Posted on 12/24/2008 7:19:49 AM PST by XR7
The collapse of the U.S. auto industry would be easier to take if the cars were junk.
That’s how it was the last time one of the Big Three (Chrysler) went belly up back in 1979. If you’re old enough to remember the Cordoba, you know what I’m talking about. It was easy to comprehend the failure of late ’70s-era Chrysler because Chrysler’s cars of that period were junk. People tend not to buy junk — end of story. Simple relationship. Cause and effect.
But today?
Never have the products of the Big Three — especially GM and Ford — been as good as they are right now. The incidence of problems, recalls, etc. is actually lower for some American-brand cars than for Toyota and Honda. By any objective measure, parity, at the very least, has been achieved. The cars are damn good. But they’re not selling.
How do you fix a problem like that?
The cruel answer is, it’s not up to GM or Ford anymore. They have done almost everything they can, on the product side. What’s coming home to roost is a deadly trifecta of lingering buyer suspicion of American-brand cars combined with soaring gas prices and an economy in free fall.
You can fault the American car companies for the first item — the unpleasant legacy of Pintos past, so to speak — but the other two are completely beyond their control.
Some fault GM, Ford and Chrysler for building too many big trucks and SUVs. But that is what the market wanted — until quite recently. The car industry does not turn on a dime. It is not like making a candy bar or a plastic bucket. Millions of dollars and several years (24-36 months is typical) are needed to design a brand-new, wheels-up new car model and bring it from design sketch to production. The surge in gas prices came upon us — and the auto industry — suddenly.
Those who fault GM, Ford and Chrysler for not anticipating the uptick forget that every single major Japanese automaker was feverishly working on gigantosaurs of their own circa 2000-2004 — from the aptly named Nissan Titan to the monstrous Toyota Tundra. But they got to the party late — and their exposure was minimal as the feces began to hit the fan. It was relatively painless to throttle back (Nissan and Toyota may actually cancel their big trucks) and re-focus on what they have historically always done best — passenger cars.
But the backdrop issue is the collapse of the consumerist economy. What’s forgotten amid all the hair-pulling and gnashing of teeth is the simple fact that people, in the main, were only able to “buy” cars — irrespective of who made them, whether Americans or Japanese or Germans — by signing up for a big fat loan on the easy monthly payment plan.
Often, few, if any, questions were asked.
Credit and loans made it possible for even average middle income people to drive home in $45,000 vehicles (SUVs and cars). Now that credit has dried up, the party’s over. No one’s buying anything — because no one can afford to buy a damn thing. Gas mileage is a bogey. The truth is most of today’s middle-large sedans don’t deliver much better fuel economy than trucks and SUVs. About 5-8 mpgs or so better. Big whoop. If the car in question has a V-8, there is virtually no difference. Minivans are obnoxious pigs — with typical city mileage in the mid-high teens, as bad or worse than a new Escalade.
No, the problem is we’re tapped out. We can’t afford gas because we can’t afford anything. That includes cars.
Which is why the cars aren’t selling. Which is why the $25 billion bailout won’t do much except temporarily preserve the jobs of those unlucky souls working directly or indirectly for the industry.
Until the broad masses are once again in a position to buy expensive consumer goods such as automobiles, no amount of bailout boodle is going to solve the problem. Trillions in hopelessly unrecoverable debt is going to have to pass through the economy’s colon first. Then, incomes — and income stability — will have to rise, so that people not only have disposable income once more but feel reasonably secure in their jobs so that they’re willing to sign up for a big hunk of debt.
Do any of you see this happening in the near-term future? Me either.
So, we’re left with the cruel irony of an industry that has never built better products that is on life support — and not likely to recover.
Because for it to recover, we’ve got to recover first.
And no one’s offering us a bailout.
Now onto the article....
The notes of a consumer driven economy.
For better or for worse the Greenspan low interest rates combined with the CRA, Fannie Freedie drove a housing market that was the underlying cornerstone of our consumer driven economy. That house of cards fell.
We do not manufacture anything anymore, much is shipped off shore because the paint they want to use is not environmentally friendly enough so they say screw it and do it off shore.
But what we have now is our assets have had their unrealized gains deflated and the Obamatons want to restart the economy with a Kenseyian Governmental Pump Prime was well as a continued devaluation of our currency with printing more.
IMHO it won't work.
The big-3's problem is a symptom of a larger problem of our economy not having a strong enough manufacturing base.
How do we fix that? set up an environment that is condusive to manufacturing. We have to look at those that are kicking our butts, in this arena, I.E. the former Soviet "Stans:" Many of these countries have Flat Taxes and much lower Corporate Tax Rates. Case in point, I hear Poland is now the world leader in making drills and tools, what happened to the U.S. being the leader here....The bad news is the Obamatons are married to the Left's ideological paradigm and they will not accept such ideas to bring manufacturing back as a driver.
Yes the big-3 are finally getting it right, darn shame half of America doesn't see it or get it, Darn shame dunnerheads like Frank and Dodd couldn't pass an Econ or Accounting course to save their sorry @$$es and come up with more broad range solutions for the big-3 and the economy in general, ditto that the RNC....
< And THERE is the crux of the issue. Yes, American cars have improved, but the foreign competition has improved more. And in many cases, those improved cars are built in American factories, by American labor.
“LOL...right up there with the Pacer and Pinto”
Ugh! I needed a car bad in 1979 and almost bought a Pacer. Thank goodness my cousin had a ‘69 Camaro he could sell me.
The author doesn't know what the hell he's talking about.
Because you dare not risk having Pat Buchanan call you a traitor. ;)
I just had one of those as a loaner while my 2004 Silverado truck was in for repairs. Even though it was a “stripped down” model I still thought it was a nice car. Nice seats, nice stereo, nice climate controls. Better than any other Chevrolet car I have driven (with the exception of the 2006 Corvette I got to try out a while back) in 20 years.
It was a bit underpowered, and the suspension was too soft for my taste, but it is built on the same basic platform as my much better handling/more powerful Saab 9-5 and there IS a family resemblence, even if somewhat diluted.
They should put their money where their mouth is. When Kia decided to switch from making cheap cars to making good cars they put forth the longest warranty in automotive history (10 years), admittedly the fine print includes a lot of limitations on that warranty but just waving that number around in commercials has an effect. For years and years Ford advertised that quality was job one while making cars that suck, now they make cars that don’t suck and they wonder why nobody believes them. Throw a 10 year warranty on there, if they prove that THEY believe the cars are good the buyers will be willing to take a shot.
Here ‘ya go -
http://www.youtube.com/watch?v=vIL3fbGbU2o
check out the lapels on that jacket!
also related -
http://www.youtube.com/watch?v=HVELhUyLZGk&feature=related
Sweeeet car, classic though I prefered the '67,
'67 Firebird is one of my favorites too...um, umm ;^)
GM stayed alive selling profitable SUV's and large vehicles. The gas price crunch removed that crutch and GM collapsed.
I agree with you.
No, but I did total one on a railroad viaduct. ;-).
I never owned one.People would make fun of you. I did,why buy a little car to get good mileage when gas was soo cheap.I was driving a 66 Mustang with a 289 at that time that got 25mpg. The pinto got like 32mpg.
I just saw a 1976 Cordoba for sale at a Goodwill auction. It was in pretty decent shape with a $500 minimum bid and did not sell. Probably because it had cloth instead of Corinthian leather! Most of them have rusted away.
And it’s ALWAYS better to total someone else’s car!
Trust me on this one; I know of what I speak!
Only rich Corinthians bought them.
Real Corinthian leather???
I thought the Romans killed the last of the Corinthians before Christ was born!
Unmentioned is the trillions the big three will be shelling out in the coming decades for contractually mandated retiree Health Benefits that will balloon out of control as baby boomers retire.
Unless the big three can get out from under this unsupportable expense there is no hope for their survival. Anything the Government does will merely postpone the inevitable.
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