Detroit: Three dead men walking

11-19-2008 |

Detroit’s corporate welfare bums want a $25 billion bailout. What they need is the ‘tough love’ of bankruptcy and a buyout

Panama Star Panama is only a few thousand of miles away from Detroit. Yet, its auto sales are light years ahead— up 15 percent for the first nine months of 2008— while Detroit struggles to keep losses below thirty percent.

The reasons for this difference are easy to see: Detroit makes bad cars that nobody wants, with Chrysler and GM heading the list. Detroit also makes expensive marketing goofs like GM selling the same car through three divisions (Tahoe, Yukon, Escalade), Chrysler, Ford, and GM backing away from leasing, instead of making realistic residual values, and all three manufacturers forcing dealers to order poor sellers if they want some ‘hot’ models. Neither does Detroit have any realistic business plan to make money, and instead, trots out the following myths to beg for handouts:

Automakers are losing billions because of “legacy costs” of retirement pay and health care for workers in Detroit. Not true. Other countries’ workers have pensions, too, although those pensions are more highly socialized than in the United States. But the cost of labor in a car or truck is barely more than a tenth of the price of an average vehicle (The average labor costs of a car or truck are slightly above $2,000, and an average car or truck costs about $24,000).

Detroit makes the best cars in the world. Wrong. Check the frequency of repair stats in any Consumer Reports or J. D. Power survey. American models are shown to lack quality, performance, and styling. Can you tell the difference between a 2008 Impala and a Malibu? A Cobalt and a Caliber? Detroit needs sexy reliable cars. All three automakers should hire the quality-control people from Honda, Hyundai and Kia (Toyota quality has slipped of late) and have them supervise the plants around Detroit, just the way the Japanese hired W. Edwards Deming to teach them American quality control after World War II.

Detroit’s bailout won’t cost us anything. Are you kidding? The $25 billion “bridge loan” given last month is estimated to cost American taxpayers about $8 billion. Also add on to that the billions that won’t be spent on infrastructure repairs that could create many more jobs and a greener environment.

The truth is like many of the airlines that successfully reorganized and merged while in Chapter 11 bankruptcy, Detroit needs this ‘tough love’ in order to throw off the yoke of its inbred, short-sighted, arrogant, corporate welfare bums that are demanding another $25 billion on top of the $25 billion they were give last month.

T ed Turner, founder of CNN and Turner Broadcasting says this about the auto bailout: "I don't like to see these bailouts, and particularly of the big industry and, on top of that, who's to think that $25 billion is going to bail them out? That'll probably last until March and then they'll be back for some more. Their problems aren't going to go away any time soon. They've just been building the wrong kind of cars for a long time."

Economist Ben Stein agrees: “It’s management’s fault. Time to put the bean counters out to pasture and to install people who will design and make cars that dreams are made of.”

Instead of a bailout, the Detroit 3 need a buyout. Preferably, by the federal government which could buy the companies in bankruptcy for 10 cents on the dollar, and renegotiate worker salaries and benefits and supplier contracts. It would be nice to see the three automakers organized into one lean, green, and aggressive automaker with (why not?) Lee Iacocca or Ted Turner at the wheel (for a $1 a year, maybe $2). They may even be able to call it …AMERICAN MOTORS… I hear that name is free now.

Sadly, this is not likely to happen because of weak-knee Republican moderates who will cast their lot with Nancy Pelosi’s Democrats for a bailout. A House win is a sure thing, but the Senate will be tight. Expect McCain and Lieberman to vote for the bailout and watch how many ‘earmarks’ will be thrown in to make the Kool-Aid sweeter.