Nathan Scandella (personal)

Not Worth Saving

So, we're still talking about the Big Three US Automakers, and whether or not they deserve to be bailout out (again). Since I think climate change is far more important than any of the issues that people are worried about today, I'd be more than willing to subsidize the US auto industry, if it started making fleets of fuel efficient and alternative fuel cars, instead of the token offerings they have now. If they agree to tighter CAFE standards, agree to drop lawsuits against the government (for trying to enforce tighter standards), and get real concessions from their labor unions, I'd be content to have them dependent on government support.

But, let's look at whether that would be a good business decision. Besides, the concessions on fuel economy, and labor prices, aren't likely to happen, so the business case for this proposed bailout may very well be the only issue remaining.

CNN this week published a couple reports from Consumer Reports, who I think is a fantastic resource for the American consumer. The published a list of their 10 best 2009 cars/trucks, and also a list of their best values in each major category. The best value list included 23 vehicles in 5 different categories. Not a single offering from Ford, GM, or Chrysler was on that list. On the 10 Best list, only the Chevy Avalanche made it. And that was in the Pickup Truck category, where US automakers have a huge advantage. Import tariffs on trucks are an astounding 25%, which means you basically have to build a truck factory here, or concede that market to GM. The Avalanche very well may be a quality vehicle. I wouldn't know because you'd never catch me driving such a gas-guzzling menace. I guarantee that half the population thinks that truck is hideously ugly, and it costs between $35,460 - $46,700, depending on options. And green car critics are complaining that plug-in hybrids will be too expensive to be successful?

Let's also look at the recent financial performance of a couple of these companies. GM has had only four profitable quarters out of the last twelve. And the four quarters they stayed in the black, combined, amounted to less money than they lost in each of six of those losing quarters, individually! The last quarter of 2008, which we all know represents a completely different economic climate, wasn't even GM's worst in recent history. They had much worse quarters in both 2007 and 2008. So, any argument that GM is simply caught up in what's ailing the entire world right now is pure nonsense. Ford has been a little more consistent, but not what you would call "good". They have only had two profitable quarters in the last twelve, and like GM, the combined profit of those two quarters is less than they lost in each of six down quarters. These companies are Dead Men Walking.

We should just find work for these people (and by "people", I mean the manual labor ... the management of these companies should never again be employed by anyone) doing something else. A budding wind, or solar power industry, comes to mind; something that returns something of value to the people of this country, even if it's built inefficiently ... which it almost certainly will be if Detroit's displaced workforce is involved. But, paying these people to keep building the same old cars is just flushing money down the toilet.

Posted at 01:22AM Feb 28, 2009 by Nathan in Economics  |  Comments[0]