You Won't Like Him When He's Asked for a Bailout

Will Bush Hulk Out with as-yet-undetected dedication to free markets and limited government, or give in with a giveaway, if struggling automakers beg him for a Chrysler-style bailout? Our mysterious president merely says: "I would hope I wouldn't be asked to make that decision."

Comments

[Tim Cavanaugh]

Why are they asking for a bailout anyway, when they just set a monthly record for factory orders?

[russ 2000]

Those were the American factories of the foreign automakers.

[biologist]

it might not be ideologically correct, but if Iacocca's autobiography is factually correct, at least Chrysler paid the government back

[John]

Biologist,

They did pay the government back and it was a small bailout. What saved Crysler was the fact that the UAW was willing to work with them and cut labor costs. Currently the UAW would rather burn the entire American auto industry down rather than take a pay or benifit cut. As it was put yesterday in the WSJ, "auto workers of America unite, you have only your jobs to loose."

[wellfellow]

John,

Stop it! Just stop it! There's no elephant in this room!

[MP]

Currently the UAW would rather burn the entire American auto industry down rather than take a pay or benifit cut.

The UAW knows that only Reagan had a backbone. Uncle Sam will bail them out.

[Pirate Jo]

Hey Tim and Russ, maybe you can help me understand something. I have no idea how many thousands of Americans are employed by various automakers. But if Honda or Toyota are selling more cars in America than Chevy or Ford, but have factories in America - employing Americans - to make them, then why should we care from a jobs perspective? Okay, the CEOs of Ford and Chevy might care, and they are probably friends with a lot of politicians. But I'm just your average pirate who can stick my 401K money in Honda or Toyota stocks just as easily as GM, and I can just as easily go to work for Honda or Toyota as GM. Why is this a huge deal?

And another question. How do those Honda and Toyota factories in America compare with GM as far as compensation and benefits?

[mediageek]

"I would hope I wouldn't be asked to make that decision."

Because we all know that Bush can't say "no."

[Jeff]

Most of the foreign factories are in southern "right to work" states (like BMW in my old home state of South Carolina), and so they do not have union issues. That being said, their compensation and benefits are much higher than the local average for non-professional jobs (the starting wage at the SC BMW plant a few years back was something like $18/hour + benefits, very high for that area, and I assume higher still these days).

I think most of what GM and Ford makes is total crap, so it does not much surprise me that they are suffering. As for the intransigent unions, the fact of the matter is they could cave in to management demands, and Ford and GM would be right back here in a few years bitching about the intransigent unions again. Management made their deals with their workers, and if they are choking on them now, so be it.

[Pirate Jo]

To clarify what I posted a minute ago, I am obviously not an expert on the auto industry. But I am assuming that part of the reason American automakers are hurting is that people are buying foreign cars instead? Or are auto sales down overall?

*Assuming* that it's because people are buying foreign cars instead of American ones, I keep hearing that one reason for this is that the employment costs of union workers are driving the cost of American cars up to the point where (in relation to their quality) it makes more sense to buy a foreign car. It doesn't sound like a bad argument, at first. I hear horror stories about lazy union employees who demand big bucks despite the fact that their skills are not in high demand relative to their supply. How they can't get fired, and how their pension costs - of people who aren't even working there anymore, let alone contributing to the company's bottom line - are bankrupting their former employers.

But here's the thing - if those workers lost their jobs and went down the street to work in the Honda factory, how big of a cut in pay or benefits would they really take? How similar are those companies with regard to what they offer? And certainly payroll expense can't be the only variable.

[wellfellow]

"And another question. How do those Honda and Toyota factories in America compare with GM as far as compensation and benefits? "

Not even close.

[DaveInBigD]

Mediageek, the exception that proves the rule is "no" to disclosing any kind of information about his administration's activities.

Has anybody thought to lay at least some of the blame on Bush's steel protectionism driving up US production costs?

I realize that that doesn't make up for the fact that I don't want to buy Ford, GM, or Chrysler cars, but its still worth stiring the 'protectionism has real consequences' pot once in a while.

[wellfellow]

"I hear horror stories about lazy union employees who demand big bucks despite the fact that their skills are not in high demand relative to their supply. How they can't get fired, and how their pension costs - of people who aren't even working there anymore, let alone contributing to the company's bottom line - are bankrupting their former employers."

You have no idea. Imagine the most absurd caricature of that as you can, multiply times ten and you're in the ballpark.

[rafuzo]

The UAW knows that only Reagan had a backbone. Uncle Sam will bail them out.

Papa don't take no mess.

[Anjin-San]

Fuck 'em--I drive a Honda, anyway.

[Pirate Jo]

Thanks, Jeff, and I agree with you about American cars. The fleet manager for the company I work for replaced our entire fleet of cars with Toyotas and Hondas. He found that you could get an extra year out of them, put another 30,000 miles on them, spend less on repairs during the time you owned them, and still get more money out of them when you traded them in.

That is also interesting, what you say about management. While I think a lot of complaints about unions are valid, I can also see management using them as a convenient scapegoat. I think American automakers have survived for as long as they have because they have powerful bedfellows within the government and because a lot of older people have a romanticized ideal about buying American cars.

(Of course I'm just a heathen, disloyal Gen X'er who wants to buy the best quality car for the money. How un-American of me.) 😉

[thoreau]

Could Detroit's problems have anything to do with a business model that relies on revenue from replacement parts?

There's a reason why I ditched my Saturn for a Honda.

[thoreau]

(And I'm aware that my Saturn was made in TN, not Detroit. Still an American car.)

[Swillfredo Pareto]

Whether George W. Bush bails them out now or not, we are all going to be greased up and penetrated Se7en-style once these companies start handing their pension obligations over to the the Pension Benefit Guarantee Corp. That damage is already done, the liabilities have already been incurred. But while we are at it, let's make sure the FDIC deposit insurance limit is increased.

[Jeff]

I really don't think in the context of the automobile industry that present pay and benefits differ THAT much between union and non-union shops, particularly when you account for cost of living differences between relatively rural areas of the south and relatively urban areas of the north (although there is a difference for sure). I think the really big killer for the American companies are the legacy costs from past workers-- guaranteed pensions, lifelong medical, and the like. And for my money, this is the hardest area to square, because those workers worked under the promise that they would have those benefits-- it was a contract, after all. And when the automakers eventually screw those past workers by going into bankruptcy, they will screw all of us too (when those people get part of their benefits paid out of the government guarantee fund and look to Medicare and SS for the rest).

So much of this goes back to the 50's and 60's, when American car companies thought they were kicking ass because they were so good, when in fact they were kicking ass because Europe and Japan were still rather rubble-ized.

[R C Dean]

But here's the thing - if those workers lost their jobs and went down the street to work in the Honda factory, how big of a cut in pay or benefits would they really take?

They couldn't go down the street; they'd have to move across the country. The pay cut would be pretty substantial, I beieve, although naturally there isn't any public data on this.

And certainly payroll expense can't be the only variable.

I'm told that what's really killing Detroit isn't so much the rich comp packages, its the work rules and union interference in company operation.

[John]

I have always good luck with American cars and actually American cars are now rated ahead of European brands and only slightly behind Japanese cars for reliability. A lot people had bad experiences with American cars in the 1980s and don't realized how much they have improved. That said, I won't buy a Japanese car because most of them are boxy and ugly. I don't care if they do run for 250,000 miles, with a few exceptions, like the RX8, they all look like Accords to me, but there are few cars made in the last 30 years I like anyway.

I have only one question for all of the union defenders. If the UAW is really looking out for the best long-term interests of its workers, why has it failed so miserably in unionizing workers at foreign owned plants in this country? Why aren't American employees of BMW and Toyota lining up to get on the UAW side?

[Pirate Jo]

"And for my money, this is the hardest area to square, because those workers worked under the promise that they would have those benefits-- it was a contract, after all. And when the automakers eventually screw those past workers by going into bankruptcy, they will screw all of us too (when those people get part of their benefits paid out of the government guarantee fund and look to Medicare and SS for the rest)."

I agree - it was a contract, and the company should have invested money back then and created an asset base to back up their future obligations. (Isn't that a law, by the way?)

However, the government should not be bailing these people out. Bankruptcy is an unfortunate thing, but it's been around for a long time, and mopping up those spills isn't Uncle Sam's job. Sometimes housing markets go bust, sometimes companies lay off lots of workers, sometimes the stock market plunges, and sometimes your former employer can't fund its pension anymore. The fact is, you just can't get blood out of a turnip. Your best bet is to live within your means and don't put all your eggs in one basket. And even THEN there is no guarantee that you will be able to quit working at a certain age. An unpleasant truth, but there it is.

[wellfellow]

"American cars are now rated ahead of European brands and only slightly behind Japanese cars for reliability. A lot people had bad experiences with American cars in the 1980s and don't realized how much they have improved."

That's exactly true.

The RX8 is a Ford product, BTW. Also, the Pontiac Vibe and the Toyota Matrix are the same car with different bodies. There are a lot of old prejudices about American vs. Japanese car quality that are obsolete.

[thoreau]

Pirate Jo-

Unions as they stand now, with legal protections, may not warm the hearts of libertarians. But here's an idea somewhere between every-worker-for-himself and unions as they exist now. I suspect that because it doesn't fit into either niche nobody will like it...

There are companies that make a decent profit by aggregating low-skill labor. These companies frequently offer janitors, food service workers, rent-a-cops, etc. They charge the client overhead on top of the wage, so they effectively get more money per worker than the client would pay if he did his own hiring. But they offer also save the client some overhead by performing HR duties and other things that the client would have to do if the client did the hiring.

So, what if one of these service companies were employee-owned? The employees, as shareholders, would elect the Board of Directors, just as in any other corporation, but also in the same way that unions elect their leadership. And they could put profits into dividends, padding their low salaries.

It wouldn't pay as much as union work, especially not in the legendary heydays of unions. But they'd make more money than they would if they had to compete on their own, since they'd have the advantage of size when bargaining, and they'd receive dividends.

I'm guessing that nobody here will like this model, regardless of their ideological persuasion. So be it. Just a thought.

As far as Detroit, maybe they'd find a way to solve their pension problems if they made cars that people want to buy.

[Pirate Jo]

Actually, thoreau, I think that sounds like a great idea! They would have to be cost-effective - do all the background checks, etc. that a company's H.R. department normally does. Maybe even have their own health insurance? That would save their clients a bundle, not having to provide that. If they started charging too much, their clients would just go back to hiring people out of the paper.

Very interesting idea.

[thoreau]

Pirate Jo-

These companies already do those things. Most rent a cops work for some company other than the one they're guarding. And it makes sense from another perspective as well: If a company only needs 1 guard, they're up a creek if he gets sick. They put that problem on somebody else. So some other company hires lots of guards. A lot of the clients only need a handful of guards, and then some of their clients only need a guard sporadically. They hire slightly more guards than their clients need, and as needs fluctuate they either pay overtime or cut hours slightly. If one guy gets sick another guy gets overtime, or a part-timer gets extra hours, or something. It's a way to allocate resources where they're needed when they're needed.

Similar things are done with janitorial work and some food service. And lots of other service industries.

I don't know how one of these companies would transition to employee ownership, and I'm certainly not advocating any coercive measures to bring that about. I'm just saying that an employee-owned service company might be the capitalist equivalent of a union.

[Jeff]

Well, growing up in the south, the whole union thing has always been a little alien to me. But in libertarian terms, I don't know if there is anything "wrong" with people organizing and getting what they can get, so long as it is privately done. Obviously, like most things, unions in practice became corrupt and in many respects counter-productive for their own members, but I don't have a problem with them in theory.

And John, I don't count myself among UAW defenders, but I would say that the legal environment and culture in the south (where most of the newer and foreign plants are) is very anti-union. I have no idea how hard the UAW has tried, but they would have quite a battle if they did. Obviously, the original unionists had a hard fight too, but then desperation makes people, well, desperate. When the natural course of things actually kills off the existing unions (whose leaders are still fat), you may see that push to unionize more in right to work states. But I dunno.

[John (the IT guy)]

"I agree - it was a contract, and the company should have invested money back then and created an asset base to back up their future obligations. (Isn't that a law, by the way?)"

I had a finance professor whilst completing my MBA that took us through a recent 10k filing of GM's. (def: 10k is required quarterly by the SEC and includes a balance sheet, income statement and cash flow)

As it happens, GM had about $10 billion in pension liabilities and $60 billion in expected health care liabilities. IIRC, they had about $10 billion in assets to meet these. So, the pensions, ie the 'contract' is funded to the extent of the law. It's the health care they problems with.

My prof then informed the class that GM was in no way unique in this area and that many of the Fortune 500 are in the same boat. He then said that that fact is why many of them support some form of universal health care.

[Rimfax]

I won't buy a Japanese car because most of them are boxy and ugly.

I don't want to bust your balls too badly, but I strongly disagree about relative aesthetics.

Ford and GM range from conservative to comically ugly, with some modest success with a couple of retro designs, namely the new Mustang and GM's cruiser wagon thing. Chrysler has some exceptionally interesting styling, but most of their success is a reliance on retro and their quality is still a dead end.

For real boxy and ugly cars, Europe is still the winner. Aside from Rover, all of the SUVs look like jacked up minivans. Volvos have more lines than they used to thanks to some liberal copying from Honda and Mercedes. Even BMWs pretty much look only slightly morphed from the late 70s. The most interesting designs are, again with the retro, the retro Minis.

Japan luxury cars still borrowed heavily from Mercedes, but below the luxury line you can't find more interesting and radical designs than the new Nissans. Nissans are still not qualitatively Hondas or Toyotas, but they are every bit as good as Ford and GM.

For not boxy, not ugly, and not remotely uninteresting, there's Toyota's Matrix, the Scion compact, and the Scion coupe. The bonus there is that you have a Toyota under the hood.

The Honda Element and the Scion wagon may be boxy and ugly, but at least they are neither conservative nor retro nor subtle morphs from last decade nor anywhere near as ugly as the Pontiac Amazon.

[xpanda]

A friend of mine works for GM Canada and he claims that the cost of pensions alone is equal to $1200 USD per car.

Another friend of mine works for a non-union Toyota plant and he tells me the wages on the floor are roughly the same as their unionised counterparts.

Now, this is in Ontario, where Toyota plants, GM plants and Ford plants are all within a one-hour drive of each other, making competition for employees very real, which could be the reason for non-discrepant wages.

[MP]

The bonus there is that you have a Toyota under the hood.

My Corolla has 176K miles on it, I've had it for 11 years, and it still gets 36mpg highway. Detroit has yet to make a compact car that is close to comparable. They'll be buried under the weight of their own declining SUV sales.

[Rimfax]

thoreau,

I think that you've nailed a little bit of the future there. Essentially, you're talking about a co-op or a nonprofit that supplies services. It wouldn't be a profit enterprise because there wouldn't be anything left over, unless there was some sort of rainy day cash buffering built into the business model.

I think that this is one thing that libertarians need to think more about. We are all a bit polluted by the Randian ideal of the profit bearing enterprise as the ultimate virtue. A lot of industries, especially the kinds of ones that we'd like to see spawn from a shrinking government purview, might be better served by nonprofit businesses.

[wellfellow]

Rimfax,

You couldn't be more wrong:

"For real boxy and ugly cars, Europe is still the winner."

Audi/Volkswagen cars are some of the handsomest designs on the market. Superb attention to detail, refined proportions, excellent fit and finish, the whole bit.

Saab, which is really GM, has really nice designs.

The Mini interior is ghastly.

The Toyota Matrix is ugly as hell. The lines are lazy, the proportion is cumbersome.

The Ford F150 is the most attractive truck on the market, perhaps you don't like trucks, though.

Rover and Volvo are Ford, BTW.

The Nissan Quest and Armada are about as ugly as you get, except for the Aztek, which still holds the title as ugliest car ever. Ever.

Scion wagon looks great, the Honda Elephant is horrid.

"subtle morphs from last decade" I think BMW calls that brand equity...

[crimethink]

You mean the Pontiac Aztek, right?

[wellfellow]

Yup.

[SY]

Sorry guys, not even close. The World's Ugliest Car has to be the Smart. Every time I see one, I expect about 50 clowns to come pouring out.

[Pirate Jo]

"I think that this is one thing that libertarians need to think more about. We are all a bit polluted by the Randian ideal of the profit bearing enterprise as the ultimate virtue."

Hi Rimfax, I agree this is an idea worth thinking more about. But if I'm not mistaken, Thoreau's co-op type of idea would be profit driven, just not so much at the corporate level. Since it would be employee-owned, the profits would simply be passed down to its employees/owners. So someone making eight bucks an hour as a security guard could pad his income nicely with ownership dividends. I think it sounds great.

It would also give employees a lot of motivation to keep the company profitable - pretty much the opposite of what Ig just described. There would be no conflict between "what's good for the company" versus "what's good for me."

[happyjuggler0]

Detroit's problem is that it is paying much more for its labor pay/benefits than foreign auto makers that operate in the US. The solution? Pay them the same as the foreigners pay their American workers.

The only crisis is the lack of a backbone on the part of Detroit's management. No one is forcing them to pay more than the competition. Therefore, even if you actually beleive the concept of a bailout makes sense in theory, in practice these morons don't deserve even the thought of a bailout. They can fix their problems on their own if they really wanted to.

Another thing, regardless of whether or not you think a bailout is wrong in general, it can only make sense if it will work. Just exactly how will giving cash toa company that is bleeding cash help? They need to turn around their problems. Iacocca at least understood this much, and persuaded his employees of this fact. These jerks just want to suck money away from the rest of us.

They can solve their problems on their own now. If they don't care to do so, then only a moron would even think of trying to bail them out. Which is probably why we the taxpayers will get royally screwed here...our politicians and mainstream media are morons.

[Happy Jack]

Have to agree with Jeff. Looks like there isn't a great deal of difference in productivity, quality, and pay. Most of the Big 3's problems are legacy costs. Link

[Pro Libertate]

Boxy like the Honda/Acura NSX?

I've owned two cars--an '85 Accord and a '95 Accord. Both ran (one still running, of course) very well, and they were far more reliable from what I've seen than comparably priced American cars. Though the first one was built in Canada and the second in Ohio. I seriously doubt we've completely closed the quality gap, though the situation has gotten better.

[loli]

And in the midst of all this, the mayor of the necropolis of Flint wants a local-government-owned assembly plant...
The I-75 corridor in Michigan is probably among the best areas for UAW-entitlement-think to flourish. There were kids in my class even in elementary school who were stunned and a little disgusted at the sight of my parents' 1988 Jetta. Nobody in our town had a foreign car, and things haven't changed much. When they sold the car to my boyfriend in 2003 for the cost of a new battery, his dad reacted the same way.

Also: everybody in town drives a fucking Aztek. Take that for what it's worth.

[dpotts]

I think that design is a real issue when it comes to the auto market. Admittedly, just yesterday there was a report about how much better US autos have gotten in terms of quality, but they really are butt ugly. Even the most boring cars out of Japan (Accord, Lexus, etc) at least have clean lines and well laid out controls. Seriously, look at the average Accord on the road today and then look over in the other lane at the Taurus next to it. Two boring cars, but which one is sexier? Also, why do US manufacturers insist on making the interiors of their autos feel like a rubber room? The new G6 is a great looking car, but the interior feels absolutely cheap; tons of low grade plastic.

[Ig]

Amen Happyjuggler0, You support my case with superlative brevity and better manners! I, employed by a supplier to the big 3 as well as the Asian brands, am too close to be unemotional about the matter.

Those of us in the industry know allowing the inevitable to occurr will be painful for some or even most of us. But the eventual outcome would be better products and a REAL market. This was evidenced by the complete trouncing the Asian Mfrs. gave the big 3 in the late eighties. And although the US cars are often not as good as the ToyoHonNissans now, there is no comparison to how bad they were in the eighties... K car?
Chevy Citation? Junk all! I know, I used to repair them.

Another problem is that the Big 3 has been propping up a false economy for years now by nearly giving cars away (0% interest etc..) solely to facilitate producing more. Thereby not idling factories where they have contractual obligations to pay UAW workers even if REAL demand would warrant those factories closure.

[Karen Cox]

Just to finish the last bit:

The dealer takes the consumer's trade when the contract is signed and sends the consumer home in the new car. The consumer has signed all the purchase docs, plus a "contingent delivery agreement," making the actual sale effective only if the dealer can place the consumer with a lender. This doesn't happen. Meanwhile, dealer sells consumer's vehicle. Consumer wants to back out when financing falls through because he can't make the higher payments. Dealer then says his trade is gone. Dealer repos the new vehicle.

[dead_elvis]

The Honda Element and the Scion wagon may be boxy and ugly,

I had a thought a little whlie ago- the guy who lost his job (at least should have, in a just world) over the design of the Pontiac Aztec must be absolutely pissed that the Element and the xB seem to be hits.

[dead_elvis]

"I would hope I wouldn't be asked to make that decision."

Take notes, aspiring leaders- that's real leadership!

[Bob Smith]

An employee-owned service business might work, but there's one big problem: the owners often continue to act like employees. They still have an adversarial relationship with the new management, and basically bankrupt the company by voting themselves unsustainable levels of wages and benefits.

[wellfellow]

Dpotts,

"Also, why do US manufacturers insist on making the interiors of their autos feel like a rubber room?"

It comes down to cost, company/purchasing infrastructure and supplier base. Mostly cost. In other words, it isn't the designers' intent.

[Ed]

The first time I saw an Aztec I laughed out loud. I was sure it was some kind of joke and I looked around for the camera crew. There was no crew. It was an actual car/van/truck/thing! I moved a bit closer to the thing and examined the markings, expecting to find an Eastern European heritage. It said Pontiac, and for a moment I was embarrassed to be an American.

[Solitudinarian]

I had never heard of the Pontiac Aztec until today.

I have just seen a picture of one.

I share your embarrassment, Ed.

[Pro Libertate]

Isn't an expenditure of funds at that level a Congressional decision? I can't keep up with the federal structure, anymore, so the heck if I know 🙂

One thing I've noticed about Honda is that they don't change parts or features in their cars as frequently or as arbitrarily as American automakers do. If the engine works, stick with it. If the odometer is peachy keen, why change it? I'm not saying that they don't tinker with new models at all, but the Japanese make major model changes far less frequently than their U.S. counterparts do. I think a big part of this problem stems from the U.S. penchant for allowing advertisers and marketers to completely control product development. Gotta change everything all the time. Whether it works or not.

[Krusty]

Hey, kids! Here's what I think about cars!

Can you name the truck with four-wheel drive,
Smells like a steak and seats thirty-five!

Canyonero...
Canyonerooo!

Well, it goes real slow with the hammer down,
it's the country-fried truck endorsed by a clown!

Canyonero...
Canyonerooo!
(Krusty)Hey hey!

The federal highway commision has ruled the Canyonero unsafe for highway or city driving.

Canyonerooo!

Twelve yards long, two lanes wide,
sixty-five tons of American pride!

Canyonero...
Canyonerooo!

Top o' the line in utility sports,
unexplained fires are a matter for the courts!

Canyonero...
Canyonerooo!

She blinds everybody with her super-high beams,
she's a squirrel-squashin', deer-smackin', drivin' machine!

Canyonero...
Canyonerooo!
Yah!

Yah, Canyonero!
Yah!

Whoa, Canyonero!
Whoa!

[Jeff]

I agree that the quality gap between American and Asian cars has been narrowed considerably, as it has been between Korean cars (Hyundai in particular with their latest generation cars) and Japanese cars, but it really is the interior where you still see the problems-- horrible plastics, cheap-looking wood-esque trim, Fisher-Price radio controls.

[keith]

Thank you for that informative post, Karen Cox!

There are a couple of notable majority-employee-owned organizations:

UPS "over half is employee owned": http://www.usnews.com/usnews/biztech/articles/040126/26eeups_3.htm

I can't find a website to prove it, but it's my vague memory that the SuperFresh chain was carved out of the A&P system in 1982 in part as a union-takeover concession.

Another thought: since health care is the killer hidden cost in pensions; and heath care and educational services have had consistently higher cost increases over inflation or other COLA measures, what is a valid 1:1 hedge against these costs for pension managers? A portfolio of pharma companies kind of fits, until one of the pharmas tanks hard on a bad drug. Hospital operating companies don't make profit. There must be a solid hedge available for these costs, and I can't devise what it should be.

[ChrisO]

I don't think that improving Lemon Law performance by the Big 3 tells much about the real quality difference between "American" and "foreign" cars (scare quotes because lots of Chevys are built in Canada and lots of Toyotas in the USA). The reason why GM and Ford sales are in free fall is obvious to anyone who has gone new-car shopping recently, as I have. Every GM, Ford, and Chrysler I tried out looked, felt, and drove cheap and tacky. Clearly inferior in every area. Every Japanese car I tried out (except for a Mitsubishi) was solid as hell and seemed thoroughly designed and thought-out. We ended up buying a Scion. The funniest comparison was the Ford Focus versus the Mazda 3. The two cars are (AFAIK) based on the same platform and use the same engine. But the Mazda was a killer little car, while the Focus just screamed 'economy car'. I don't think that dealer monopolies had anything to do with that.

By the way, interesting notion about subsidies for the foreign makers. Does it apply to their U.S. plants, as well? And it still doesn't explain why GM and Ford seem unable to design cutting-edge vehicles or turn out quality workmanship.

[joshua corning]

They pay vehicle inventory tax on vehicle sales, meaning no tax consequences to what stays put. Another perverse incentive, but as far as I know, only in Texas.

yeah cuz we should tax them for the cars they don't sell...that would make a more sense.

[slingshot]

Karen there are so many inaccuracies in your item.
GM did buy Daewoo!( its cars are sold in Europe as Chrevrolets!)
Honda has two competing vehicle lines Acura and Honda, and in Japan itself there are many more, eg Mitsubishi and MMC.
The reason why the financing arms of Ford and Gm make the money is because the manufacturing arm sells its cars AT COST to the finace arm for lease deals. This is merely more tax efficient as they can avoid US taxes by using offshore funding through tax havens for the finance business.

[Dar]

I see it as the Unions being the reason as well as the automakers fault.

Unions and their employees demand what they consider fair market value for their work by threatening strikes and continually asking for more and more benefits etc. The automakers cave into the demands and then have more overhead which is passed on to the consumer. The consumer however is working on fair market value principles when making a purchase. Thus if you pay people more than they are truly worth to perform a job function than you have to add that cost into the final product which makes it cost more than it is worth. This is where the market and the manufacturer/union part ways.

When employees are able to demand a certain wage and benefit regardless of market conditions the market will not stretch to meet it on its own. When the price demanded for the product is to high compared to other products of arguably better quality from other makers you will slowly lose business. People will only spend money on brand loyalty for so long before the financial implications of continuing to do so make them switch loyalty.

Employees able to demand a certain wage forces business to demand a certain price and that is not how the market works.

The automakers are to blame for allowing this to happen time and again. They are also to blame for trying to cover to many markets instead of focusing on just one and doing it well. The competition by all makers to make all types of vehicles doesn't help them produce good quality products just more medicore products at always rising prices.

Now the ultimate question for the unions will be where do your people go to work making that kind of money now? Who will pay them what they expect when they must have done a crappie job for their last employer since they are now of business. Seems like it would be hard to justify continuing to get those pay rates when your track record is one of failure. Who do they think they are the Federal Government 😉