Just Say No to Detroit

The Wall Street Journal ^ | 11/15/08 | David Yermack

[NewJerseyJoe]

Given the abysmal performance by Detroit's Big Three, it would be better to send each employee a check than to waste it on a bailout, says David Yermack

Before Michael Moore became famous for documentaries like "Fahrenheit 9/11" and "Sicko," his first big success came in 1989 with "Roger and Me." In that film, Mr. Moore followed General Motors chairman and chief executive Roger Smith with a camera crew, asking him why the company was closing plants and producing low-quality vehicles. Mr. Smith looked flustered and inartfully avoided Mr. Moore's camera crew while it lingered outside his country club or GM's executive offices.

"Roger and Me" was entertaining, but it missed the real story about Roger Smith, who turned out to be a forward-thinking genius. Mr. Smith made big investments in information technology and satellite communications, acquiring Electronic Data Systems in 1984 for $2.5 billion and Hughes Aircraft in 1985 for $5.2 billion. Mr. Smith's successors divested those businesses at huge profits -- EDS was taken public in 1996 for more than $27 billion, and Hughes, renamed DirecTV, went public in 2003 for more than $23 billion. (The man who sold EDS to Roger Smith at a bargain price was H. Ross Perot, who then convinced many people that the experience qualified him to be president.)

Mr. Smith understood all too well that GM shouldn't continue investing in its failing automobile business. That was 25 years ago.

[capt. norm]

My son pointed out an interesting NON-coincidence: Two of our largest failures, the auto industry and education, are held in a death-grip by two of the largest unions, UAW and NEA, and both continue to pay off their enablers in the Dem. Party.

There's no way the libs will fail their paymasters by allowing the auto industry to tank.

[netmilsmom]

Is it really? We went to Buffalo last year and the people were really nice.

[Cookie123]

Boycott Detroit!! This bailout means that I will never even remotely consider buying an American-made car again.

[org.whodat]

There is no need for Congress to bail out the car companies. Now is the time for BIG OIL to invest in car companies.

BS, I'm looking forward to the day big oil is in the bankruptcy line.

[Comparative Advantage]

Is that average total compensation or actual wage?

[Plywactwo Glowa]

We considered replacing one of our cars this year, but postponed in the true spirit of Operation Thrift. And, courtesy of Dave Ramsey, we will be looking for gently used cars from now on. We may have bought our last new cars.

A 1- or 2-year old Honda or Toyota seems good to me. We have owned both and enjoyed the reliability.

[truthguy]

Those of you wishing for the decline of the US Auto Industry have totally lost your minds. The blow that this would have to the economy would be staggering on top of everything else that's going on. We MUST have a domestic auto industry. Too many other industries are leveraged off the auto industry.
First of all the foreign car companies DO NOT MANUFACTURE here. They do LOW TECH final assembly. There is a HUGE difference. All the profits and all the know how go off shore. The dolts that work on the assembly line for Toyota or Honda have no future with the foreign companies becasue they are not Japanese or German. They are third class citizens in the eyes of their employers.
Yes the US Auto workers have been way overpaid for a very long time. The costs that GM and the others must pay makes it very difficult to compete in a tough environment. This would make the case for restructure. But the manufacturing know how is something we simply cannot afford to lose. Once you have lost this it IS NEARLY IMPOSSIBLE to get it back in a competitive environment.
We must have a competitive auto industry. The deindustrialization of the US MUST stop. It's a national security issue if nothing else. We cannot be a low tech service economy. That's not feasible for our future.
GM and the other companies have some very attractive cars out there now. They will have some more great cars in the future. Go research this.
Yes we must get a handle on their health care and pension costs. This MUST be renegotiated. If chapter 11 is the answer then so be it.
But let me remind some of the posters of something. All the car companies are doing poorly as are so many other manufacturing companies. Not all the car companies could be poorly managed. Yes I know that the managers of the US companies are not as smart as the posters on this board, Yes I know that many of the posters here could probably run these companies wonderfully.(Sarcasm) But we need these companies. We don't need the UAW. We don't need the 800,000 or so pensioners.

[truthguy]

Boycott Detroit!! This bailout means that I will never even remotely consider buying an American-made car again.

You are a fool of unimaginable proportions! You would cut off your nose to spite your face. See my posts about the necessity of having a domestic auto manufacturing capability. Please do some reading or studying so you will know what you are talking about.

[truthguy]

My husband and I are going to be in the market for a new car in the next year. I’m thinking we won’t be looking at any thing made by the Big Three.

You are a fool of unimaginable proportions! We must have a domestic auto industry. Toyota and Honda doing final assembly here is not Auto Manufacturing. It's no better than low tech service work. I employ you to reconsider and look at some of the fine American Cars that are out there today. What you are doing by not even looking at the American Cars is very stupid and very foolish and dare I say not very patriotic!

[eleni121]

Of course the people are mostly nice - in pockets and they are survivors - —I was referring to the economic and moral disintegration of this state in general.

[EVO X]

I see a lot more justification for bailing out major industrial operations that are caught in a world wide credit squeeze not of their own making than bailing out the banks that created that squeeze.

The auto industry isn't blameless on this. Dealers put people in cars that they really didn't have any business buying. The consumer was ultimately responsible for signing their name, but the auto loan industry did make it possible for the consumer to go upside down with 5 and 7 year loans.

[ex-snook]

"We must have a competitive auto industry. The deindustrialization of the US MUST stop. It's a national security issue if nothing else. We cannot be a low tech service economy. That's not feasible for our future."

Some long range sense at last. Too many on this site have a hard-on for anything made with union labor regardless of consequences.

Wall Street only, please, we're Republican.

[vikzilla]

Are these not the Manufacturers that retooled and provided much of the tools of war for the country in the past. I don’t like the idea of bailout on a gut level, but when this entered my mind I thought maybe we owed a debt. I don’t know . Just thinking out loud.

[eleni121]

Calm down—you have your facts wrong.

There is no problem with manufacturing know how and increasing technological innovation in the US.

The only heavy burden we face is the archaic union management entities that are killing the economy. Add to that the federal bureacrazis that support that monumental burden.

[truthguy]

Tell me some US manufacturing companies that are doing well? Tell me. And don't give me companies like Google or Microsoft. I want companies who actually build something. Yes we need high tech and Software is huge. I'm all in favor of that. But we also need manufacturing as well. Maybe we don't want to make socks or wicker baskets but we must have high tech manufacturing.

[MathDoc]

My husband and I are going to be in the market for a new car in the next year. I’m thinking we won’t be looking at any thing made by the Big Three.

I was thinking something similar. If they get my tax dollars, that's more than enough support. I may never buy a Ford/GM car again if the bailout spreads to Detroit.

[eleni121]

You are talking about jobs and I’m talking about manufacturing. Different things.

Loss of workers in manufacturing is due to automation — not de-industrialization.

[factoryrat]

I understand what you’re saying. What most people here don’t realize is if the big three goes down, MILLIONS of their tier supplier, NON-UNION workers along with the massive infrastructre that supports them will go belly up. A plant closing will turn a city of 80,000 people into a ghost town overnight. Been there, done that. The UAW and domestic automakers seem to be the favorite whipping boys around here. I don’t see the the zeal and enthusiasm of watching other industries being destroyed as much as the automotive industry. Why stop with the UAW? How about we destroy the trade unions too? Electricians, pipefitters, welders, clerical workers, nurses, teachers, steelworkers, communications workers, aerospace, defense, officeworkers, I.T.professionals, utility, transportation, and scores of other industry workers obviously are paid way too much money. NO point in paying them for their skills and knowledge, or their ability to build and maintain our infrastructure. Sorry we wont live up to your “China Pricing”as GM puts it, sorry I can’t compete against third world workers and illegal immigrant labor. I see a lot of people here bashing anyone who makes, grows, or builds anything, union or not. It just reeks of the snooty elitism we witness coming from the other side. What are you going to do when these people stop producing? They will stop, it’s a matter of when.

[factoryrat]

Chevy Malibu = Toyota Camry with different badges. They share the same platform. It’s a joint effort between GM and Toyota.

[factoryrat]

OH It gets better, the chosen one has selected Jenny from the Bloc as his economic advisor! Be prepared to be “blown away” rest of the country.