Auto bailout


I couldn’t tell you if the coming auto bailout is a good or bad thing for the rest of the country. But I know this: if we bail out the automobile industry but leave in place the screw-ups who have been running Detroit for the past two generations, we would be better off burning the money for fuel.

As long as I can remember Detroit management has provided best-in-field innovation. Unfortunately it hasn’t been in automobile engineering. Instead they have led the world in whining. In the 70’s and 80’s they built junk, garbage cars that fell apart in a few years. Rather than see this as a problem, they continued to engineer in “planned obsolescence” but were wildly successful in getting the US government to impose “voluntary” import quotas on Japanese auto makers. In other words, the American people wanted fuel efficient, reliable, good looking and maneuverable cars, and rather than attempt to provide them, the Big Three convinced the US government to shaft its citizens and make it harder to buy them from the companies willing to make them.

The list of US Automanufacturers whining and special pleading is a mile long, but here’s a few notable episodes:

– The “It Can’t Be Done” response to government mandated fuel efficiency and pollution control in the 70’s. Hysteria, outrage, fear mongering – Detroit generated these in mega-doses as they spelled out the consequences to the American Way of LIFE! ™ if these foolhardy laws weren’t repealed. Honda, on the other hand, came out of nowhere and simply met and then exceeded all the mandates. You remember Honda? The car company that has done very well in the past decade and is still doing well now that the economy is down and fuel prices are doubled what they were before? Oh, and by the way: Honda Accords are built in the USA by UAW workers.

– The “Health Care Costs Are Killing Us” mantra. They endlessly trumpet a $1500 per vehicle penalty they have because of benefit costs as compared to other makers. Of course a big part of this is health care costs, both for current and retired workers. So obviously Detroit is using some of it’s lobbying army to persuade Congress to get serious about universal coverage, right? Take the burden off companies and put it on government/private citizens as is done in every other country with a per capita income north of $5000? Nah, if they lobbied for that the execs might get kicked out of the “Serious Businessman’s Club”, so instead they move production to Mexico. There is one huge flaw with their argument though. If they could be profitable with another $1500 per car, why don’t they simply build cars people are willing to pay $1500 more for? Simplistic and naive? Just remember, there isn’t a category of car that US citizens aren’t willing to pay a $1500 premium for, if it is made by Honda or Toyota. From the smallest econobox to the fanciest luxury vehicle, people are willing to pay $1500, $2000, $5000, or even more for the corresponding Toyota or Honda as compared to the equivalent car from GM or Ford.

– And last but not least, the old “But No One Could Have Predicted This” moan. I guess when Global Warning skeptics occupy your top leadership positions, the idea that oil might one day reach a production peak sounds farcical. But the rest of the world was asking “when?” and planning for it.

So when GM, Ford and Chrysler come with their hands out, the Administration should make it clear nothing comes out until the board acts to solve the fundamental problem: idiots in charge.


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