We’ve heard a lot of news from the press lately about the dire situation the American automobile industry is in. In part due to the “financial hurricane” that the credit crisis has created, the Detroit 3, (D3), including GM, Ford, and Chrysler are on the brink of going bankrupt or closing up completely. As a former GM employee who loves cars, and cares for Detroit, my friends who work in the auto industry and our whole country, I believe that the government must provide loans to the Detroit 3. Blame can be laid on many things but a negative spin about the Detroit 3 has gotten out of control to the point that people have a grudge beyond reason, one that could lead to our government making a horrible decision. I don’t mean to dismiss mistakes of management and the possibly unreasonable demands of the unions up to this point, but the issue is not who we should punish but what we should do now to prevent a catastrophe.
I’ve written on countless numbers of website comment sections and based on what I’ve written, I want to address all the claims others have made as to why they think the Detroit 3 shouldn’t get support in the form of a loan, (not a bail-out). Please don’t quote me on the exact numbers as these are estimates, but read this with the understanding that I do know a lot about the auto industry from experience and interest. Feel free to research some of my general figures.
Here are claims and suggestions listed, with bullets beneath them addressing why the suggestions aren’t feasible, the claims are overstatements or just aren’t true.
The Detroit 3 don’t make cars that people want to buy:
- Ford, Chrysler and GM sell nearly half the vehicles purchased in our country. 50% of the customers are not nobody, and many of these customers are loyal repeat ones.
- The Detroit 3 had fewer competitors in the 70's than they do now, so some market share attrition is bound to occur by virtue of there being more choice.
- GM sells the most mid-sized cars of any manufacturer, but they are spread out amongst many models with different styles but the Honda Accord and Toyota Camry get all the credit for their manufacturers
The D3 only make gas guzzlers and SUV’s:
- They did profit from the SUV craze but so did/do all the other competitors. Consumers tended to equate value with size and the D3 couldn’t get its typical consumer to buy small cars at prices that would be profitable.
- Admittedly, they should have started making hybrids earlier but that’s a small slice of the market. - For the segments that sell the most, American car company vehicles are amongst the most fuel efficient in their segments such as the Chevy Malibu, Saturn AURA and Ford Focus...
http://www.freep.com/article/20081117/COL14/811170379
The quality of vehicles from the Detroit 3 is not nearly as good as that of the Asian and Europeans:
- The quality gap has narrowed significantly and in some cases, D3 products have better quality than Toyota and Honda, (Chevy Malibu and Ford Fusion are prime examples in JD Powers studies.) http://www.freep.com/article/20081117/COL14/811170379
- Toyota recalled more vehicles last year than GM did http://forums.motortrend.com/70/6495664/the-general-forum/recall-numbers-for-2007-honda-toyota-numbers-highe/index.html
If the Detroit 3 go under, the import competitors will just sell more cars and provide just as many jobs:
- The Detroit 3 employ far more people in our country than foreign-based companies. It’s not just at plants but at headquarters white collar professional, engineering and technical jobs.
- If any one of the D3 go under, then many suppliers will go bankrupt leading to more job losses and parts will stop flowing to the Toyota, BMW, Honda plants here. That would lead to (at least temporary) layoffs at the transplant company plants.
- No other company is going to take up slack in our industrial base by starting a large, new auto manufacturing company as the major investment, expertise, low profitability, and economy would be inhibitors. Small companies like Tesla and Fisker will take tens of years to become mass market manufacturers, (assuming they succeed).
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