Why I'm shedding few tears for Detroit

A few people over on Twitter have wondered why I do not seem overly sympathetic to the plight of two-thirds of Detroit's car makers. Let me say at the outset, that I am extremely concerned for the millions of workers who theoretically could be laid off before this whole thing shakes out. I am also aware of the serious impact to the world's economic well-being. Already traumatized, the collapse of GM & Chrysler could be the most devastating body blow of a series of body blows.

Let me also say that I have relationships with people at GM and Ford they are good people. I believe them to be truthful overall. Although, I have to scratch my head because I visited GM & Ford earlier this year and met with more than 20 representatives of these companies. On after another sang me a song of a magnificent and imminent comeback. They showed me new designs and advanced applications of collaborative computing and virtual reality technologies that looked like they were reducing time to market of better, safer, more fuel efficient cars. In fact, one of them in jovial fashion, leaned over to me as we walked down a hallway and half-jokingly advised me, "if you have any spare cash laying around, this would be a great time to buy some of our stock."

Well it happened that this year I have not had any spare cash laying around. As a matter of fact, most people I know do not have any spare cash laying around and earlier this year, when Hank Paulson took a hefty chunk of our tax dollars and started to spread it around financial institutions in a haphazard and mysterious fashion, it inspired some of the most frugal thinking I and my fellow countrymen have expressed in about 75 or 80 years.

The bravado I heard in Detroit of February was gone. Now, Detroit's management and union leadership was in a panic. Suddenly, we were told, the end was near. If they could not get $15, billion--aw Hell, make that $35 billion, we are going to tank and millions of people in the world will be out of work.

All this tended to piss me and a lot of other people off, but that did not get me to oppose the package. When the head of the UAW termed a temporary pay reduction to $49 an hour "unacceptable," I wondered just who that was unacceptable and if he really did prefer the $0 an hour that the other side of his mouth said was coming. But that also did not stop me from opposing the bailout.

What got me to oppose it was that these guys, sitting before our Congress were the very guys who got us into this mess and they were proposing to be the guys we financed to get us out of it. They had no plan, displayed no vision and demonstrated the same lack of leadership that are at the nexus of the problem we are in.

Let's talk about that issue as well. My last American car was a 1974 Ford Mustang, a beautiful little car whose gear shift came off in my hand at about 42000 miles. My dealer's response was that I should buy a new car. He was right. I have been driving Japanese cars ever since. Most older Americans I know who drive foreign cars have some story of what an American manufacturer or dealer did at some point in the past 40 years to put them into other cars. We raised our children to believe that value and safety could be found more easily in cars made elsewhere. There is a mountain of data to back that up.

Not only did Detroit make the mess they are in, but they have had more than four decades to turn it around. They have an awful record in safety, value, environmental responsibility, credibility and more.

Still, I would have supported the bail out. What stopped me is that I saw and heard no evidence that the people glaring at Congress had any sense of their enormous contribution to the mess we are in and I had no sense that they would step aside and let newer, fresher thinkers replace them to drive our failing auto industry in a new direction.

Comments

[dean guadagni]

Shel,

I am with you all the way! My last American car was a 1971 Pontiac Firebird. I bought the car in high school with 27k miles and 3 yrs later sold it.

The planned obsolescence of Detroit was evident in the fact that I replaced the alternator 9 times, radiator at 30k, brakes and water pump twice, and I can't remember how many thermostats.

I drove Japanese and now German. No matter how much change Detroit makes, I would never invest American again.

[Gerry Corbett]

Shel:

Well said and very good points, though very sad state of affairs. Perhaps now will be the wakeup call that works. Who knows. My last American car was a 1962 Studebaker Lark convertible, nicknamed the "Road Toad."

[Darryl Siry]

Shel,

Accountability is important, but I think you also need to acknowledge the extraordinary circumstances in the auto market globally in these last 4 months. Since August, the annual sales rate of automobiles in the US has plummeted 40% from about 16MM units to 10MM units. In a high fixed cost manufacturing industry, I'm not sure any set of managers could have navigated such a severe and rapid downturn.

It is still a valid question whether the US Government (i.e. taxpayers) should bailout this industry. I am very dubious that these bailouts do anything but defer the inevitable. Still, I think that there are an awful lot of people saying "throw the bums out" without really understanding the situation well.

[Elliott Ng]

I agree with your sentiment. But I think everything you just said about the auto industry also applies toward the banking industry. Those guys were no less repentant--just a bit more connected--and with potentially more threatening consequences of default.

The biggest thing that concerns me is that this shows that we (unions, companies, governments, voters) in the US are not equipped to face reality in a hard way. I think we are still in the Denial stage and will stay there for a bit longer. I can't help but feel like a more centralized response--perhaps by first educating the country on the situation we are in--would help us get to the Acceptance stage earlier.

One of my best cars I ever owned was a 1996 Saturn Wagon. I'd love to support GM and Saturn again but they just don't have what I would want to buy. So I went out and bought a great car that I absolutely love: Toyota Prius, made in Japan. I think its the best car we've ever owned! Hope Toyota can start manufacturing Prius'es and other hybrids here in the US.

[shel Israel]

Elliott, you raise a good point and I don't disagree. The financial guys had the advantage.of coming first. Actually they didn't even come. Henry Paulson came and convinced us to trust him with $750 b of our money. His performance since then inspires my cynical view of Detroit's leadership.

[Robert Scoble]

I agree with you that they have done so many things wrong and have stopped innovating. The fact that we won't have a Chevy Volt until 2010 is a demonstration of that.

But, I should say, that I've owned a couple of American cars recently. A Ford Focus and now a Saturn Aura.

I love the Saturn Aura. I also have a BMW and it's a better car, but cost noticeably more so I'd expect it to be a lot better.

That said I've put 30,000 miles on my Aura so far and it is quite an impressive car and has had no problems at all.

The American car companies have been building crappy cars, though. Everytime I rent one I'm disappointed. That keeps their brand in the toilet.

Anyway, I'm bummed out because all these workers will be on the dole and we'll have to pay for them to do nothing instead of working building cars.

No good answers here. I sure wish things were different.

Happy holidays!

[Wendy]

Great points Shel. As much as I feel for everyone downline in the industry impacted by this, I'm having a hard time finding reasons to support it when it doesn't appear they are doing whatever it takes to turn it all around... most importantly a change in leadership.

[Douglas Karr]

I still don't understand why we don't simply take that money and pay the workers way through education programs that would re-educate them for high-paying jobs in the technology sector. We invented cars, we built them... it was profitable at one time, it was fun... let's move on. I don't remember a bailout of the computer industry when all of our hardware started being built cheaper overseas.