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Obama Backs Auto Bailout, Demands That Companies "Reform"
Barack Obama, in a new statement, throws his support to the big $17.4 billion bailout of the auto industry announced today and offers a stern warning to the effect that the auto companies better get serious about reforming their business practices:
"Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers. With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together -- including labor, dealers, creditors and suppliers -- to make the hard choices necessary to achieve long-term viability. The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it."
Once Obama becomes President, he'll have a big stick to brandish in order to compel the companies to reform (though it remains to be seen whether "reform" will be enough to save the companies). The deal calls for the loans to be called back if the firms aren't viable by March 31, 2009 -- a decision that would probably be made by Obama's Treasury Secretary. Also, this is only a temporary fix and further action will be required from the Obama administration, among others.
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From Boston.com:
"Chrysler tied Toyota for productivity in car making as the best in North America, so say the results of the 2008 Harbour Report—the authority on automotive productivity—released June 5, 2008.
Once all the numbers were crunched—including the number of hours it takes for stamping, building transmissions, engines, and assembling vehicles—the two automakers finished in a dead heat at 30.37 hours per vehicle each.
In descending order, the rest of the pack are: Honda (31.33 hours), GM (32.29), Nissan (32.96), Ford (33.88), and Hyundai (35.10).
This near-parity is a far cry from a few years ago when the Japanese could out-produce the Big Three 2:1.
“But productivity doesn’t guarantee profitability,” Ron Harbour warns. The Japanese still make much more money on each car assembled and sold. The numbers are downright scary. Honda and Nissan make $1641 in pre-tax profit on every vehicle assembled, while the average profit on a Toyota is $922. Contrast that with $1467 lost by Ford per vehicle, a loss of $729 on average for GM, and $412 in the red on a Chrysler product."
With those kind of numbers you can understand why all car manufacturers fought congress over CAFE standards (with full complicity from the Republican party and Democrats from MI) to keep building large high profit margin vehicles.
The American owned manufacturers aren't going broke because UAW workers make a lot more money than non-union workers. The difference is only about $3 an hour right now. And labor costs account for 10% of the price of a vehicle anyway.
Here's the lie of omission Republicans tell when they blather about $70+ an hour Big Three labor costs vs. about $49 an hour for transplants: they don't mention that American car companies are on the hook for their retirees' pensions and healthcare. GM alone supports over 400,000 retirees in the US because they've been building cars here for a century. Toyota which has operated in the US for a lot fewer years only has about 700.
Outside the USA healthcare is provided by the host nation. That's a big reason why GM builds more cars in Ontario than Michigan today. It's also a big reason why we need to overhaul our national healthcare system.
December 19, 2008 11:51 AM | Reply | Permalink
I like your leveling the playing field approach. Too bad those repugs in Congress are so clueless to the reality of the current situation. They'd rather see the the economy tank so long as they can hold on to those foreign auto assembly plants in their respective states.
December 19, 2008 12:29 PM | Reply | Permalink
I like your leveling the playing field approach. Too bad those repugs in Congress are so clueless to the reality of the current situation. They'd rather see the the economy tank so long as they can hold on to those foreign auto assembly plants in their respective states.
December 19, 2008 12:30 PM | Reply | Permalink
The problem is all these companies, foreign owned and domestic, have a lot of the same suppliers. For instance a few years ago I bought new front axles for an old '88 Civic I used to own. They were the same ones used on about every small front wheel drive car sold in the US except for the Dodge Neon and it's sister Plymouth. Ford, Chevy, Nissan, Honda, Toyota, all the same part.
That's why Ford is looking for the contingency line of credit in the bailout in case GM or Chrysler go belly up. The transplants are hurting just as badly in this crunch, but they didn't start the year carrying hundreds of thousands of retirees on their books. If you take one of the big three out, it'll damage the supply chain for everybody. Shelby is a fool if he thinks his helps his non union home state car makers.
December 19, 2008 5:04 PM | Reply | Permalink
Of course, "reform" often means tons of layoffs....
December 19, 2008 12:20 PM | Reply | Permalink
What the heck is possibly going to change in 3 months? Certainly not demand for new cars, even if they are smaller and more efficient, which will take more like 3 YEARS, not 3 months, anyhow.
December 19, 2008 12:20 PM | Reply | Permalink