Bust-Up, Not Bailout 32 comments
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'Bust-up, not bailout' should be our rallying cry. Once upon a time busting up big companies was a populist movement. It's time for that movement to rise up again. Not so much to rid our society of monopolies, but to rid our society of financial minefields that are 'too big to fail'. I read a quote on twitter yesterday that said 'too big to fail means too big to exist'.
And yet the government's answer to our problems is to push for more consolidation. It's nutty. Scale and complexity are the enemy of innovation and what ails most of the large businesses in this country, auto in particular, is a structural lack of innovation in the industry architecture.
It takes something like five years to get a new car designed and built in most large auto companies. That's too long. I realize that designing and building a new car platform is not like hacking up a new web app. But five years? C'mon! We have to do better than that.
And we need to completely neuter the auto industry's ability to lobby our government to stop important initiatives like clean/alt+energy and mass transit. It's borderline criminal what the auto industry's political efforts have done to our global competitive position right now.
The same is true of the financial services business, the airline business, electric utilities, and a host of other industries.
I am sympathetic to the argument that we cannot allow the entire supply chain of the auto industry to fail and I am certainly aware of how many plants will close and jobs will be lost if we let General Motors (GM), Chrysler, and Ford (F) fail. It's a tough call and Obama has already staked out a pro bailout auto position.
So I hope someone from his incoming team reads this and the conversations on this topic that went on via twitter yesterday. If we give taxpayer money to the auto business, it should be to finance a wholesale bust-up of the business. One PE firm should buy Volt. Another should buy Buick. A third should buy Jeep. A fourth should buy Lincoln. And if a brand can't find a buyer at any price with a boatload of taxpayer money behind it, then it should fail.
This is the best way out of this mess. We have to get the biggest businesses in this country smaller and nimbler, we have to get smart money behind them, builders not spreadsheet pushers, and we must focus on innovation, not lobbying. That's the only way forward that makes sense short of throwing them all under the bus and starting over.
Disclosure: None
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This article has 32 comments:
Design lead times are also impacted by government regulations and validation requirements...nothing to do with the automotive companies and size.
Brands have common components and are built in the same factories for economies of scale and can't be spun off in the manner stated. This isn't just the Big 3 -- Honda/Acura, Toyota/Lexus, etc.
This article is just journalistic drivel.
some of this stuff these finance types write about manufacturing boggles the mind. You can't make this stuff up. LOL
Where do you guys come from? Your articles are dangerous and will harm the society.
Please stop writing and stay in a closet.
On Nov 12 09:14 AM Your kiddin right wrote:
> Busting up the auto companies will do nothing to decrease the auto
> lobbies it will just make them stronger. And yea it takes 5 years
> because it takes that long to design and integrate a million individual
> components into this thing we call a car. How long does it take microsoft
> to write a new operating system ?? Current automobiles carry onboard
> software and computer programming that almost rivals the windows
> operating system. Everyday I am stunned by the publics ignorance
> that this is a blender they drive around. The technology today rivals
> that that put us on the moon by a long shot.
On Nov 12 11:13 AM TB3 wrote:
> I agree with tired of your bs. The writers (I can't call them analysts
> as they constantly demonstrate that they have done little or nothing
> to understand what it takes to run an auto company nor do they have
> a grasp of what the auto makers are doing today to recover from their
> current financial crisis) would be better off writing about McDonalds
> or Starbucks, companies whose complexities they might be able to
> get their minds around.
But 5 years to develop a car? Wake up.
On Nov 12 12:00 PM kotika98 wrote:
> also, dont forget, bankruptcy does not mean closing the doors forever.
> At least it didnt have to mean that, if they did it a year or two
> ago. Most likely GM would continue like before the next day after
> bankruptcy, only that their pension, healthcare and other obligations
> would be wiped out allowing for a fresh start.
Now the EPA is pondering pedestrian-friendly flattened facias, so that impacts from hitting a streetwalker spread the load out. A lower nose has been in testing for every car for better coefficient of drag & mileage. Now manufacturers may have to retool TWO different noses for every model, and every model with every engine & transmission combination will be crash-tested in each country by the IIHS and HTSA (or equivalent.) If you want to know why it takes ten years, ask your Congressman.
Your idea would be perfect if every single federal agency and Congress were placed on a 20-year moratorium on regulatory changes.
The only thing that needs to be busted up is some politician's nose... Maybe a striking union worker could do it, just for something to do.
On the concept of cause and effect, here's a piece of brain exercise - pull out a pencil and piece of paper, and using fourth grade arithmetic, calculate the health care and retirement costs incurred by Volkswagen, Porsche, BMW, and Daimler-Benz as compared to General Motors and Ford.
If you can perform carries (used in addition), and borrows (a technique used in subtraction), you can see that the numbers are large.
By the way, also about unions, my moniker is accurate, but I was once, for about a decade, a blue collar member of the IAM/AFL-CIO. And here is an irrefutable, incontrovertible fact - that union was the only reason that I, and my co-workers, were treated by white collar management with some modicum of respect.
I neglected to state one of the foundational facts on which I sat to launch my harangue.
Germany and Japan each have very, very powerful labor unions.
1) Govt will bailout the big 3, both for political reasons and because the cost of the bailout will be partially offset by the taxes expected to be received from the workers over the next few years. The big 3 will then use the funds to lay off tens of thousands and continue their relocation to non-union areas like Russia, Mexico, and China, as well as funding mergers. Toyota, Nissan, Honda, and VW will then rightly sue the govt. for showing such favoratism and win billions more. Perhaps Mississippi and Texas should sue Michigan if Toyota pulls out.
2) Cars of the future will be cheaper, as financing will be more expensive, the dollar will be in decline, and consumers will be tapped. No more $40k SUV's and leather-trimmed F-350 4x4's to commute to work. More like the Toyota Yaris, Honda Fit, and Ford Fiesta. Then the Chinese cars arrive...
3) 10,000 Chevy Volts will be sold at a loss to collectors for $45k each as a marketing gimmick. Then we will all talk about the next big thing, which is more likely to be a Chery than a Chevy.
4) Interest rates on government debt and mortgages will approach levels that used to be attributed to junk bonds, as dollar devaluation increases the costs of borrowing.
5) The development of light rail in big cities will still not occur despite all the costs from automaker bailouts, petroleum dependence and oil wars, auto accidents, pollution, auto depreciation, auto insurance, auto maintainance and repairs, and auto financing that are such an obvious drag on our economy. After all, we have to make work by keeping our inefficient transportation system, right?
6) The costs of the national debt will continue to be paid in the form of inflation, currency instability, and recurring financial crisis. After all, taxes are unpopular and hurt growth, right?
7) We will continue to pay twice as much for healthcare and face 15% medical inflation every year rather than moving to cheaper single-payer systems found in most other advanced economies. After all, we have to keep all those insurance salespeople, plan administrators, and lawyers employed, right? Otherwise we might owe them a bailout!
Are you a 'public defender' by chance? No? Why not?
and before you accuse someone of lacking 4th grade arithmetic skills, can YOU perform the said 4th grade skills for us?
I'd like to see your math sir/ma'am.
FURTHERMORE if you were only treated with respect due to your affiliation with union, then maybe you should have either demanded it yourself! Or... leave your 'crummy' employer!
its funny, you love your job, but hate the employer (due to lack of respect?) therefore leaving you no option... (like get a new job) but to organize an entire group of 'like-minded' victims.
sounds a lot like the liberals in this world!
to join a union is to guarantee yourself no distinction from the person next to you... sad
The Detroit Three need a more level playing field when it comes to trade fairness, healthcare/pension costs, currency manipulation. That's a big part of it, but their management should share some of the blame too. To let them fail would hurt our economy immensely and it would reduce our national security and platform from which to develop alternative energy technologies since much of what we use is for transportation.
I think I should write articles for this site since I have real automotive experience. You can get a taste here...
realitydriven.com
Atul H. Patel
i love these bitter 2-3 comment ex-auto industry turned economic policy experts
you and your unions are at the heart of this! refute my post!
I'd love to hear you defend you stance of...
biting the hand that fed your children....
all in the name of unions.
How's that healthcare and pension look now?
It is sad and I don't rejoice in the failing of these companies, but don't give me your 'holier than thou' spill
it's time to take the training will off the motorcycle!
just as social security was supposed to be temporary back in 1930's
not to be a hypocrite, but if union members were so concerned with worker's rights... why still support Chinese products manufactured in sweat shops!
unions were established for political gain... worker's rights was merely a by-product.
Wal-Mart is doing pretty well without them
-Then why are we driving around in gasoline cars that have not fundamentally changed since the 30's? Take away the drive train innovations and you are left with the same internal combustion engine.
The writer is dead on. The big 3 have stymied innovation in the electric car repeatedly, gas mileage hasn't moved in 20 years and we are at war in Iraq just to get more gas into our cars.
You are right it takes 5 years to make an internal combustion car - but not to make and design an electric one. Try Telsa. Try 2.
On Nov 12 09:14 AM Your kiddin right wrote:
> Busting up the auto companies will do nothing to decrease the auto
> lobbies it will just make them stronger. And yea it takes 5 years
> because it takes that long to design and integrate a million individual
> components into this thing we call a car. How long does it take microsoft
> to write a new operating system ?? Current automobiles carry onboard
> software and computer programming that almost rivals the windows
> operating system. Everyday I am stunned by the publics ignorance
> that this is a blender they drive around. The technology today rivals
> that that put us on the moon by a long shot.
Tesla has yet to deliver real cars in any significant amount Period!! They are also on the cusp of failing and its been 3 years. So whats the hold up its just batteries and an electric motor. Hell they don't even make the shell its a lotus with different body panels.
I may be a day late, but I'm not short any dollars.
This thread is in the bit dust now, but I'll respond to your anguish anyway.
First, for the off-topic part, I am not a public defender.
Second, for the substance. Let's view it as a lesson in argument. Mr. No-Union stated a conclusion, which is that unions are a significant cause of the demise of the US auto industry. Mr. No-Union submitted one, and only one fact as, according to him anyway, support his conclusion. The fact he submitted is that unions exist. He submitted nothing showing how the unions caused the demise. I'll assume he meant to say that union demands for higher wages, better retirement, and better healthcare drove the US automakers' costs so high that they folded. I saw that Mr. No Unions' argument was not a logical argument. It was a statement of emotional position. In the forum of logical argument statements of emotional position do not exist.
There are various tools for tossing such statements.
One is to demonstrate that it is such a statement, and let the forum deal with it as it sees fit.
I chose that tool and, reaching into the toolbox, used the technique of disproving the other side's (Mr. No Union's) hypothesis (Unions cause demise) by submitting counter examples (Germany and Japan have unions, but their auto industry is not in a state of demise.) The counter-examples I chose are so well-recognized that I did not need to state any further proof of their truth.
The burden then shifted to Mr. No Union (or anyone else out there) to submit facts showing: (i) my counterexamples of Germany and Japan were invalid or (ii) that the unions in the US had some deleterious effect on GM, Ford and Chrysler in the US that German unions have not had on VW, BMW and Daimler in Germany.
Neither Mr. No Union nor anyone else out there submitted any such facts.
Note, regarding the second type of counter-example that I identified, that I put into my initial argument a fact that, if someone had submitted such facts ( i.e., facts showing that the unions in the US had some deleterious effect on GM, Ford and Chrysler in the US that German unions have not had on VW, BMW and Daimler in Germany) laid a foundation for me to show that such a statement would, in effect, be a statement that the lack of socialized medicine in the US was a direct cause of the fall of GM.
Think about this Mr. No Dozer, and reply with a logical response, having facts in support.
The corpses of the Big-3 have been picked dry.. they are just a rack of bones by now. You filthy criminal parasites know that you are the REAL reason that they are dying/dead. Your unadulterated GREED has drained the vitality out of the US car industry.
So now... you guys and gals are going to have to whine and cry awhile while you burn your unemployment, and then..
GET OFF YOUR BUTTS AND GET A REAL JOB
On Nov 12 11:11 AM a retired automotive engineer wrote:
> You're ignorance of the workings of the automotive industry is only
> exceeded by the amount of excrement that flows from the hollow space
> in your head where your brain should reside.
Oh dear! We can't articulate the central issues with class, so we revert to crude obscenities to lash out.
I can readily see why the Big-3 cars "engineered" by such as yourself are so compelling that masses of buyers will forever be queuing up at dealerships to buy.
hahahahaha! hehe HOHOHOHO hahahaha!!!
Tell us how the UAW wrecked the auto industry.
Present facts and present a defensible argument showing that the facts you present prove your point.
If you cite "cost per labor hour" to the US auto industry, show a reliable source for your numbers.
If you have numbers showing the labor cost of German and Japanese companies being lower than labor cost of US companies show a reliable basis for your numbers, with a breakdown.
I assert that the German and Japanese auto industries are in good shape.
I assert that labor unions in Germany, particularly those of auto workers, are very strong, and those in Japan are also strong
If you refute this, state your argument and cite facts that support your argument.
If you cannot do the above then change your moniker and try a new schtick in your pathetic attempt to play at being an intelligent, educated person.
On Nov 14 08:19 PM homer II wrote:
> UAW maggots!! I'm calling you all out !!
>
> The corpses of the Big-3 have been picked dry.. they are just a rack
> of bones by now. You filthy criminal parasites know that you are
> the REAL reason that they are dying/dead. Your unadulterated GREED
> has drained the vitality out of the US car industry.
>
> So now... you guys and gals are going to have to whine and cry awhile
> while you burn your unemployment, and then..
>
> GET OFF YOUR BUTTS AND GET A REAL JOB
are you a public defender? answer: NO
relevance, private money/firms pay based on performance... (free market)
NOT via Government salary (socialistic) public defender
I see you believe in free markets only when it leads to personal gain...
In this case of the US auto industry, I prefer to discuss the players in question as opposed to your 'case law' reference from an overseas market that plays by different rules!
we discuss GM in the US... and you go for a VW in Germany... you should represent your client (unions and the US auto industry) rather than jump to foreign markets.
You mentioned running 4th Grade math on some numbers... I asked you where they were?? NO ANSWER!
provide the court some evidence instead of rhetoric. The argument that "it works in Europe" sounds good, but... THIS ISN'T EUROPE.
this argument is why unions don't work HERE! not overseas...
the fact is, you and your industry is sinking, not mine...
so, you hold onto your 'it works in europe' argument... it won't pay your light bill
again.. why must unions exist?
why can't the auto industry perform without them?
these are elementary questions that I await to hear you address in your attorney diatribe.
the burden of proof, sir, is on you and your industry... you know, the one looking for tax payer money!!!!
fyi... I own a Ford and a Honda... so I'm equal opportunity here
The administration will create a financial entity to provide money for auto parts industry.