Driving Sports

You know things have reached a strange pass when Michael Moore and Republican Congressmen are in perfect agreement about the proposed automaker bailout. In an article at the Huffington Post (where else?) Moore says, "Let me just state the obvious: Every single dollar Congress gives these three companies will be flushed right down the toilet."

Senator Richard Shelby of Alabama, ranking Republican on the Senate Banking Committee, said, "I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes."

It's hard to argue against either assertion. Certainly, the history of the last 20 years wouldn't give you much to go on. Advocates point to the early-80s bailout of Chrysler and the fact that this money was paid back early, with interest. But there is no Lee Iaccoca at the helm right now, and no clear vision of what needs to happen - or if there is, there's no big hurry to swallow that medicine.

Let me take you back to the 2006 Auto Show season - when the watchwords were Big, Bigger, and Biggest.  Yet the price of gasoline had started ticking up and those of us who watch the industry and the market had taken notice.

The Big 3 use the show season to make a pitch for the highlights of their new model year. The first was Chrysler, and the pointed question was this, "How will you respond to rising gas prices over the next few years?" The official response (condensed) was "We think the American public has stated clearly what they want, and that's a big, powerful, capable SUV. We haven't seen evidence that there's a market for any car with less than a 2.5-liter engine."

Second verse (with Ford) was the same as the first. Big, bigger, and biggest. Gas prices? No worries. And finally GM turned up to tell us that their marketing plan for the GMC Yukon Denali was to place "high-profile, high-value customers" in the car to be seen and photographed. That means movie stars, musicians, and sports stars. The idea was to make the Denali desirable to those who want to think they're celebrities.

Yes. Really.

So there's the background - the Big 3 have been reciting their spin about what people will and will not buy, while continuing to do more of the same thing they've done since 1990.

I don't believe it's about quality. I drive new cars from every manufacturer every week. If you equalize for price point and target market, cars from GM, Ford, and Chrysler aren't that far apart from their Asian competition.

I think it has more to do the executives who tell the designers what to design, and then sign off on the manufacturing and marketing plans to sell those cars. The CEOs need to explain why they persist in the notion that Americans won't buy a small car when there's a waiting list to get a 1.6-liter MINI Cooper from BMW, and Honda sells as many Fits as they can make. Ditto Toyota with the Yaris, Nissan's Versa, and so on.

And the screwiest part is this - GM and Ford make plenty of small cars right now, today, and sell them all over the world. Take a walk down any city street in Europe and you will see GM and Ford-badged cars that you never see in the United States. Does anyone really believe that the Big 3, who are on the verge of getting $34 billion from Congress, couldn't get those cars past the Dept. of Transportation if they just asked?

So, what's the issue? It's not a perfect storm of credit crunch, gas prices, and UAW contracts - it's a perfect storm of management myopia, management arrogance, and bad business practices. The Big 3 spent millions, if not billions, to fight CAFE standards and scare Americans into buying SUVs and making people think that driving a 4WD F350 around downtown Dallas was a good idea.

And the cherry on the hot fudge disaster sundae is GMAC - General Motors Acceptance Corporation. This finance company was spun off to loan people the money to buy a GM car or truck. But they got into mortgages and then general financial services - is any of this ringing a bell?

In the middle of all this, the UAW isn't helping much. On November 20, the UAW's Ron Gettelfinger made a speech complaining about how unfair it is that all the foreign companies building cars in the United States have managed to avoid the UAW, and have located in states that offered tax breaks to lure the companies in.

"We have Hyundai Motor Company that got $252 million in incentives. Toyota there got $29 million in incentives. Honda, $158 million and Mercedes $253 million in incentives. It just seems odd to us that we can help the financial institutions in this country and that we can offer incentives to our competitors to come here and compete against us but at the same time, we are willing to walk away from an industry that is the backbone of our economy," Gettelfinger said.

We're not walking away from the industry - here's a list of car companies building automobiles (or factories to build automobiles) in the United States today: Nissan, Toyota, BMW, Honda, Subaru, Kia, Hyundai, Volkswagen and Mercedes.  They're building in Tennessee, California, Ohio, Kentucky, South Carolina, Alabama, Mississippi, Louisiana, Michigan, Indiana, and Georgia. Virtually every foreign automaker has at least one design studio in America. The original draft of Nissan's new 370Z hot rod came from California.

What Gettelfinger fails to understand is that an automaker who did not seek those tax breaks and locate in the most financially advantageous place would be guilty of a breach of responsibility to its shareholders. The companies would be civilly liable to their owners. And in what universe does providing a good blue-collar, living wage manufacturing job in Ohio (Honda) or Indiana (Subaru) count as competing against the United States? The sun does not rise and set with the UAW.

And here's the coup de grace - every one of these companies seeking a patriotic bailout is a multinational. Ford Motor Company isn't Henry Ford walking the assembly line in Dearborn any more. It's a huge conglomerate with fingers in a dozen pies - not the least of which is finance. Same with GM and Chrysler. Then throw in the fact that the Big 3 own chunks of many foreign companies, and foreign companies own chunks of the Big 3. Ford owns Mazda, Volvo, and a chunk of Changan in China. They used to own Land Rover and Jaguar, until they sold them to a multinational automaker from India called Tata. GM owns Opel and Vauxhall in Europe. Fiat owns a chunk of GM as well as owning Ferrari and Alfa Romeo. VW/Porsche/Audi has a chunk of (or maybe all of) Lamborghini. Chrysler used to be part of Daimler-Benz, so while the UAW was banging out Dodges in Michigan, the parent company Mercedes was making SUVs in non-union Alabama. Are you seeing how this works?

It's disingenuous to talk about GM, Ford, and Chrysler as though this was still the 1950s. Even then, Ford was making Anglias and Prefects in England. A "Domestic" brand is as likely to have been made in China as any other. There is no clear connection between a multinational supply chain and the name and face of its CEO.

So what's the bottom line? Just this: You're being fed patriotic theater to get you to call your Congressman to "save" a bunch of multinationals who started as automakers but got into finance, mortgages, and many other businesses.

The Big 3 and the UAW are going to have to come to terms with change sooner or later. If the automakers had spent the money they spent fighting CAFE and selling Hummers on making better cars, they'd be like the import brands right now; in a good position to ride out the economic trouble. If they spent a fraction of that money and brought their European cars into the United States, they'd meet CAFE tomorrow and sell every one of those cars. But they don't, because the executives think they can get some free money from the government and keep the game going another year.