is pulling this one out more than they did the Wall Street bailout. While it is true that it is Detroit’s fault it needs the bailout, it is too vital to the economy for us to let it fail. Here’s the thing that really makes me pause: Wall Street, when it was bailed out, could not present any firm plans for action, could not present a timetable as to when the investment might be profitable, while the Big Three have plans to fix the issues that made them fail, have timetables as to when it might be profitable, and have made more deals in order to get bailed out, such as the CEO’s agreeing to have their salaries cut to $1 for the year, that it just doesn’t make sense why Congress is so hesitant. Does the efficiency and well-thought out plans scare Congress or something? Are they freaking out because it is too reasonable and sensible? The first time they went to Congress, they were turned away because they flew in their private jets. What was up with that? Yes, the Big Three’s reluctance and bitter fighting over restructuring was their downfall. But now they realize they have to change, and they are a rather humble trio about it now. Bailing out the auto industry also makes more sense because, as Jon Stewart said on the December 4 episode of The Daily Show, that we can actually get a visible, touchable product with the auto industry, unlike Wall Street. Bailing the Big Three out should be a no-brainer decision.
Connection: Lobbying: The Big Three are lobbying Congress to get them the money they need to stay afloat in the market and keep from having to file bankruptcy. They also lobbied Congress earlier to stop fuel-efficiency standards from being passed during the SUV era.
I think that if the boys in Detroit can prove that they can get their acts together they should be given a chance. I do, however, believe that this chance should come with a lot of guidelines and a lot of timelines. Among these guidelines I believe that they should be required to have an even higher level of environmental responsibility. The new models of cars should have to meet an updated level of not only fuel efficiency but also should have to provide some idea for a new way to reduce emissions on top of what is already being done, it would also make it a stronger factor of competition between the companies that would lead to a higher level of environmental awareness and protection. Scream hippie, tree hugger, green freak all you want, environmental protection is by no means my first priority but I do think that something should be done. I also think that the companies should create a reformed production plan, that would be presented to congress prior to receiving the bailout funds; one that reduces and eventually eliminates production of the models that are not selling, there is no point to have that burden on the bailout by tax payers, and that optimizes production of the most popular, most fuel efficient and most cost effective to produce. I think that this will help to ease taxpayer’s minds about where their money is going. I also think that making this requirement will help to reduce the wasted funds within the big three. I also believe that certain timelines should be put in place for these new plans to be implemented. Something along the lines of increased fuel efficiency and reduction of emissions by 2011 and inventory the product lines with those on the chopping block gone by 2014. After these are agreed to, and only then, should the bailout begin, in my opinion.
While I do have some personal vested interest in this issue due to the fact that my dad is employed by Ford I think that I would feel the same way despite this.
Connection:
I think this situation is similar to the responsibly party model. When the party says it will do something it generally does for the sake of not being called out on it, and when a party does screw up and get called out for something they take some action to rectify the issue. I think that now the big three should take action similar to the way a political party would since they have been called out for their wastefulness and overproduction of unwanted cars; I think they should solve the problem by making some plan to resolve it and then enacting it in full, no matter how long it takes.
Phew! That was a lot to read but overall the main point is this: Our economy is struggling and our auto industry, especially The Detroit Three, is learning a hard lesson. In our day and age we have grossly succumbed to jealousy and greed and are constantly seeking prettier, bigger, and better cars compared to those of our neigbors. A guy behind the wheel of a big beasty truck sure thinks he’s a lot more macho than his “pal” with the little old beater. Sadly our pride and greed have caused the auto industry to give us what we’ve asked for. Hence, mass production of trucks and hummers and suvs…However, with the struggling economy we are suddenly all too eager to blame the auto industry, claiming that we are getting tired of them, and point fingers and question their tactics. However, I’m not saying that the auto industry isn’t to blame as well. Even though they’re saying that they are going to “slash the number of plants it runs, the number of brands it makes and the number of dealers who sell them,” it will be a long process in reconstructing the system. Additionally, the underlying problem was, according to John MacDuffie, the failure to learn. Instead of learning from past mistakes and lows, they have continued to be a failure in mastering small cars, cutting costs, getting tough with the UAW, improving fuel efficiency, and establishing a trustworthy relationship with their hired help. All in all, in order for the auto industry to succeed in the future, we need to keep our pride and jealousy in check and the auto industry needs to take some hints from its mistakes.
Connection: Our nation has become focued on high-tech politics, in which the behavior of citizens and policymakers and the political agenda itself are increasingly shaped by technology. Since the auto industry has become such a demanding item, it has ultimately shaped our policy agenda and we expect Obama to do something about it once he enters office.
In response to Johanna/Jonathan:
Cutting salaries instead of jobs is virtually impossible to do. When you raise salaries, you don’t cut them back down. We have unions that protect workers against that (UAW in this case). Even in our local Spokane government level, we’re having our own economic problems with massive budget cuts this year. There are plenty of people working in the Spokane County who are downright overpaid, but they’re not going to volunteer giving up their money, and unions wouldn’t allow that. Same goes for workers in the Big Three. Possibly, we should have been much tougher in negotiations with the UAW. As the article said, people aren’t retiring at 65 and dying at 66. It’s nothing that we can fix now, and I’m not going to ever advocate for taking away people’s guaranteed retirement packages. So, I have to agree with Jonathan. If Congress gives a $700 billion bailout to Wall Street, we can certainly afford to give $34 billion to our car industry. Especially because the Big Three have a plan, and many are merging or they creating partnerships. Our American auto industry has finally realized that they need to change. No more surpluses of SUV and other “gas-guzzlers”; Ford is changing to concentrate on small to medium sized cars and Chrysler is making way in electric/hybrid cars. For the sake our economy, let us hope that our auto industry pulls through.