Can the U.S. Auto Industry Be Saved?

Build to order should be the distinguishing specialty of the North American car industry, which is located in the heart of the world's greatest car market. You should be able to get the exact car you design on the Web within a week of placing your order. There's no way in the world that overseas manufacturers could compete with that.

Modern technology can translate a Web order to factory instructions easily. Computer assemblers like Dell have done that for a long time and even given spot incentives to people to order over-stocked rather than under-stocked components.

Dealer inventories will shrink down to one of each kind that you can test drive on your way to placing an order. Dealers would be able to deleverage their own balance sheets without the requirement to finance huge lots of new cars or the lots themselves (I’m not sure what we do with all the real estate along our state highways once it isn't full of new cars). Manufacturers won't have to carry finished product inventory either.

Since manufacturer and dealer costs go down, so will the price of cars. That means a triple decline in the amount of borrowed capital needed to keep the industry going – no factory finished product inventory, no floor plan financing, and less consumer financing for cheaper cars.

The manufacturers can protect the dealers who attract people for a test drive by compensating them for sales that happen a reasonable time after a test drive of the same car from their lot. Dealers, of course, would retain the aftermarket businesses of maintenance and repair and selling used cars.

Dealers for importers will be disadvantaged by still having to maintain huge inventories, stock a shipping channel, and not being able to deliver exactly the car the customer wants in any reasonable amount of time. Some people will still opt for imported cars, of course, and the foreign nameplates made here will be able to follow the domestic build to order strategy themselves

There is a danger that we will be called on to further bailout banks and GMAC if they lose their dealer financing business. Personally, I think we need cars more than banks. The economy gains in the long term when it manages to do business with less need for financing. The banking industry needs right sizing even more than the car industry, not that a space alien would be able to deduce that from the relative amount of bailout allocated to each… but I'm wandering.

Plan A suggests a workout rather than a bailout, the U.S. government should pre-order a green fleet and partially prepay to help with retooling.

Plan B is to let bankruptcy either eliminate or strengthen the weak players as it has in many other industries.

Disclosure: None

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you too will need to get a hair cut before your next job interview. As we are overrun by experts and are in need of real workers. Good luck may be you can get a senate seat


Senate seat for sale
December 14, 2008
A “No” vote on the loan package for Detroit’s Big Three was a chance for the GOP senators from the South who led the charge against the legislation to kill two birds with one stone. Not only could they strike a blow to the United Autoworkers, a traditional adversary, but they could also advance the economic interests of their own states. Unfortunately, these senators voted against the economic interests of their own country.

Foreign automakers have spent billions building plants in the states these senators represent. Should America’s automakers go down for the count, Americans would still need cars and foreign automakers would step in and spend additional billions building more plants in, you guessed it, the states of these very same GOP senators.

Christopher Hayes of The Nation magazine was interviewed on MSNBC’s Countdown with Keith Olbermann show last week and pointed out what he called “the worst-kept secret in Washington.” Hayes was referring to the glaring double standard that these Southern senators, Alabama’s Senator Richard Shelby in particular, have displayed.

“They’ve been throwing taxpayer dollars at Toyota for years in Alabama and no one raises a stink about that” Hayes said. In fact, as Olbermann noted, Alabama alone has given more in tax subsides per job to foreign automakers than Detroit was asking for in the bailout plan to save jobs at American companies.

The Big Three haven’t been competing against Toyota and Honda and Nissan; they’ve been competing against Japan. Unlike America, that nation actually has an industrial policy. While our government talked about the virtues of free trade, the Japanese government worked hand in glove with their automakers to help make them the world leaders.

Japan is aggressively trying to do with autos what they did with consumer electronics – undercut American manufacturers, drive them out of business and capture the American market. Japan heavily subsidizes their automakers, they fund their research, they manipulate their currency, and they erect trade barriers that make it virtually impossible for American automakers to export to their country. Think the fact that Pacific Rim nations buy up 80-percent of our government debt has something to do with keeping our government from enacting policies to level the playing field? The bank that holds your mortgage doesn't dance to your tune, you dance to the tune of the bank that holds your mortgage.

I don’t care what you’re manufacturing or if your CEO is Albert Einstein, if you are competing against a country that actually has universal health care, while you’re forced to add $1,200 to $1,500 to the cost to every unit you manufacture to cover your employees’ health care, you’re not going to be competitive. If your country doesn’t rebate the value added tax when you export your product while your competitor’s country does, not only will you be priced out of their market, your foreign competitor’s government subsidy will put them at a tremendous price advantage on your home turf.

Now, thanks to the likes of Senator Shelby, the Big Three are not only competing against Japan, they’re also forced to compete against their very own government.

The fact that nothing is made in America anymore is a familiar lament of Americans. But here’s what Americans don’t seem to get: what little is still being manufactured in America is increasingly being made in foreign-owned plants of foreign-owned companies.

I realize that there is a long history of sharecropping in the South, but I see no advantage to we Americans becoming sharecroppers in our own country.
Hey, Southerners: Detroit 3 helped you to survive

BY TOM WALSH
FREE PRESS COLUMNIST
When Hurricane Katrina slammed into Louisiana and Alabama on Aug. 29, 2005, the automobile companies of Detroit did not harrumph that the gulf coast should have been better prepared.
They didn't sit back and wait for New Orleans to submit a detailed plan for future repair of the ruptured levees.
General Motors Corp., on Aug. 30, donated $400,000 to the American Red Cross 2005 Hurricane Relief Fund, pledged to match up to $250,000 more in employee contributions, and sent more than 150 vehicles to the stricken area for use in relief work.
Ford Motor Co. and the UAW quickly made a joint donation of $100,000 to the Red Cross. The Chrysler Group gave $150,000 to the Red Cross and $200,000 to local New Orleans charities. DaimlerChrysler Services chipped in $200,000 for the Red Cross and pledged to match employee donations up to $50,000.
The three Detroit auto companies together gave more than $18 million in cash and vehicles to the Katrina relief effort in the ensuing months. No strings attached.
The U.S. Senate’s most adamant naysayers about whether Detroit deserves rescue loans should have thought about that before now. It might have made Thursday’s futile wrangling over a compromise to get $14 billion in emergency rescue loans for GM and Chrysler a bit less tortuous.
U.S. Sen. David Vitter, R-La., for one, might have dialed down his earlier rhetoric.
Vitter said Wednesday that he plans to vote against the rescue because, in his words, it is "ass-backwards" to give money to the distressed companies before Congress sees more detailed survival plans.
Sen. Richard Shelby, R-Ala., should think about Hurricane Katrina, too. He has threatened a filibuster against the bill, calling it "a bridge loan to nowhere" and stating that Detroit's automakers should undergo a fundamental restructuring before they ask Congress for money.
None of the logical arguments made by, or on behalf of, Detroit's auto industry seem to resonate with certain congressional critics.
Not the fact that GM, Ford and Chrysler have slashed billions of dollars in costs. Not the fact that they have the nation's top-selling pickups and minivans. Not the fact that they have lots of high-mileage vehicles and more on the way. Not the fact an auto company bankruptcy would have a horrible ripple effect, wiping out scores of suppliers and making hundreds of thousands more U.S. workers jobless.
No, to the most adamant auto-rescue opponents in the Senate, Detroit doesn't make cars people want. It's a dinosaur not worth preserving.
Could the opinions of these senators be colored by the fact that the foreign-owned plants of Toyota, Honda, Hyundai, Kia, BMW, Nissan and Volkswagen -- which compete with the Detroit Three -- are located in their states?
Nah, let's not even go there.
Let's just say that since logic hasn't worked, we should fall back on a simple moral argument.
If you see a fellow American is drowning, gasping for air, do you quiz him for a while about whether he's drunk or why he never learned to swim better? Or do you throw him a life buoy and ask questions later?
That, it seems to me, is where we are with America's car companies.
You have done nothing and failed them, senators.
So now it's up to President George W. Bush and Treasury Secretary Hank Paulson to, hopefully, rush in with emergency aid from the $700-billion Troubled Assets Relief Program.
They could still hold the Detroit Three's feet to the fire afterward, empowering a strong auto czar to bring all stakeholders together to forge business models for these companies that can withstand future shocks.

2008 Dec 15 07:48 AM

[woodsey:]

Right on, seat for sale. Thanks from old GM retiree.

2008 Dec 15 03:51 PM