Should We Bail Out Detroit

Posted on Friday 12 December 2008

That’s a good question.  My feeling on it is that we shouldn’t bail them out.  Chrysler has already gone to the government for assistance once before, yet here they are again. I think we should let the three automakers sink or swim on their own.  Bailing them out is more than likely just postponing the inevitable.

Unlike most Americans, I have seen letters from the big three automakers that state they weren’t interested in developing a more fuel-efficient, ultra low-emissions automobile.  They didn’t even want to explore the possibility. That shows you how disconnected from reality the management of the three big automakers really are.

Chrysler is an example of bad management through several changes of ownership, with each learning nothing from the mistakes of their predecessors.  At one point, following the last government bailout of Chrysler, most of their product line was based on the Aries K-car platform—including their new innovation, the minivan.  However, since those dark days, Chrysler has not really learned much.  Why else would a car company come out with a vehicle like the Dodge Viper.  The Dodge Viper is a perfect example of how wasteful and inefficient a car can be.  It has a V10 engine and only seats two people.  Is there really any need for any automobile to have that much horsepower or capability for speed, given a top speed limit of 70 mph in this country?

General Motors went and developed and sold the Hummer brand of SUVs.  The H2 is a monstrosity that really has no good reason for existing.  It doesn’t even share any real heritage of the military Humvee the brand was supposed to be based on, being a fairly standard SUV—essentially a re-badged Chevy Suburban for the most part.  The original Hummer, or the H1 as it is sometimes called, has a very unique drivetrain and was developed for all-terrain conditions, not highway and road use.  Even the H1 really serves little purpose as a consumer vehicle.

Ford really isn’t much better.  Now, I will disclose that my favorite aunt was a long-time Ford executive, and was, at least until she retired, referred to within the family as Auntie Ford. However, Ford developed the Excursion, which was even larger and more massive than the Hummer H2.  There was no need or excuse for such a large vehicle.  Ford’s current product line is far better suited to the needs of the economy and the environment—especially as the Excursion has been discontinued.

The Dodge Viper, the Hummer H2, and the Ford Excursion are all fairly expensive, low fuel economy, limited niche marketplace vehicles.  Wouldn’t it make far more sense to design and build a vehicle that had a much wider market appeal, was more affordable, and was more fuel efficient.  They would make less per vehicle, but I’m pretty sure they’d sell a lot more vehicles.

Poor planning and management has gotten the three automakers to the point their at today.  Their management has profited, even in years where the companies lost huge amounts of money.  There is no obligation for the US Taxpayer to bail them out.  By letting the market deal with them, we will end up with automobile manufacturers who are far more fit and responsive to the changing needs of the automotive marketplace.

George W. Bush’s plan to tap the TARP fund to bail out the big Three is short-sighted and irresponsible. It doesn’t matter where the money goes, it is throwing good money after bad. Letting the auto industry sink or swim on its own is the only way to get the UAW and the management of the big three automakers to accept a changed reality of the auto industry. Honda, Toyota, et al, all have factories in the USA now. Building cars that are fuel efficient is something that should have been done decades ago.

If GWB doesn’t understand that bailing out Detroit is something that has no guarantee of success, and that the money is better spent elsewhere, unless the big Three and the UAW are willing to come to terms with the reality of the automotive marketplace. Until then there’s no point in spending the money there.

When the Hyundai Excel was first introduced in the US market many years ago, people laughed at it… it had a rather ugly design and some reliability issues…. yet twenty years later, Hyundai was the first automaker to come out with a 10 year warranty, and they’re doing a hell of a lot better than the big three.

1 Comment for 'Should We Bail Out Detroit'

    December 12, 2008 | 10:42 am

    […] at Sea —Dan’s blog on « Should We Bail Out Detroit The Next Generation […]

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