This past month, Detroit’s executives at Ford, GM and Chrysler (Big Three) have pleaded with Congress for $25 billion in loans and credit lines, in an attempt to revitalize their failing businesses. But despite this dire situation, the public has been unable to empathize with their cause and now question whether or not their tax money will be effectively utilized.
The skepticism began when the executives were caught flying into Washington D.C on their own luxurious private jets. Their decision to do this brought about many questions about their intentions. If they are pleading for financial help, wouldn’t you think they would be willing to cut back on their lavish travel plans? The private flights were estimated at a staggering $20,000. If they had downgraded their transportation means by choosing to fly commercially, round trip airfare would have cost only $500, a $19,500 gain, which could have been spent to help the automakers in redesigning and implementing changes in their business models. By the same token, it would have proved that the executives understood the severity of the situation. It is this type of unnecessary spending that likely got them in this situation in the first place.
If the Big Three are in desperate need of financial help, then what they really need to do is come up with a plan that will begin to enforce positive changes. Most importantly, the automakers must be willing to restructure their organizations in order to adapt to the changing trends of automobile industry and society in general. The “green revolution” and the emergence of fuel efficient vehicles appears to be the future model for automobile manufactures. Consumers aren’t interested in purchasing large vehicles that pollute and harm the environment (and, not to mention, drain their bank accounts because of their horrible gas mileage). Drivers want smaller vehicles with higher fuel efficiency standards that can keep them on the road longer. While the Big Three have embraced hybrid technologies to a point, the company’s executives need to devise a long-term strategy that effectively eliminates gas guzzling automobiles from their inventories. This will ensure that all of their cars have met a fuel efficiency threshold.
So, what are your thoughts? Do you think congress will/should approve the bailout package, or does the industry need to prove it has enough order to be responsible with tax payers money?
veganlibre said,
December 4, 2008 @ 4:09 pm
I am a capitalist and therefore believe that failing business should just be allowed to fail. Government has no business giving money to companies that can’t operate. I was against the banking bailout as well, although it can be argued that a) that bailout was actually an investment, not a hand-out, and b) letting a bunch of banks fail would basically trigger a Great Depression. Still, I would have preferred to see insurance guarantees that would’ve cost taxpayers a fraction of the $700b that this bailout can reach.
Back to the “big 3″… there is no question they waste money at the executive level (the flying private jets example is just one of many wastes no doubt), and there is no question they build substandard products. But let’s not forget that they are also strangled by the UAW, and shoulder the highest labor costs of any automaker in the world. I read recently that GM’s labor costs exceed $75/hour per worker, while Toyota is in the low $40’s. Obviously Toyota puts those savings to good use by building superior products, and therefore can actually sell cars that people want. GM/Ford have to build junk because they spend all the money they would otherwise invest in better products on overpaid labor. Luckily the UAW has decided to negotiate now, and even stop the ridiculous “job banks” that basically pay laborers to do nothing, so maybe there is hope for the big 3 after all. But if they have to fail, there is plenty of blame to go around: 1) corporate waste; 2) lack of innovation, and last but certainly not least, 3) suffocating labor costs. Giving them taxpayer money would basically encourage more of the same by enabling this behavior.
- Leo
(Vegan Libre)
Alhan Keser said,
December 4, 2008 @ 8:12 pm
I am furiously against the idea of giving these companies – that I despise for not having made efforts to reform their ways – public money. But can see that if they do go under, then it could cause havoc across the board. So looks like we don’t really have much of choice no matter how much we dislike car companies.
Have you read the New Yorker’s article on this? Hilarious. To quote from the article:
“Last month, when the chief executives of the Big Three flew to Washington in their corporate jets to plead for public money, the result was embarrassing on almost every level. During two days of congressional hearings, the C.E.O.s were unable to answer the most basic questions, such as how they had arrived at the sum they were asking for—twenty-five billion dollars—or why it would be better to give it to them rather than to their customers, or whether, if they got it, it would be enough to keep them solvent. The three didn’t seem to think it necessary to present Congress with any documentation showing how they would spend the money, and they were sent back to Detroit like delinquent schoolboys…. ”
http://tinyurl.com/6nqjo5
Kathleen M. Connell said,
December 4, 2008 @ 8:53 pm
I just blogged on this and related topics, please go to my website for the entire post. Here is my gist…they can get loans if they crowdsource their model options before manufacturing. And green will win the popular vote, often.
David C. Reynolds said,
December 4, 2008 @ 9:14 pm
Remember one thing though as we all excoriate the Big 3 – for YEARS the American consumer bought SUV’s over fuel efficient cars and the Big made money. They defend themselves saying they were only meeting the market needs of the people. Of course, many others of us were buying Hondas and Toyotas and while we got better gas mileage, we were sending $ to overseas manufacturers (for the most part).
Should we allow them to go down? Probably, but the aftershocks will hurt us more than the bailout. Same argument as the financial institutions.
I think we are stuck and we’re gonna have to suck it up and take our medicine – even those of us who had no dog in this fight.
What galls ME though is now they are reintroducing another 700b package of cuts and incentives to buy us off just because they are bailing out the financial and auto companies. I think every American should say enough is enough and I won’t be bought off with another $600 ‘incentive’ check this spring.
But of course we will. To say ‘rise up and just say no’ would not be popular with most people. So we’ll let the govt buy our cooperation by adding another huge bill to be paid back by future generations.
If we have no stomach for auto bailouts, we should have less stomach for this pork laden money soon to be hitting the mailrooms again.