Not much sympathy here for Detroit
The results are in from our highly unscientific poll on whether the government should try to rescue the Big Three, and it looks like our readership is strongly in favor of free-market Darwinism. OK, it was a very small sample -- a little less than 320 votes were cast -- and our blog's polls are so unscientific, some of my colleagues wish we'd refer to them by some other name. The most popular choices were "Do nothing" (99 votes) and "Allow failing automakers to file for bankruptcy and reorganize, but cover the cost of honoring their warranties to reduce damage to the brands" (90). That's 189, or 60%, in favor of letting the chips fall where they may.
On the other side, voters were pretty equally split between lending money with conditions (41) and rescuing Detroit without conditions (40). Only 19 liked the idea of nationalizing Detroit's retirement obligations. Collectively, these options drew 32% of the votes, with the remaining 8% falling into the "None of the above" bin.
There were plenty of thoughtful comments from voters, which you can read here. I was especially struck by this one from Don Goodwin:
Detroit has made great strides in quality and technology in this century and has cut their labor cost by 50% in the new contract as well as shifting the responsibility of the retiree medical obligation to the union starting in 2010. Detroit is on the verge of developing a new generation of renewable energy vehicles that can help propel the U.S. into this new technology. Our transplant motor vehicle industry conducts all such research overseas. The argument is more than a question about how best to create a new Great Depression for this century. It is also about the future economic stability of our country.
This is precisely what Washington is struggling with today. The current contracts with the UAW make up for some of the excesses of past years, offloading a lot of cost onto the union itself. Will that be enough? Do we just need to buy Detroit some time until the credit crunch eases and demand for cars revives? It's really hard to say. There are just too many variables. How long will the downturn will last? What will happen to gasoline prices over the next five years? Will climate-change regulations and "smart growth" efforts push more people out of cars and into mass transit? I tend to think that market forces will do a better job shaping the domestic auto industry than government officials could. And I'm especially troubled by the idea of a "car czar" ruling on automakers' restructuring plans. Do you really want someone in the government deciding how many brands GM should have, or how much of Ford's R&D budget should be devoted to battery technology? But as reader Goodwin put it, there's a lot at stake here.
AP Photo/David Zalubowski
We have lost ten million jobs since 1999. Can we remain an important country when we manufacture nothing? Financial services, commercial real estate, home building and sales and manufacturing are all in the tank. Where do we go from here? What will recover?
We will be forced to compete on a dollar for dollar basis with the hourly workers of the undeveloped countries. The American worker is on a path to peonage
Posted by: c. perry | November 17, 2008 at 08:17 PM
For 30 years "Detroit" has been losing money. Sure, they have plenty of "new technology" in the works, but they still have green light gas guzzlers that are beyond the brink of cancellation and will debut in the next model year or two. The price of petrol has gone down. But it's temporary. And the American public will no doubt buy these behemoths. But the hubris of "The Big Three" is their downfall. For 30 years they've lagged behind foreign automakers. Now it seems too little and too late for Detroit ask for another bailout. It's like Wimpy from Popeye asking for a hamburger every 5 seconds. How can the American taxpayer trust GM, Ford or Chrysler to really put whatever billions they are asking for to be used correctly. Right now, the cash is simply a bandage anyway. It doesn't address how these companies will re-organize their business. If not their mind-set. So let them file Chapter 11 and really re-organize their company. They will need to re-negotiate all their contracts again. And maybe they'll get it right. Their complaint that Americans won't buy a car from a company that went backrupt. They already are. We still fly on airlines that filed backruptcy. Chapter 11 does not mean extinction for the "Big Three." One or the other will rise from the ashes. But in all business, there are those that will fade away. We have no Hudsons, Packards, Studebakers, American Motors, and dozens of other automobile companies who's names are in the history book, and cars sitting in lonely museums or rusting somewhere in an abandoned barn in Iowa. Jobs are important for Americans. But jobs that are simply redundancies of the past are not the solution. If we cannot make cars, we make something else. Even now, many so-called domestic cars are assembled or parts made in other countries. Mexico for instance. The bottom line for GM or Ford is build (or buy) cheap and sell high. That goes for all companies. Walmart the worst example. America has been falsely lead down this road of a consumer economy. We produce nothing but buy buy buy. And mostly on credit. And credit is shot. If Detriot needs re-tooling, the entire country needs an overhaul.
Posted by: DaveT | November 17, 2008 at 11:19 PM