The People's Car Companies; Europe Wants Some Now

[YSSMAN]

There in lies the problem, I have serious, serious, serious doubts a dime of it will ever get paid back in my lifetime...or ever.

Given that I do not know how much GM or Ford will take out, and given the relative "health" of their European and Asian operations, you don't have much to fear on that end. However, with Chrysler... Its a whole different ball game. I don't think anyone debates that in Detroit. I know DeLorenzo is saying that he doesn't expect them to make it past 2009. I have my doubts as well.

Shouldn't people have tried harder at their jobs? I mean especially the UAW workers. When robots do the work for you most of the time there really isn't an excuse to screw up the basics of snapping things together. And engineers should have actually put forth the effort to design products that didn't suck in the eyes of the buying public. Honestly, if they don't have food to eat, it's because they messed up the company.

Whoa, whoa, whoa whoa... You're making a lot of assumptions here. While I certainly agree that there was far too much short-sightedness on behalf of the automakers, I don't think we can go about pointing a finger at the workers for "poor effort" when their products have continued to score well in reliability and quality (better than A LOT of European brands), to that end, engineers who do their job to deliver a cost-effective and reliable product that is adaptable to more products than just one. There is a MAJOR difference between running a company like BMW/MINI where there isn't too much going on by comparison to a multi-level global corporation where they have to design specific products for every continent. Yes, I understand that should have been fixed long ago, but at they very least, they're working on it... Plus, don't get me started on the SUV thing. Thats what people wanted, and GM/Ford/Chrysler (for a time) couldn't build enough of them. Problem was, they put too many eggs in that basket, but they're making the changes necessary and hoping for the best.

GM and Ford are in a far-better position than Chrysler, and I'm far less-likely to point fingers at companies who have plans that are already starting to work, companies who show that they are committed to building and selling good cars in America, and to that end have promise that they will continue to exist for the foreseeable future.

We give them $25B now, what's to stop them from getting $50B next time? It was really easy for them to squeak this one by.

Again, I do not know how much is going to who, and for that matter, how quickly that money would be applied directly to the market. It appears as though GM and Ford want the loan simply to have the cash on hand to quickly change their truck plants over to car-building facilities. Bad credit = no money. No money = no changeover. No changeover = no company to reform.

We'll see what happens, but this is far more critical in my opinion than this housing fiasco that they're going through on the hill. With 1 in 14 jobs in the US tied in some way to the American automotive industry, losing any one of the three would be "game over" for millions of Americans.

 

[niky]

It's a mess I wouldn't know how to deal with... even given a detailed roadmap of American auto-industry failure, a hundred million dollars in unmarked bills (to buy out controlling shares in stocks) and a one-way ticket back to 1980, I wouldn't know how to fix this problem.

It's simply a combination of too many factors... the entrenched union contracts... poor market perception... a lack of focus on quality and brand perception... and a buying public obsessed with cheap trucks. During the halcyon days of SUV sales, it would've made absolutely no sense, from a financial standpoint, to concentrate on building a world-beating compact car... something which Ford has actually attempted, and done, over and over, yet with poor reception from the US buying public. Car companies aren't to blame for building vehicles people actually wanted at the time.

Now, the cascade of cause-and-effect has come crashing down on the Big Three... GM and Ford are in better shape, since they're diversified into other markets and products... but the amount of lost revenues and market shares are staggering.

Ford and GM should make it. They're too diversified to die off completely even with the loss of position and power in the home market. They'll shrink, but the corporations and some of the brands will survive, in one form or another. Chrysler... I'm not so sure... it might make more sense for Chrysler to cut its losses and live on as a single brand entity than to continue squandering resources keeping three different brands alive... or trying to share platforms between the three brands and coming up with vehicles that either compete with each other or just aren't competitive.

Maybe Mitsubishi should buy out Chrysler... they're tooled for the same engines, anyway, right?

Either way... the "Big" part of the Big Three is over. Downsizing and increased flexibility is the only way to survive into the next decade. Take a cue from Honda... concentrate on plant flexibility instead of outright production numbers... it won't make you the biggest, or the most profitable, but it gives you the ability to respond to market demands quickly and successfully.

 

[Joey D]

Given that I do not know how much GM or Ford will take out, and given the relative "health" of their European and Asian operations, you don't have much to fear on that end. However, with Chrysler... Its a whole different ball game. I don't think anyone debates that in Detroit. I know DeLorenzo is saying that he doesn't expect them to make it past 2009. I have my doubts as well.

So if Chrysler goes belly up, then what happens to the portion of money they got from the taxpayers? That's another big question.

Yes GM and Ford have large Asian and European operations, but this "bailout" money shouldn't be invested there what-so-ever. If they are going to use American taxpayer money then all the money should be reinvested back into America. This means moving plants from Canada and Mexico back to the US to provide our workers with jobs.

Whoa, whoa, whoa whoa... You're making a lot of assumptions here. While I certainly agree that there was far too much short-sightedness on behalf of the automakers, I don't think we can go about pointing a finger at the workers for "poor effort" when their products have continued to score well in reliability and quality (better than A LOT of European brands), to that end, engineers who do their job to deliver a cost-effective and reliable product that is adaptable to more products than just one.

I think we can point fingers, especially now that our money is on the line. Obviously I live in an area where a majority of people work in the automotive industry, both blue and white collar, and while many of them are good people they are incompetent in the working world. UAW workers worse then anyone. I was on a GM sponsored FIRST Robotics team back in high school (Team 68 Truck Town Thunder) which was based out of the body on frame mock-up in Pontiac. I saw how the UAW employees acted. While they were all great people their work ethics sucked and they would often brag about parts they stole or time they cheated the system out of. Engineers were the same way in many ways, they would just put a project on the back burner and then half-ass it when it got close to deadline.

There is a MAJOR difference between running a company like BMW/MINI where there isn't too much going on by comparison to a multi-level global corporation where they have to design specific products for every continent.

Why should GM and Ford redesign their products for other markets? Chrysler doesn't really as many of their cars are the same in Europe. Make a good product to start with and people will buy it. Why Ford must design an American Focus and a European Focus is beyond me.

Plus, don't get me started on the SUV thing. Thats what people wanted, and GM/Ford/Chrysler (for a time) couldn't build enough of them. Problem was, they put too many eggs in that basket, but they're making the changes necessary and hoping for the best.

Yes people wanted SUV's which is fine, but did they really need a choice of 20 of them? I knew that oil prices weren't going to stay low forever and I'm far from a marketing genius. Some people will always need large vehicles that can haul people and tow loads, but to put all your R&D into that seems foolish.

===

I'm still really disgusted by the whole thing, mainly because if I wanted to support the Big Three I would buy their cars. I don't want to make a mandatory donation to them in the form of taxes. Also if the Big Three kept jobs in America, where they belong, I might not have as much as a problem with the whole thing. But when a Honda Civic is more American then a Chevy HHR I have an issue.

 

[YSSMAN]

This means moving plants from Canada and Mexico back to the US to provide our workers with jobs.

***

Also if the Big Three kept jobs in America, where they belong, I might not have as much as a problem with the whole thing. But when a Honda Civic is more American then a Chevy HHR I have an issue.

The purpose of the bill is to have GM, Ford and Chrysler gain some level of cash in order to do just that. As I stated earlier in the thread, GM is opening a new engine plant in Flint, Ford will be re-tooling the F-150 plant in Detroit to (if I'm not mistaken) build Fiestas, not to mention the massive re-investments of cash both of them are going to undertake in modernizing and adjusting their existing production lines.

Will it create thousands of jobs? Not immediately, that depends largely on what products become official and how good sales are. But will it guarantee that they continue to build cars in the US and at the very least keep the Mid-West economy strong? Most-certainly.

 

[Joey D]

But why did they move the jobs out of here in the first place? Yes I understand that Mexican workers will screw cars together for pennies but really how can you tout yourself as the end all and be all American companies when foreigners build the cars? Our economy in Michigan has many reasons for tanking but one reason is that the Big Three closed plants and moved them out of the country, that doesn't help us.

 

[YSSMAN]

I can't account for all of them, but GM has continued to build the majority of their vehicles sold in the United States within our borders. The only big-sellers that they had built outside the country were a small number of trucks and SUVs, and obviously, the Impala/LaCrosse/Grand Prix that was screwed together across the border in Canada. Their best-selling Malibu and G6 are both built within the state (and down in Kansas), the Cobalt/G5 are done down in Ohio, obviously we've got the Corvette in Kentucky, the Kappa cars in Delaware, all of the "modern" Cadillacs here in Lansing in addition to the Lambda crossovers.

Chrysler has a big problem with Mexico and Canada. Ford is fixing it, as of now, very few of their cars are built in the US, but the Fiesta, the MKIII Focus, and possibly other European/Asian-market cars will be built in the US starting in late 2009 or early 2010.

The main reason why they went elsewhere is because labor was cheap, the American dollar too strong, and consequently it padded the profitability on each car or truck they sold. With Mexico now as a "no-fly-zone" economically, the Canada no longer an easy way to get cheap labor, they're left to come back to the US. Ford appears to be committed to bringing their small and mid-size car operations back to the Mid-West, and hopefully that plan will work out well enough to bring some new jobs back. The problem is, automakers (not just American) are rushing to the relative labor and tax haven that is the American Southeast instead of the experienced and desperate Mid-West.

 

[FoolKiller]

Ford will be re-tooling the F-150 plant in Detroit to (if I'm not mistaken) build Fiestas,

They are also redesigning the Explorer, Expedition assembly plant in Louisville for either cars or whatever their fuel efficient plans are.

 

[YSSMAN]

They (GM and Ford) have a plan, and it appears that for the most part whatever money they will get out of this loan, it will be put to good use. I just don't know about Cerberus/Chrysler...

 

[forza2.0]

From what I hear from the ford europe guys, ford is in such big trouble, that ford europe arent being allowed 100% freedom anymore to spend R&D costs on whatever they like. The first casuality of this is the Fiesta ST. Unless the Fiesta becomes a sales hit in the US, there wont be a ST, even though ford of europe makes a profit. Sounds like Ford is counting on ford of europe to stay afloat, and therefore they dont want to spend money on riskys cars.

Oh well, atleast you guys know that Ford badge will never die. If they go under im 100% sure a european or japanese firm will pick up their european assets.

 

[Joey D]

The Senate has approved the bill, now it's just waiting on President Bush's signature.

Senate approves auto industry loans

The U.S. Senate approved a stop-gap spending measure that funds the government through March and includes up to $25 billion in low-cost government loans for automakers to retool plants to build fuel efficient vehicles.

The Senate's 78-12 vote sends the bill to President Bush, who is expected to sign it before the government's current budget expires Tuesday.

The president's signature will mark the culmination of nearly two years of efforts to win additional financial support for automakers who face tens of billions of dollars in costs to increase the efficiency of their vehicles by at least 40 percent by 2020.

Detroit's automakers praised the Senate passage, which followed Wednesday's 370-58 vote by the U.S. House.

"Congress clearly recognizes the need to move forward at this critical time to make available this source of capital for automakers and suppliers," General Motors Corp. spokesman Greg Martin said, adding that the loans "will help speed the transition to cleaner, more fuel-efficient vehicles."

Automakers will get up to 25 years to repay the loans. Because they have sub-investment grade credit, they would save more than $100 million per $1 billion borrowed in lending costs. They could also ask the Energy Department to defer repayment for up to five years.

Congress appropriated $7.5 billion to cover the costs of the loans, including the risk of default.

"This is an important first step to providing access to capital for important investments in the future at a time when the capital markets are distressed," Ford Motor Co. said in a statement.

In an interview Saturday, Michigan Sen. Carl Levin, D-Detroit, said the loans "will speed the transition for the industry to more technologically advanced vehicles" and said it would provide both "a financial and psychological boost" to struggling automakers, who are facing disastrous economic conditions.

The $25 billion program was authorized by an energy bill passed in December 2007 but not funded by Congress.

"This is a smart investment which will speed the introduction of more fuel efficient vehicles, and also create tens of thousands of good-paying U.S. manufacturing jobs," United Auto Workers President Ron Gettelfinger said in a statement Saturday evening.

GM and Ford lost nearly $25 billion in the second quarter of the year, and along with Chrysler LLC are closing plants, shrinking their work force and slashing spending as the auto market is down 11 percent through August.

The National Highway Traffic Safety Administration has estimated it will cost automakers $47 billion through 2015 to meet the first five years of fuel economy increases, starting with the 2011 model year.

Levin vowed to begin work early next year on obtaining another $25 billion in loans for 2009 and 2010.

But now lawmakers may have to push to get the money into automakers' hands.

Energy Secretary Samuel Bodman wrote a letter Wednesday to two Michigan members of Congress warning that it could take "six to 18 months or more" to approve funding and distribute loans to automakers, which brought angry retorts from a number of Michigan lawmakers.

Levin said he expected it would take up to six months for automakers to see loans, but that he would work to push the Energy Department to speed up distribution of loans. "Bureaucracies can be expedited," he said, noting that the bill includes language that forces the department to have final regulations for overseeing the loans in place within 60 days of it becoming law. The bill also awarded the Energy Department $10 million to hire outside experts to speed the process.

U.S. Rep John Dingell, D-Dearborn, sharply criticized the Energy Department's timetable, which brought a response from DOE spokeswoman Healy Baumgardner, who said the Energy Department "rejects these wholly unfounded accusations" and accused Dingell, who is chairman of the House Energy and Commerce Committee, of making "uniformed and inaccurate sound bites."

Michigan Sen. Debbie Stabenow, D-Lansing, said Saturday she had spoken to Sen. Majority Leader Harry Reid, D-Nev., and Jeff Bingaman, d-N.M., chairman of the Senate Energy Committee, and both vowed to work to ensure the loans are approved quickly.

Stabenow said Congress must still approve a tax credit worth up to $7,500 for plug-in hybrid vehicles and more funding for battery research.

"Today's action is a critical first step," she said.

 

[YSSMAN]

From the lips of Rick Wagoner:

 

[Omnis]

From the lips of Rick Wagoner:

Another example of why Washington lawmaking is bogus. That bill locks out competition. Oligopoly ftw.

 

[YSSMAN]

I believe he said at the end there that its available for anyone (foreign or domestic) that will be building cars in the US... So I suppose thats only GM, Ford (+ Mazda), Chrysler, Honda and Toyota.

 

[Omnis]

I believe he said at the end there that its available for anyone (foreign or domestic) that will be building cars in the US... So I suppose thats only GM, Ford (+ Mazda), Chrysler, Honda and Toyota.

So if I had designs for ultra-efficient vehicles, I could get an easy 25B start-up loan from Uncle Sam? Not likely.

 

[a6m5]

Did he say that auto makers are entitled to this loan as part of the bill requiring auto makers to improve fuel economy(also emission)? He claimed that this loan(or 'support') was part of the bill.

This is the first I had heard of this prearranged loan, and I suspect that they snuck it in. Or Wagoners lying to our face. Government presented a bill demanding better fuel economy from auto manufacturers, I had heard that. But nothing about the billion of dollars in loan that was going to cost the tax payers. 👎

 

[Joey D]

Seems Europe wants a slice of pie as well. Guess it's keeping up with the Jones on a large scale.

Euro carmakers want billions in loans, too

This week, Detroit got its $25B bailout loan approved by Washington, and according to The Wall Street Journal, European carmakers are making like this is a game of "Simon Says." The Journal reports that Fiat has proposed the idea of hitting up the European Commission for €40 billion ($55B USD) to help the European auto industry make the move to cleaner, greener cars ahead of the strict new emissions regulations currently being bandied about. Like we said, this rationale is very similar to the one Motown used to get its money.

Fiat's grand idea was presented to other automakers at the ACEA meeting on Friday, and according to a spokesman for the automaker, "All European carmakers agree on the [€40 billion] demand." What a shocker. Said demand hasn't been formally made to EC bigwigs yet, but the lobbying is obviously well underway.

 

[YSSMAN]

Its not exactly surprising, and to that end, not exactly different. They're already state-funded operations in some cases, companies like VW and FIAT both coming to mind here. Seems that everyone is a bit hung-over from the cheap fuel prices, and with no one having any cash, they're all struggling to make the sales they need to fund the changes.