Showing posts with label Big Three Automakers. Show all posts
Showing posts with label Big Three Automakers. Show all posts

Tuesday, April 13, 2010

Auto Bailouts: Where Did We Go Wrong?

This is likely to be a fairly long post, but I'll try to make it as readable as possible. The information here is condensed from a couple of research projects and a number of articles from the auto industry.

At one time, the American auto industry was king. Nobody in the world produced the quality of cars, with the technology and engineering at the prices that the United States was producing before and after World War II. That ended around the 1970s and 1980s. (It's hard to pinpoint an exact year, but for the purposes of this article, within a decade or so is accurate enough).

After 1980, the Japanese auto industry, which already had a foothold in the U.S. began to take off by leaps and bounds. At the same time, Americans were discovering the quality and drivability of European makes like BMW, Saab, Volvo, Mercedes and others. Around this time, foreign makes were jumping ahead of American manufacturers with regard to quality, engineering, technology and, especially, design.

Many auto industry insiders view the "beginning of the end" of the dominance of American auto companies to be the book "Unsafe at any Speed" by Ralph Nadar.

The book was written about Chevrolet's unique car, the Corvair. The Corvair was designed in the late 1950's by very forward-thinking GM engineers and designers. These people inside GM were looking at Porsche and Volkswagen and they wanted to see what they could learn from the popularity of those German cars. In terms of handling, reliability and technology, these cars were simple designs with sporty performance (at least Porsche was) and were noted for reliability in extreme weather and road conditions.

Chevrolet wanted to see what it could do with a similar concept. They wanted to create a rear-engine, air-cooled, rear-wheel-drive car. Unlike Porsche and Volkswagen, they wanted to make the car a little larger so that it could be used as both a sporty car as well as a small family sedan.

The Corvair was introduced in 1959 (as a 1960 model) and was Motor Trend's Car of the Year. It brought to market a number of firsts and innovations for an American car: A rear-engine air-cooled aluminum flat six cylinder engine with rear transaxle, four wheel independent suspension, with the front and rear suspension components each attached independently to the subframe. In terms of design, technology, innovation and concept, it was different in every way from every other car Detroit was producing and different than anything Detroit had ever produced.

A few years later, Ralph Nadar wrote his book in which he alleged that the Corvair was an unsafe vehicle. Nadar was an unknown "consumer advocate" looking for a cause, and he found it in the Corvair. He alleged that the vehicle was prone to turn over easier than other vehicles, that it was more prone to catch fire in a front end collision and that it was more likely to cause injury to passengers in a rear end collision than any other car.

These allegations were proven false. The government held hearings and then conducted its own safety tests of the car. Their findings: The car was as safe, or safer, than any other vehicle on the road. (The government actually found that the car was less likely to catch fire in a collision than other cars.)

The damage, however, had been done. Sales of the car dropped and it was phased out in 1969, to be replaced by the more conventional Chevrolet Vega, a car with all the disadvantages of a small car along with poor fuel economy and poor handling. The lesson the Big Three Automakers took from this episode of automotive history is this: Don't innovate. Just make your traditional vehicles like you've always done, and don't try anything new, exciting or innovative.

When Subaru introduced front wheel drive to small asian imports, (Saab actually beat them to it in the American market), the other imports followed. By the mid 1980s, Honda, Toyota, Nissan and Mazda had front-drive on most of their car models. The U.S. manufacturers did not follow suit until it became apparent that they were losing sales because of this feature. The same can be said of smaller, four cylinder, more fuel efficient models. Most other innovations and engineering breakthroughs after the 1960s came from either European or Japanese manufacturers. The Japanese in the 1980s and 1990s and later on the European manufacturers even began leading the way in styling. Today, if you take the nameplate off of a car and show it to the average consumer, most people would pick a foreign car to most domestic models.

All of this has led up to our current situation in which the government "had" to bail out two of the Big Three automakers.

I would be the last person to suggest that Ralph Nadar is single-handedly responsible for all of the ills of the auto industry. Over the past 40 years, there has been enough bad decisions, bad design and stupidity within the industry for a lot of folks to share the blame.

The question I have is, who is holding Nadar's feet to the fire? If industry insiders had lied and conspired in some way to bring an entire industry to its knees, no doubt those folks would be held accountable. Yet, Nadar is a darling of the left; a champion of the "little guy"; even a "green" presidential candidate. I doubt the American public is even aware of his role in the decline of the American auto industry (and by extension, American manufacturing).

While this post probably isn't as timely as it could have been (I recently ran across a series of articles that spurred this entry), I suppose the whole point is that I'm now doing my part to help people understand why we are where we are, today. Something as seemingly small and innocuous as a little book with a few little lies has had an effect that has spread to every American some 45 years later.

Now, use your imagination and look ahead to the next thirty or forty years. How do you think the lies currently being spread by O.B.A.M.,A., and Reid and Pelosi about health care and how much universal coverage will "save us" is going to affect America in the coming years?

Tuesday, October 6, 2009

Chrysler Going Down the Tubes: More Bailout Needed?

Rumors, credible rumors, are beginning to circulate in the car industry and the automotive press, that Chrysler may not make it another year primarily due to its falling sales and growing financial losses at partner Fiat.



Chrysler sold a 62,197 cars in September, down 42% from the same month last year. The figure was down from 93,222 in August when traffic to dealers was pushed up by the ”cash for clunkers” program.



Chrysler’s problems may only be beginning and, if so, Fiat, the ”managing partner” among Chrysler’s owners may not be able to keep the American company intact.



.... The daily management of Chrysler is controlled by Fiat which owns 20% of the U.S. company with options which could take that amount to 35%. Fiat has not put any money into Chrysler, so if the American firm becomes a significant operational or management burden there are very few reason for the Italian company, which has sales troubles of its own in Europe, to stay long term. Fiat lost $254 million in the second quarter, so its board may eventually believe that Chrysler is a distraction and one without a future.



.... At this point, the Chrysler product line is still dominated by mid-sized sedans, SUVs from Jeep, minivans, and pick-ups like the Dodge Ram. The company has no real product in the alterative (sic) energy/hybrid segment. Chrysler’s domestic market share in September 2008 was 11.1%, according to Edmunds. Based on sales figures released by the industry today, that share is now closer to 7.5%.



.... Chrysler sales are now running at the rate of 750,000 a year, which includes sales of cars, trucks and vans from all its divisions; Chrysler, Dodge and Jeep. (By contrast, Ford sold over 600,000 F-150 pickup trucks last year). It probably does not have the capital to wait through another year of low US car sales with a market share that is almost certainly to stay below 8%. It does not have models tailored to the current market tastes. Chrysler is going out of business. The company just hasn’t made it official.



Thank goodness, our federal government spent billions, so far, to bail them out, only to fail later on.

Tuesday, August 25, 2009

Cash For Clunkers Has Clunker Website

Auto dealers the nation over are praising the cash-for-clunkers program for filling their showrooms with folks ready to buy. According to most estimates, somewhere between 700,000 and 800,000 units moved in connection to the program. How many of them would have moved anyway absent government incentives which allowed dealers to make more money per car? Er, not clear. What will the effect of the $3 billion in tax dollars being sucked out of one end of the economy and thrown into the backseat of a new Prius? Also not clear (though shouldn't all cash for clunk receipients be forced to give rides to anyone who asks for as long as they own the car?). Exactly when and how the trade-ins will be destroyed? Also not clear (though would make great video, for sure, especially if Transportation Secretary Ray LaHood personally destroys all vehicles).



This much, however, is clear: The government's website that was supposed to handle all dealer claims sucks worse than your grandpa's Pinto:

"We continue to address technical problems with the CARS Web site, and have determined that the Web site will not be fully functional before [this] morning," the Transportation Department said in a statement sent to dealers late Monday evening. "Dealers should be assured that they will be provided time to submit pending deals equivalent to the time that was lost this afternoon while the system was down."

The feds have made various noises about not reimbursing dealers who are either late with paperwork or can't access the broken site in a timely enough fashion. Expect the followup on this "successful" stimulus program to be about as dogged and high-profile as news from the war in Afghanistan. Here's a Dallas dealer's lament from yesterday, the last day of the program:

"Any deal you do today, there's certainly a high risk of not getting paid," he said. "Unfortunately, there will be some dealers who will be hurt financially by this program. There are probably some nervous lending institutions, too."

Dallas-area sales are down 37.5 percent from last year, btw.

Tuesday, August 4, 2009

Obama Pushes for Fast Vote on Cash for Clunkers; Withholds Data on Program's Success or Failure

From Fox News:



The Obama administration is refusing to quickly release government records on its "cash-for-clunkers" rebate program that would substantiate -- or undercut -- White House claims of the program's success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales.



The Transportation Department said it will provide the data as soon as possible but did not specify a time frame or promise release of the data before the Senate votes whether to spend $2 billion more on the program.



Transportation Secretary Ray LaHood said Sunday the government would release electronic records about the program, and President Barack Obama has pledged greater transparency for his administration. But the Transportation Department, which has collected details on about 157,000 rebate requests, won't release sales data that dealers provided showing how much U.S. car manufacturers are benefiting from the $1 billion initially pumped into the program.



The Associated Press has sought release of the data since last week. Rae Tyson, spokesman for the National Highway Traffic Safety Administration, said the agency will provide the data requested as soon as possible.



DOT officials already have received electronic details from car dealers of each trade-in transaction. The agency receives regular analyses of the sales data, producing helpful talking points for LaHood, White House spokesman Robert Gibbs and other officials to use when urging more funding.



LaHood said in an interview Sunday he would make the electronic records available. "I can't think of any reason why we wouldn't do it," he said.



LaHood, the program's chief salesman, has pitched the rebates as good for America, good for car buyers, good for the environment, good for the economy. But it's difficult to determine whether the administration is overselling the claim without seeing what's being sold, what's being traded in and where the cars are being sold.



LaHood, for example, promotes the fact that the Ford Focus so far is at the top of the list of new cars purchased under the program. But the limited information released so far shows most buyers are not picking Ford, Chrysler or General Motors vehicles, and six of the top 10 vehicles purchased are Honda, Toyota and Hyundai.



LaHood has called the popular rebates to car buyers "the lifeline that will bring back the automobile industry in America." He and other advocates are citing program data to promote passage of another $2 billion for the incentives -- claiming dealers sold cars that are 61 percent more fuel efficient than trade-ins.



LaHood also said this week that even if buyers aren't choosing cars made by U.S. automobile manufacturers, many of the Honda, Toyota and Hyundai cars sold were made in those companies' American plants.



But there's no way to verify his claims without access to DOT's data.



Senate GOP leader Mitch McConnell of Kentucky has argued against quick approval of $2 billion for the program because little is known about the first round of $3,500 and $4,500 rebates.



"We don't have the results of the first $1 billion," McConnell spokesman Don Stewart said. "You don't have them. We don't have them. DOT doesn't have all of it. We'd hate to make a mistake on something like that."

Cash For Clunkers: Did the program do anything?

Pelosi and her cronies spent the weekend touting how fabulous the "Cash for Clunkers" program has been for America. But was it, really?

It did seem to create a very short term stimulus for the auto industry. Numbers aren't in, yet, but dealers report "good, but not great" sales.

Democrats were quick to point to the environmental benefits of the program. However, I researched the top 10 cars purchased with the "clunkers" cash and discovered something surprising: The only car in the top 10 to have an EPA estimaged MPG of better than 31 was the Toyota Prius with 50 MPG. Many of the cars in the top 10 were not in any way "economy" cars; the Ford Escape SUV and the Toyota Camry, which has grown into a full sized auto over the past decade were among the best sellers. The average EPA MPG was 28.

This is somewhat shocking because even the "small, efficient" cars on the list are less efficient than the same models a decade ago. Even in the 1980's, it was not difficult to find a car that would get 33 to 37 MPG. Today, the Toyota Corolla, the Honda Civic, the Chevy Cobalt, and a number of others that fit into the "economy" class get between 28 and 31 MPG.

The other problem with the program is a philosophical one. Charles Krauthammer expressed it best when he said last night that the cash for clunkers program destroys American assets. Billions of dollars in assets were "trashed" by the program, because all of the cars traded in, many of which still had a lot of life left in them, were junked. That makes neither economic nor ecological sense.

Carter Osterhouse, a TV show host and carpenter for HGTV, has said that the "greenest" house is one already built. His point being that more energy and carbon is used building a new home than in taking an old one and making a few upgrades.

I suspect that the greenest cars are the ones already on the road, as well. While environmentalists and members of the UAW would not like to hear it, buying a new car is likely far worse for the environment than making your old one last a few more years. And destroying billions of dollars worth of autos makes absolutely no sense whatsoever for the nation's economy.


Tuesday, June 9, 2009

Illegal Takeover? They Don't Report; You Decide

The Obama administration’s arguably unconstitutional and potentially illegal makeover/takeover of General Motors and Chrysler hit a legal road block on June 8, when Supreme Court justice Ruth Bader Ginsburg issued a stay preventing Team Obama’s plan to sell Chrysler to the Italian automaker Fiat. This speed bump was a great opportunity for the media to pay attention to objections to the White House’s reckless executive-branch manipulation of the auto business.



Or not.



President Bush and his team were regularly savaged by the media elite if they so much as sniffed a hint of evasion over the rule of law and the bounds of constitutional authority in fighting terrorism. So why is President Obama’s unprecedented intervention in the auto industry, including a TARP-fund bailout expressly ruled out by Congress, all but ignored?



Even with the Supreme Court order, the nightly news shows of CBS and NBC gave the decision just a few seconds of air time, the equivalent of a stifled yawn, and never went anywhere near describing the strange bankruptcy proceedings the Obama administration has cooked up to manipulate the industry to its liking.

Tuesday, June 2, 2009

What Do These Names Have In Common?

Can anyone guess what the following names have in common?

Allard
Allstate
Auburn
Cord
Crosley
DeLorean
Duesenberg
Essex
Frasier
Hudson
Kaiser
LaSalle
Packard
Studebaker
Tucker


Answer:  These names represent auto companies that were allowed to go out of business without spending billions and billions of taxpayer dollars.


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