Time For Detroit to Reap What it Has Sewn

You've all ready about it, heard about and possibly discussed it. The big three U.S. automakers are asking for a bailout with our tax dollars.

Used as ammunition to get the money, GM for instance is falling back on the old saying "What's good for GM is good for America". But is that the truth?

Granted, the bankruptcy of such a major former blue chip company will ripple through the industry. Thousands of companies provide services or parts to GM, Ford and Chrysler. They really have no other markets.

The employees of those companies will lose their jobs, the money they would have spent won't go into the cash registers of many more thousands of businesses.

The fall of GM alone could cause the unemployment of over one million people on the United States.

So if we fail to bail out GM, they tell us that it'll be more expensive when we have to pay for their funeral.

Is that true?



What has happened to get Detroit to this point?

Thirty some years ago, the Arab Oil Embargo "caused" gasoline shortages. The American people flocked to the dealers to buy more fuel efficient cars. Since Detroit had nothing to offer, Toyota, Datsun (now known as Nissan), Volkswagon and even Honda suddenly had a new market.

Detroit continued to make large vehicles knowing that once prices went down, their market would return. But their lack of preparedness gave those other companies a strong beachhead in the U.S. market.

From the mid-70s through the 1980s foreign cars became more reliable, better built and became more and more acceptable to American buyers. Meanwhile, Detroit's offerings were going downhill. Some of the worst vehicles I ever had to work on or use were Chryslers and GM products of the 80s. Anybody remember the Chrysler K car? The Ford Fairmont? Or driving a 1978 Chevy pickup on the freeway and watching the front fenders flex and flap? I do.

In the past thirty years, Detroit has done little to plan ahead other than in how to gouge the buyer. Did you know that there are some current cars from the big three where to change the battery, a hole has to be cut in the wheel well? That's right, you can't just go to Sears or Pepboys, buy a battery, remove the cables from the old one, swap them out and reconnect. Need to replace the $5 oil pan gasket on your Northstar equipped Cadillac? Well, I'm sure the gasket is more than $5 but you get the idea. Anyway, you have to remove the engine!

Meanwhile, executive bonuses and pay are higher and higher, as are the wages of the workers on the factory floor. According to one of GM's statements, they plan on new hires (untrained workers) getting only $14 an hour instead of the current $29 an hour they get now.

That's right... fresh out of high school kids were hired at big three auto plants making 50% more than my wife made as a nurse with 40 years of experience.

Now what does Detroit want the money for? GM wants at least $10 Billion (yes billion) just to cover the pension fund, and another $10 Billion to fund designing more fuel efficient cars. They MIGHT even close some of their plants in Mexico and bring more of the manufacturing of American cars back to America. But there are no guarantees on that.

Compare that to Honda. They are opening several new plants in the U.S. this year and next. They've revamped all of their plants so that they can quickly switch manufacturing over to whatever the public wants to buy. Quickly being in the range of six months to a year, while the big three need three years lead time to switch.

Do you think that the Big Three have learned their lessons?

We taxpayers bailed out Chrysler once before. As a result, people who bought Chrysler stock cheap made millions over ten years. We taxpayers were paid back by Chrysler providing our government with those K cars. (What a deal) Now Chrysler is in the toilet again and wanting another bailout.

My firm belief is that any money we give Detroit will only put them on life support. At some point they are going to die anyway.

So it's pay for their funeral, or give them billions and then pay for the funeral anyway.

I say "screw them". They made their bed, yes people will suffer if they fold. But the suffering will be less in the long run if we pull the plug now.

Perhaps whomever buys the assets of a bankrupt Ford, Chrysler or GM will run things more efficiently. They could certainly use the Japanese companies as inspiration.

Auto bailout debate: What's at stake - Nov. 17, 2008: "NEW YORK (CNNMoney.com) -- For more than a century, the U.S. auto industry has been at the center of the American industrial economy. Events over the next month could determine if that remains the case.

This week, Congress will consider whether to cough up billions of dollars to bail out the troubled companies."

(Via CNN Money.)

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