Archive for Saturday, February 21, 2009

GM, Chrysler should be allowed to die

February 21, 2009

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General Motors made my first car. It was a 1955 two-tone Chevrolet with stick shift and black tires. It had an AM radio and air conditioning, if I hand-cranked the window down in summer. It came with bench seats, the better to have your date close to you. I bought it used (this was before cars were “pre-owned”) in 1961. My Dad co-signed the $750 note, which I paid.

Those were the days when you could fill up for pocket change. Somewhere I have old Esso receipts that show a full tank of regular gas cost me $3 dollars.

Chevrolet, Buick, Pontiac and Cadillac were the mainstays of GM, as Fairlane, Crestline Skyliner, Falcon and later Galaxie were for Ford, some of which I would own as an adult. I would also own some Chrysler products, so I have contributed to the profits of all the “Big Three.”

Ford is fending for itself without a bailout from Washington, but GM and Chrysler have filed their restructuring proposals with the government in order to receive additional billions to keep them solvent. On Tuesday, GM received the final $4 billion on a $13.4 billion federal commitment. Chrysler, also getting $4 billion, has already requested an additional $3 billion. The money is conditioned on GM and Chrysler coming up with comprehensive restructuring plans that will prove to the government that they have made “aggressive” progress since they pleaded with lawmakers last December for financial aid. Members of Congress told the company CEOs that everyone had to make sacrifices, including management, unions, suppliers, investors and bondholders.

Here’s a better idea: Let them die a slow death, with the emphasis on slow. Tell workers (management always seems to land on its feet) that they have a fixed amount of time to look for new jobs. Government will help them with training and education, but government cannot prop up companies that no longer make products people want to buy in large enough numbers for them to remain profitable.

There are many reasons the car companies are in trouble, all of which have been reported in the major media, but that is the past and it is way too late in the game to do much about guaranteed pensions and health care that ended up crippling GM, even after the company successfully negotiated with UAW members to decrease retirement benefits, which, honestly, is a little like quitting smoking after being diagnosed with lung cancer.

Some of the cars of my childhood are no more. Kaiser-Frazier was the biggest postwar challenger to the Big Three. Models included the 1949 Kaiser Custom Vagabond, the 1948 Frazer Manhattan four-door sedan, the Dragon sedans and Henry J coupes. In 1970, Kaiser, then known as the Kaiser Jeep Corp., was sold to American Motors Corp.

Other auto companies either went out of business or were bought. These included Packard (“ask the man who owns one”), Studebaker (“first by far with a postwar car”), and Hudson, which began making cars in 1909 and, like other automobile companies, in early 1942 was ordered by the U.S. government to stop making passenger cars and concentrate exclusively on fulfilling war contracts. In 1954, Hudson merged with Nash-Kelvinator to become American Motors, a company that lasted in one form or another until 1987 when Chrysler gobbled it up.

None of these companies (and many more before them and after with names such as Tucker, DeLorean and Duesenberg) received government bailouts. If they couldn’t sell their products at a profit, they either sold out, or went bust. People who worked for them found other jobs. No one starved to death.

Americans have benefited from capitalism. Our government should not be undermining an economic system that has produced more prosperity for its citizens than any nation on earth. It cannot forever prop up companies that make products not enough people wish to buy. If a growing number of people prefer cars not produced by GM and Chrysler, how will a government rescue plan make them more likely to buy them?

The “going out of business sale” sign should go up now. Taxpayers should not be expected to underwrite dying companies, unless we get a free car for our money. But that only happens on “Oprah.”

— Cal Thomas is a columnist for Tribune Media Services.

Comments

Richard Heckler 6 years, 3 months ago

Cal is right on with this opinion. Toyota,Nissan,Subaru,Honda and Ford can take up the slack and put some to work.

lucky_guy 6 years, 3 months ago

Good thinking guys. Let's go for the sure way to save the gov some bucks. But, what happens when all those worker and retirees loose their pensions and health benefits? I don' think Honda is hiring right now. They will all go on Welfare, Medicaid or Medicare, and we all know how solvent those programs are. But, maybe that is a good thing then the collapse of those companies would make way for universal health care.
The manta to chant is "Remember Lehman Brothers". It may be cheaper to prop up GM and Chrysler than to deal with all the fall out from their demise at least until the economy can take another hit. Besides you could attach some strings like high mileage cars, etc to make the cars more saleable.

Sigmund 6 years, 3 months ago

If the option to bankruptcy is taxpayer bailouts then let them fail and the sooner the better. And it doesn't much matter if the subject is GM, Chrysler, Bank of America, or Citigroup. Unless and until these failures occur the economy will not get better because we all will be forced to pay the price, literally in higher taxes and debt, for the mistakes of a failing few.

jayhawklawrence 6 years, 3 months ago

This column illustrates another problem we are having in trying to find a solution to an auto industry disaster. Cal Thomas is no expert on the auto industry. He is an ideologue and political hack. We are hearing too much garbage from these types of people.

In the beginning my gut reaction was to let them go out of business and a bankruptcy might still be the best solution, however, we need to allow the industry experts a chance to speak instead of them being drowned out by politicans trying to tear down our President.

We have to keep in mind that this is not just a GM problem but a worldwide car problem. If GM and Chrysler go out of business, our foreign competitors will take over an industry that will be handed to them on a silver platter because their governments will not let them go out of business. Another US industry will be lost that wasn't even targeted for destruction but rather executed conveniently by inept US political leaders. They are down but don't need a boot on their throat as they try to get up again.

Sigmund 6 years, 3 months ago

jayhawklawrence (Anonymous) says… "In the beginning my gut reaction was to let them go out of business and a bankruptcy might still be the best solution, however, we need to allow the industry experts a chance to speak instead of them being drowned out by politicans trying to tear down our President."

This started when Bush was President and all the "ideologues" (otherwise known as economists) are saying the same thing now that Obama is President, let them fail. The issue isn't political it is economic.

jayhawklawrence (Anonymous) says… "We have to keep in mind that this is not just a GM problem but a worldwide car problem. If GM and Chrysler go out of business, our foreign competitors will take over an industry that will be handed to them on a silver platter because their governments will not let them go out of business. Another US industry will be lost that wasn't even targeted for destruction but rather executed conveniently by inept US political leaders."

Sweden just announced they will not bail out Saab as have other Governments. Perhaps they learned from the British the expensive lesson of Rover and British Leland, taxpayer bailouts and corporate welfare don't work and simply enraged taxpayers. Why put a government boot to the throat of Ford who is much better managed and needs no bailout by propping up their mismanaged competitors?

Besides I want the best car for what money I spend regardless of who makes it or who profits from it. "Buy American Even If It Is Crap" isn't a prescription for economic revitalization and history has shown that interference with the fall of failed corporations is an expensive exercise in well intentioned nationalist futility.

jafs 6 years, 3 months ago

Where do all of the folks who work at these companies get new jobs if we let them fail?

deskboy04 6 years, 3 months ago

I feel sorry for people that may lose their jobs...but it may be time for us to let the free market work when it comes to the auto industry. People will still buy cars. But they probably won't buy them like they used to.

Richard Heckler 6 years, 3 months ago

GMC and Chevrolet trucks were at one time different. Something I learned when seeking parts for my 1950 GMC.

Motors,transmissions etc etc were not compatible.

On radio news GM decided to cut one of its' most popular choices aka Saturn wagon....go figure.

Tom McCune 6 years, 3 months ago

Bowhunter: They whomped up GMC Truck in the old days to allow BOP (Buick, Olds, and Pontiac) dealers to sell trucks. They were ticked that only Chevy dealers sold trucks in the old days.

Chrysler should definitely be allowed to fail. The taxpayer saved their bacon once, Diamler Benz a second time, and Cerberus Capital a third time. Enough already. Liquidation time. Besides, we don't need 3 national car companies.

GM is a little different. Among other things, they are a big defense contractor. They have made some incredibly bad decisions. (Remember their visionary decision to buy FIAT? OMG, I used to own a FIAT. What a cluster of problems that was. It cost GM something like $3b to buy their way OUT OF the FIAT deal.) For GM, I think the best option involves "creative bankruptcy" using the Chapter 11 process along with some other things to stay in business, but ratchet down their debt, pension, and benefits obligations.

GM needs fewer brands and divisions, but that is the easy part. Caddy, Buick, Chevy, and Saturn should do it. They shouldn't kill Saturn, they should revitalize it. It was one of their few good decisions of the last generation. Besides, many of the current Saturn models are actually Opels, designed in Germany, and Americanized for this market. So, it's not like they have to fund a completely autonomous division. (Of course they are talking about selling or killing Opel...)

The banks are a little different yet. We would be OK with only 1 or 2 domestic car companies. But the entire economy depends on sound banks. I'm not sure if giving money to bad banks is the right method. Maybe they should have been nationalized, but widespread bank failure would be a calamity of monumental proportions.

deskboy04 6 years, 3 months ago

Jeep will survive. Someone will still make the legendary Wrangler.

Chris Ogle 6 years, 3 months ago

Uh... they could make cars that people want to buy. That might help.

Chris Ogle 6 years, 3 months ago

This reminds me of time I wanted to buy another 10,000 shares of Rambler stock.... I was almost even,,,, darn the luck... they quit selling it.

hindsight 6 years, 3 months ago

Ladies and gentlemen, l'll be brief. The issue here is not whether the domestic automakers produced some poor quality cars in the past, made bad decisions, or overcompensated executives and blue collar workers, they did.

But you can't hold hundreds of thousands of people responsible for the behaviour of a few college educated men and women (such as those from schools like KU) or grass roots blue collar workers (such as those from Kansas that work for GM or Ford).

If you do, shouldn't we blame our educational system and all the citizens of cities such as Lawrence? And if the whole city of Lawrence is guilty, then isn't this an indictment of our state in general?

I put it to you (insert name here if you are against the domestic automakers) isn't this an indictment of our entire American society?

Well, you can do what you want to the domestic automakers but I won't sit here and read your words badmouthing the United States of America!

Seriously, we are writing about people (not corporate logos). Domestic manuafacturing is critical to our national security and our economy. Note that more people in this country chose products from General Motors than any other manufacturer.

jumpin_catfish 6 years, 3 months ago

Sell out or bankruptcy whichever but no bailout. No company is so big it can't be allowed to fail. Nation of whiners and softies. Time to grow up children before the politicians kill our republic.

jayhawklawrence 6 years, 3 months ago

It seems to me that most of the transportation industry worldwide began to get into serious trouble because of the price of fuel. Now we are wondering why the price of gasoline is not dropping along with the price of oil. We have been hearing a lot of excuses but most Americans know we are getting screwed again.

Whether it is the need for more refineries or for better pipelines, etc., we know we have been at the mercy of companies that are large enough to monopolize the industry and to take advantage of that monopoly.

The Bush and Cheney group were financed by big oil. Plain and simple. Our government has been influenced by the folks with the money. Enron was a big backer of George Bush. These guys spend multi millions on lobbying every year in Washington.

How much did you spend last year on lobbying for your interests? How much did the Kansas Republican senators work with Obama to get help for Kansas?

The answer is almost nothing. It is time to start thinking about voting out the older guys and getting some new people in our legislative branch. The kind of conservatism that has taken over the Republican party is an ugly, narrow minded style of conservatism and I thoroughly reject it.

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