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Everybodys An Expert
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Written by Mark M. Holt   
Tuesday, 14 July 2009
I'VE NEVER SEEN SUCH MISINFORMATION FLOATING around about the auto industry, whether it's from New York Times columnist Thomas Friedman on the left or his colleague David Brooks on the right. They think Detroit should die. At least the Republican senators from Alabama and Kentucky have a reason for wanting to ruin Detroit. They don't tell you, but their states have plants owned by Honda, Mercedes and Hyundai (Alabama) and Toyota (Kentucky). If General Motors goes down, the Midwest may sink into rubble, but Alabama and Kentucky will boom.

So let's knock down a few myths about General Motors and Detroit:

There's a plus side to bankruptcy. Wrong. There's no plus side. Name any existing auto company that has survived bankruptcy. Few people would be idiotic enough to buy a car from a bankrupt company. Trade in value disappears. Warranties are worthless. Repair parts vanish. GM goes bankrupt on Monday and on Tuesday the only customers are vultures looking for giveaway deals. In fact, sales are probably collapsing now because of all the bankruptcy talk.

"Oh, but you can throw out the union contract and cut UAW pay and benefits," goes another argument. Humbug! Are union workers going to happily return to the assembly line with their pay slashed? Of course not. And no judge, no company, can order the UAW to do anything.

Detroit needs restructuring. Detroit has been restructured to death. It needs a few great cars with great looks and great performance. George Romney saved American Motors with the Rambler. Lee Iacocca saved Chrysler with the K car and the minivan. Phil Caldwell saved Ford with the Taurus and the Town Car. Just maybe the coming minicar Cruze and the electric Volt will save GM.

The government can appoint learned bureaucrats to run GM right. Have you ever heard of a successful government run auto company? Sure, they work if all other cars are banned and they torture anyone who criticizes the design. I've seen some: the Trabi, built by East Germany, or the cars of the nationalized British auto industry until that industry died, or those Renaults when the French government ruled. Let's not even mention the Soviet cars.

Green machines must be a condition of any aid. That nonsense would put GM out of business faster than its own management. Ultrasmall cars like the Smart and the Mini have minuscule sales. There's only one successful hybrid, the Toyota Prius, and it's outsold by gas guzzling pickups like the Chevy Silverado, Ford F-150 and Dodge Ram and is even outsold by Detroit's own small cars, Chevy's Cobalt and Ford's Focus, and GM's family size Chevy Impala and Malibu. (Note that Toyota is losing money in America, too.) Even the head of Honda says Americans like big cars, and that's what Honda wants to do, improve mileage on real cars. Electric cars are easy to talk about, but there would be a $10,000 cost premium on a lithium powered electric with a mere 40 mile range.

Detroit hasn't been building cars people want, meaning tiny gas savers. Detroit's cars are basically the same as the foreigners'. It's true that Detroit's trucks use lots of fuel, but so do the big Japanese and German vehicles. The problem is that Americans believe, whether it's true or not, that the other guys' cars have better quality, run on smoother engines and smoother transmissions, have better interiors and are better looking. Detroit hasn't been building cars people don't want; it's just that car buyers think the other guys do it better.

Order them to make all hybrids. That one successful hybrid, the Toyota Prius, carries an $8,000 premium over a similar non hybrid Toyota. It's tough to justify $5,000 to $10,000 more for a few miles extra per gallon. Sure, Detroit's cars should get better if the industry is to survive, lots better. Better looking, better handling, smoother shifting and better fuel economy. But most of our cars and trucks will be powered by internal combustion engines, gasoline and diesel, for the next few decades.

A bailout won't solve anything, just postpone the day of reckoning. Maybe. But so what? Demanding certain victory before attempting battle never works. Success in the auto business requires great leadership and great vehicles. Ford isn't that far down, yet, and GM and Chrysler can come back. Will they? I don't know, but they deserve the chance.

I've been at this since George Romney was attacking "the dinosaur in the driveway" 50 years ago. No one, no one, has been more critical of GM management over the past 15 years. I remember when we needed GM's help. We got it. Now they need ours.

Bankruptcy is a good thing for Detroit and other myths worth debunking.
Last Updated ( Tuesday, 14 July 2009 )