A Friend Stopped By | 12/02/2008 8:30 am

Help Detroit! by Kate McLeod

By Kate McLeod

Editor’s Note: If you want someone who knows the automotive industry, look no further. For more than 20 years, Kate McLeod penned pieces for ForbesAuto.com, Motion, Houston Chronicle, Chief Executive and Autobytel.com. Her column, GirlDriver, USA, is syndicated in eight newspapers in upstate New York and with MotorMatters. As if that’s not enough, Ms. McLeod, who holds an MFA from Catholic University in Washington, DC, authored Beetlemania: The Story of the Car That Captured the Hearts of Millions, and is the former first vice president of the International Motor Press Association. With such insider’s knowledge, McLeod knows what she’s talking about when she suggests the American taxpayer offer a helping hand to the ailing auto business.

It is easy to list the lame decisions that brought Detroit to its knees.

We can name all the domestic cars that no one loved and even hated. (Who could forget the Pontiac Aztec?) Or how about those labor costs of around $70 an hour? And let’s add all those complaints about quality in the past — consumers have long memories. And while we love Detroit trucks and SUVs, foreign automakers walked off with the car business by producing smoother engines and better transmissions, not to mention sexier styling. So, it is no surprise that people don’t want to help Detroit. They got themselves into this mess; let them get themselves out or go down. No mercy. No taxpayer bailout.

True, they did this to themselves, but not entirely. Others can share the blame. So I say that we should help Detroit and give the American industry another chance. Here’s why:

Detroit didn’t cause the high gas prices, the subprime-mortgage mess or the stock-market collapse. All those led to the collapse of the auto business. Greedy Wall Streeters and bankers and a government that shut its eyes caused the problem. Detroit is paying the price for their mistakes.

Washington caused part of the problem by letting Japan manipulate its currency so it could sell cars cheap here. Foreigners have a hard time selling cars in Japan and there are no foreign factories. They kept us out and invaded here and Washington kept quiet about it.

To compete against Detroit’s old plants in the Midwest, taxpayers in southern states like Alabama, Mississippi, Tennessee, Kentucky and South Carolina subsidized to the tune of billions the building of those foreign plants — brand new plants. And don’t forget those southern states will help pay for training workers that auto companies hire, and make sure they get a break on taxes. That adds up.

We’ll have to spend a lot more than $25 billion in unemployment compensation, Medicaid and Medicare and retraining — not that retraining really works — and support to the states when the domestic industry shuts.

The auto industry is the heart of our manufacturing base. Do we really want to lose it? None of us want another war but just in case, do you really think Honda will build tanks for our boys as Detroit did? Go ask them!
"They didn’t build green cars," you say? Well, we wanted pickups and SUVS. It just so happens that we liked pickups and SUVs, and they are still the best-selling vehicles. Sure, Detroit should have built better-looking, better-performing and better-quality cars — but how can we blame them for selling us what we wanted? By the way, today’s Detroit cars are pretty good — from the Ford Mustang to the Chevy Malibu to the Chrysler minivan — still the best-selling minivan in the world.

You like technology? Detroit is spending billions to create new types of cars. The electric Volt from GM, the twin turbo sedans from Ford. But there are no miracles. It takes time. Who will do it if they don’t? Citibank?

76 Reader Comments (so far…) Sign In or Register to comment

this is the best article on this i’ve seen! very good…. I GET IT. And i think you just changed my mind. I’d been feeling like “let them sink” and let the market work it out. But this makes sense.

By Chrome Toe on 12/02/2008 8:47 am

e-mail alert

Ooh, I don’t know about this article and in particular the bullet points offered up by Kate of substantiating causes for the auto makers current demise. I could go point by point and offer up HUGE gapping lapses in logic for the reasons provided. Some are so off base I am left speechless that she would even present them. Another example I guess of how we see things differently. Although I agree they are not 100% to blame for the financial situation and their standing in the world as it relates to car sales, in my opinion they are 95% to blame. Almost all of the substantiating reasons Kate has provided are instead in my mind “excuses” and not true partial justifications for their failures.

By Belinda Joy on 12/02/2008 9:21 am

e-mail alert

I feel we need to help the american automakers. America business just continues to send our business out of the US and we, the US citizens, have no choice but to buy foreign items. It is extremely sad that everywhere you turn there is an article with “Made in China” or “Made in India”. Gees, we can’t even call American Express and get an American to speak to us! I for one, say STOP!!! I don’t think China or India will give us a hand out when needed. We need our car makers! The American Citizens who work in those factories need their jobs! I vote to save the 3 car makers and quickly!

By Lisa Martin on 12/05/2008 1:49 pm

e-mail alert

Agree, also, totally; lest she so easily forget the human suffering wrought by the Big 3 on thousands of auto workers (GM FLINT). They were well-paid for their efforts, from the top down, but it never filtered down to the consumers.

By C jay on 12/05/2008 5:04 pm

e-mail alert

Belinda, I did address this ridiculous, sentimental article point by point. I couldn’t let it pass unchallenged. • Nearly every industry I can think of is paying the price of high gas prices, the sub-prime-mortgage mess or the stock market collapse. Why should the auto industry get bailed out and not “my” industry? • “Washington” may have provided Japan with market advantages, but again, other industries suffer likewise due to policy decisions of this kind. What’s unfortunate for the auto industry holds true for thousands of other industries. You’re not being picked on, so stop whining. • Blame the taxpayers for “subsidizing” the auto industry in the South? The last time I checked, taxpayers have the right to vote for subsidies that favor their region. Too bad for Detroit. Good for the southern tax base and job seekers. Those “foreign” cars are still made in America by Americans. • Maybe “we” won’t have to spend more than $25 billion? (Am I understanding you right, Kate, are you saying Detroit’s going to only need $25 billion to get back on track. I don’t believe it, and nobody else does, either.) Just maybe, other – new and improved – automakers will be able to capitalize on those empty plants and available workforce to build a new breed of passenger vehicle. It happened to the closed down GM and Ford plants in my area over 25 years ago. Instead of the Big 3, it could be 24 smaller scale designers and manufacturers of electric, solar, or AIR-powered vehicles. It could happen, and with little or no retraining of misplaced assembly workers. • Some other company – perhaps a new, agile, better run one — will step up and build tanks for “our boys” if it represents a profit. So long as we have people who know how to design and build vehicles, I’m not too worried. • Detroit built products in response to market demand – or perhaps it created that demand on its own, no matter. This wouldn’t be the first time that market demand shifted or dropped out. Just ask other industries. It happens. That’s still no reason for me to bail out yours. Maybe GM needs to scale way down and regroup using their products that continue to sell. I believe it’s called a reorg, downsizing – or how about Chapter 11? Plenty of us who work in other industries have had personal experience with such a thing. No taxpayers stepped up and rescued our jobs. So you’re saying, Kate, that if a company is big enough, it should be immune to failure? That’s not how it works. Talk about not being fair … • You bet I like technology. Some of the fastest developments happen in technology. Miracles happen every day in the technology sector. Ever heard of an integrated circuit? Every year, it’s reinvented to be faster, designed to do what we need it to do. This computer that I’m using is a year-old, and it’s already been vastly improved – it’s case even made green! What has Detroit been doing since the tech boom of the 1970s? The mighty internal combustion engine has been a dinosaur for decades now, but Detroit didn’t bother to change with the times. Of course Citibank won’t build the miracle cars, but it can have a hand in financing their invention. • When the “home team goes down,” consumer demand will continue to determine prices, not “those foreigners.” Have you priced a toaster lately? My mother paid more for hers in 1960, when Sunbeam made it in America. • I can’t help but roll my eyes when you demonize “Wall Street” in order to make your all-American auto industry feel warmer and fuzzier. It doesn’t take much intellect to know you’re comparing Apples to Oranges, so don’t insult ours. • “They’ve got good stuff coming.” We’ve been hearing that for years, why should we believe you now. Too little, too late. • Don’t insult a soldier’s honor by telling me that the Big Three “won the Second World War.” They were the only gig around to do it, and made millions (billions?) off the government in the process. WWII was good for US automakers, not the other way around. And don’t play to my sentimentality by asking me to raise my hand in homage to a car that was built 50 years ago, was unsafe, polluted the air, and guzzled gas. I’m not going to give money to an enterprise that had its best days half a century ago. We “owe” Detroit nothing more than we do any industry that’s struggling because of change.

By Susan B on 12/03/2008 10:58 am

Susan, that’s laughable. It’s not about oweing Detroit anything. It’s about millions upon millions of jobs that will be lost if the auto industry collapses. Do you know that the majority of large companies’ pension plans are tied to the automotive industry? Do you realize the national-security implications if we no longer have the basis to build? The depression this would throw our country into? Auto-supply, auto dealers, steel industry, engineering, plastics…the list is incredibly exhaustive as to the industries - and people - that would suffer. Now, I get your point about the idiot CEO’s and decision-making in Motown that led to this mess. That’s all true. But let’s not take it out on average Americans. We’re spending $10 billion a month in Iraq to no good end (there will always be unrest in Iraq), but we can’t INVEST $34 billion to kick-start America’s alternative-energy and manufacturing injuries into the 21st century? Don’t you realize the millions of new jobs in scads of industries that will receive spin-off benefits from a retooled auto industry? This silly talk of Romney’s about letting the companies go bankrupt. How moronic. No one will buy a car built by a bankrupt automaker. Dealerships will fold. As for quality of cars, hello, J.D. Power & Associates ranks several American vehicles among the best in terms of quality. The AMERICAN auto industry has more cars with minimum 30-mile-per-gallon fuel efficiency than any other country. Wake up.

By James the Game on 12/05/2008 3:11 pm

e-mail alert

I hope I’m wrong, but I’m sticking by my opinion, James. I am skeptical that the Big 3 can truly be rescued and retooled with a single huge bailout (except for Chrysler, who is only seeking a line of credit.) I’m not close to the American auto industry, obviously. It’s not in my area of the country and I may be indeed registering hyperopic, but I also think many — including the author of this article and perhaps yourself — are myopic in the same way. The argument about no one buying cars from a bankrupt automaker feels shallow to me, considering nobody’s buying cars from them — or enough of them — now. And speaking of “taking it out on average Americans,” I’m opposed to giving these companies billions of average American taxpayer dollars. I am in favor of Chapter 11 for them. This is precisely what bankruptcy laws were created for. Under Ch. 11, they can continue to keep their doors open, and a forced reorganization (as opposed to a liquidation) will happen. Reorganization ensures business as usual and that assets remain for continued support of customers and channel partners. There are plenty of big companies who have done or are doing exactly this — United Airlines is one example — and people are continuing to buy their products. I realize plenty about the ramifications of the loss of an industry of this size, I assure you. And having personally experienced (and been the victim of) rampant market downturns, bankruptcies, reorganization and economic struggles in another major industry and region, I’m quite awake. It’s the American Automakers who’ve been asleep for the last 3 decades. And it is they who are to blame for the misery of millions with their failures, not a single person with a different perspective and opinion than yours.

By Susan B on 12/05/2008 6:12 pm

The credit crunch is what’s caused this emergency. People stopped buying cars when they no longer could get credit to pay for them. The Detroit Three have more cars with 30mpg+ fuel avg than any other. You can’t equate the auto industry to the airline industry, or any other, because when people stop buying vehicles, the whole industry spirals downward very quickly. No one will buy a vehicle from a company in bankruptcy; how can they be sure the warranty will be any good, or it will be serviced, etc? And it is absolutely people with a “different perspective” that have perpetuated this entire problem, from the idiotic statements by some on Capitol Hill - and in the media - that the autoworkers are hauling home an average of $40-$70 per hour. It’s $14. Also, countries like Japan and China underwrite and support full-force their auto industries, but not the United States. That’s why our auto companies are at such a competitive disadvantage.

By James the Game on 12/05/2008 10:00 pm

e-mail alert

You’re right, our auto companies are no longer able to manufacture products in this country. Offshore companies don’t provide the medical benefits, retirement packages and what American workers would call a “living wage” to erode their bottom line. And it is also true that the automobile industry in Japan is underwritten in a virtually socialistic tie to the government. We simply can’t compete with them. Will we ever be able to? James, when people stop buying ANY product, that industry spirals downward very quickly. The auto industry is not unique in that regard. The thing that distinguishes the auto industry from most others in this country is its great size, channel pervasiveness and employment legacy. Very few major industries, if any, remain in America where entire communities and multiple generations — grandfather to father to son to grandson/daughter — have staked their livelihood on a single employer over decades. Other industries with that kind of cultural model disappeared over the last 100 years. They were the textile mills in the Northeast and the steel mills in the “rust belt.” Our auto industry has been having a tough time competing with the Asian market for a number of decades, and now the terrible economy has delivered the final straw. Today on NPR, I heard a discussion of the future of the Big 3. It looks like, with or without the government’s help, these companies will have no choice but to eliminate brands that have been part of the American experience for a century. The Pontiac brand has traditionally been muscle cars, and now the plan is to scale back to build only one or two models that reflect that. Likewise for Chevy and their brand. This will also mean the demise/sale of Saturn. Dealerships will close, parts manufacturers will be making less product. All of this is very bad news for many people, but such is the economic climate we all live in. You must know that the auto industry isn’t the only one to be so adversely impacted. In November alone, this country lost 530,000 jobs. About a half a million people lost their livelihoods — and their health coverage — in a single month. We are all in similar pain, and some of us may never recover. We can hope that a leaner, meaner, smarter GM, Ford and Chrysler will rise out of these troubles. Isn’t there talk about GM and Chrysler merging? As for the employees and communities, it is a tragedy beyond expectation, and apparently, quick resolution. It’s easy to strike out and blame the media or the government, but it is misplaced blame. As a taxpayer, I would rather give that $35 million to the people who are going to lose everything, than to the employers who did too little to protect their future. (Actually, I would buy a vehicle from a Chapter 11 company if they offered a car I liked at a price I could afford.) You don’t think people worry about flying on United? But fly they do — if it’s the right flight at the right price.

By Susan B on 12/06/2008 2:49 am

Sooze, people’s options for flying are limited to just a handful of major airlines. They will fly, and the airlines will always have a customer base. But the Detroit Three have so much competition, customers can simply buy their cars elsewhere. If you bought a car from a company that’s filed for bankruptcy, where are you going to go to get it serviced? The “new” company will be so scaled-down, and almost all of the dealerships/service shops for America autos out of business, you won’t be able to. And there won’t be any auto parts in quick order, because the auto parts suppliers will have gone belly-up, as well. And the steel and manufacturing industries. And if you have a pension, kiss that goodbye, because almost every major company has its pension tied directly or indirectly to the Big Three. You are right, though, about Chapt. 11 because a bankruptcy, not a liquidation. But rather than going through all that rigormarole, wouldn’t it be easier to just have the UAW rework its 2007 contract with the Big Three, which it says it’s willing to do? In other words, everything that could be done through Chap-11 can be done without it - if government and the auto industry work together, ensure proper oversight and so forth. It’s much wiser not to throw millions of people out of work, and bankrupt or cripple scads of related industries, when you can rework the system. Now, I do share your concern that our fair leaders may be too incompetent to pull that off, and if that’s the point you’re making, I’d have to concede to your concerns.

By James the Game on 12/06/2008 2:27 pm

e-mail alert

My concern is handing billions in public funds over to private enterprise without sufficient guarantees that we’ll see it again — or effective oversight to ensure to “rework the system”. I have absolutely no faith in the auto industry’s ability to repair themselves. They are among the largest, longest-lived, and most powerful companies in America, and they have failed. Government shouldn’t be expected to know how to fix a broken business model, that’s not what they do and it’s not their responsibility. That’s what a business does. I’d like to see the automakers fully accountable to an outside committee of business experts — CEOs of successfully run companies like GE, for example — who have demonstrated they know how to craft a marketing plan and reinvent a business model to suit the changing times. Convince me that my money is in good hands, that’s what I need to know before I loan it away.

By Susan B on 12/06/2008 6:20 pm

Look at the background of the current Big Three CEO’s: all extremely successful, with prior experience running major corporations successfully. I think their one huge failure, though, was in public relations/marketing. A lot of people think American automobiles are junk, which they were years ago. But the Detroit companies are producing some of the best vehicles out there presently, and that’s backed up by independent surveys and studies by major firms like J.D. Power & Associates. But the image of the rust-belt junkers, like the Pinto, lingers. Also, labor costs have crippled the auto industry, compared to what other countries are paying their slave labor. That’s the case in manufacturing throughout - why Michigan has lost 400,000 manufacturing jobs in seven years. If our foreign trade “partners” won’t raise the level of pay & benefits for their workers, then we need to either stop doing business with them, or support our manufacturing firms here at home. $14-an-hour and scaled-back benefits is not exhorbitant pay for a hard-working auto-factory worker nowadays, in my opinion. Japan and China simply aren’t playing fair. But you’re right that the business model needs to be seriously reworked, and the auto industry focused on alternative-energy vehicles. Why they were still manufacturing all the large SUV’s when gas prices rose last spring is beyond me - probably because that was the only area where they’d been beating the foreign competitors the past few years. High-tech, alternative/green energy, biotech, life/health sciences: these are the areas where we must focus our efforts and money, in order to compete in the 21st century. This is where the jobs must be created, along with rebuilding this nation’s crumbling infrastructure. Wars no longer create jobs, as they did in WWII, etc., they kill jobs. Let’s scale back the military to essential areas of focus - Pakistan, Afghanistan - and withdraw troops from some of the dozens of foreign countries where our presence is not deemed a national-security priority.

By James the Game on 12/06/2008 7:20 pm

e-mail alert

James, you may be right in that we might need to “hunker down” and take care of our own for a bit before we resume trying to save the world. This is a tough prospect, though, because we have established ourselves as the “protectors of democracy” in a global sense, and even pulling back a little would incite the anger and resentment of the world. (Even more than it already has.) It’s a mess, no question. I’m assuming you live in or near Michigan. As someone who lives outside of that area, I can tell you that my opinion of today’s American autos is not so much “rust belt junkers” as diluted brand. They are trying to serve too many micomarkets in my opinion, building everything from big pickups to tiny “city cars” in an attempt to cover every market, but they forgot that the American car industry was built on distinct brands that no other offshore automaker could quite match. I’m thinking back to the 70’s, when the American car brand began to erode into an “imitation” of the Japanese models that were becoming so popular due to rising gasoline prices/”shortages.” I was the proud owner of a ‘68 Ford Mustang at that time — something unique among cars of the world and perfect for the times and the culture. As soon as Ford began building “crappy” cars to compete with the Japanese, they started digging their own grave. It’s like they lost sight of their niche, which every manufacturer in every industry must always stay focused upon. Perhaps the American automakers were blinded by greed and forgot who they “are” to the public. Remember the Honda car of the late 80s? Honda never lost sight of their brand and are true to it to this day. The American auto companies lost their focus and now they’re largely regarded as builders of excellent trucks, but not passenger cars. Since there’s nothing we can really do about the way the Asian automakers do business, we need to concentrate our efforts on what we CAN do to compete with them. As I asked before, can we? We have a standard of living in this country that demands a living wage. As for “playing fair,” they are only doing what they need and can to do to compete. There is no “playing fair” in a market-driven economy. Build a better mousetrap — at a good price — and the world will beat a path to your door. What Americans do best is innovate. That’s where we need to replace our focus.

By Susan B on 12/06/2008 9:34 pm

I have a 1973 Mercury Marquis with 44,000 original miles on it, in near-mint condition. The AM push-button radio sounds clearer and better than any AM radio you’ll hear anywhere today. In other words, the antennae or transistors or whatever for AM radio were better 35 years ago than today!!!!!!!!!!!!!!!!!!!! An amazing statement. You see, AM is all I listen to.

By James the Game on 12/06/2008 10:40 pm

e-mail alert

Nice article. If only more people felt this way. The amount in lost wages, retraining, taxes, etc will only be the tip of the iceberg should the Big Three go down. The US is in a recession…well a depression will be the result if we let the Big Three go done. By the way this is not a Bailout as it is referred to by so many in the media. This is a loan that they will pay back with interest. This is just good business sense. Great article keep them coming.

By Charlie F on 12/02/2008 9:58 am