The Great 2008 Carmaker Swindle

I’ve repeatedly ignored requests to make my product cost consumers less money to use and operate. I’ve created products in foreign countries that foreign countries can make better here in America – and sell cheaper. I’ve thrown cash around my business, and burned it, like I had a direct supply to the Federal Reserve.

I’ve propped up union bullshit like “job banks” and “retirement” benefits such as Viagra prescriptions and full health coverage to retirees to the point of impending bankruptcy.

"I just want to know how GM and Ford, who each sold (tens?) of millions of SUVs and light trucks from the early nineties till about last year, suddenly have no money? Where did it all go? I thought that SUVs/trucks were more profitable than “clean and green” autos? So how will making cars now make them more money?"

I'll try to throw some light on this, but obviously I can't cover all the issues.

The profits from SUV and light truck sales, as well as profits from "reverse transplants" (foreign production/sales of the D3) went to subsidize small car production in the U.S. Because of the UAW and legacy costs, small car production in the U.S. was done at a loss. Why produce the small cars? ONE reason, was to meet Congressional mandated CAFE (Corporate AVERAGE Fuel Economy) requirements. i.e. The D3 needed to produce small cars at a loss because Congress ("we the people") required it for "Green" reasons. Of course once the transplants started to produce larger vehicles too (Tundra etc.) they reduced the D3 ability to subsidize small vehicles. [IMHO- the electric VOLT conceived, even before gas prices surged, as a form of "Hail Mary" combat this problem.]

Your question: "So how will making cars now make them more money? (I assume the critical, Hearings related, word is "now".)

Four reasons (all noted at the Hearings): 1) The UAW leadership saw the handwriting on the wall a couple of years ago and agreed to a two-tiered wage scale, with a low new employee wage. The new, lower wages will, per the CEO's, now allow the D3 to compete with foreign transplants in small car production. Also, the UAW basically gave up the Jobs Bank as a handout and reduced it to the point it actually serves D3 interests (Transplants apparently maintain small "Jobs Banks" too, to keep critical laid off workers available for quick recall as required by production shifts).
2) The D3 have made MASSIVE employee cuts (not widely known outside of Michigan).
3)Congress is not only a lender of last resort, it also has the capability to change the laws. A positive result of these hearings is that Congress and the American people have a better idea now of how CAFE standards and legacy costs (which transplants don't have) have negatively impacted the D3 and helped the foreign transplants.
4) The D3 & UAW have already made many of the massive changes that are being called for. But, as the Hearings were very effective in illustrating, they are now hit with the "CREDIT" disaster. Since the D3 dealers are so reliant upon credit, and since the purchase of an auto is the second biggest purchase and generally done on credit. Rep. McCotter (R, MI) stated this, and stated a belief that the D3 are just as deserving of funds from TARP as the parties presently receiving those funds.

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