Bush tells GM and Ford what we have all been thinking:
WSJ: Now speaking of competitive, we have some problems. GM and Ford are experiencing some of those problems themselves these days. And to that end, I wonder if you could talk about your thoughts about what their situation is and what the government might or might not be able to do for them.
Mr. Bush: …In terms of competitiveness, we live in a world in which a Ford or GM has got to compete with other manufacturers that are able to deal with costs in a different way than they are, as well as coming up with product that is relevant.
Via Jane Galt, who believes this means that Bush won’t bailout the Detroit automakers ala the airline industry. I wouldn’t be so sure, but we can hope.
srv
George won’t have to do it. Congress will, and George will sign the bailout. I’m not sure if he’ll sign a finding after that or not (maybe if a few union leaders had to be waterboarded).
Lines
As a key point to the Ford deal: They arn’t in trouble, economically, as their automotive side of the business hasn’t been economically profitable for a few years. Ford supposedly is making the majority of its profits from its forays into banking/money lending. GM as well, from everything I understand.
The Other Steve
A friend of mine whose a financial analyst for PepsiCo said this was the worst thing Ford and GM ever did. The diversification into areas outside of their core business segment.
His reasoning… If they’d stuck with cars, they would have been forced a long time ago to deal with making their auto industry relevant. Since they diversified into other areas, they were able to hide the car problems behind other profits.
BTW… I work for GMAC
Steve
I wonder how things would have played out if the government hadn’t bailed out Chrysler back in the day. I wasn’t quite old enough to understand what it meant, but I knew it was really big news.
Pooh
Well, good on him, for once.
RonB
Business as usual in Washington, to throw domestic industry overboard at the expense of “competition”.
In the case of Chrysler, thousands of workers were saved by benevolent government loan guarantees…other countries protect their industries…why don’t we?
Lines
RonB: First off, why should they? We are a capitalistic society and Ford/GM don’t really stand to help either our security, nor do they assist in the GDP.
Other than Republican’s love Suburbans and Excursions, why would a Republican government save a branch of a business that doesn’t donate much to their campaigns?
Also, don’t forget that Ford and GM arn’t hurting like Chrysler was, they can, and are, existing solely on their banking branches. If they cease to make automobiles because they arn’t profitable, they don’t cease to exist, and their profitability barely changes.
Steve
Well, at least we know Lines isn’t a Michael Moore liberal. My goodness.
Lines
I mispoke slightly.
Ford and GM certainly do donate heavily to Republican campaigns, but they do so through other profitable divisions. At least thats what I’ve been led to believe.
Marcus Wellby
Holy smokes, for once I am on the same page as Bush. I just hope he stands by his choice — I have a funny fealing he will eventualy bail both out and shortly after the CEO’s of each will leave with hefty bonus packages.
ppGaz
Bush might want to investigate why foreign auto makers don’t have $1000-1500 per car costs associated with pensions and healthcare. Just a suggestion.
And why should oil companies be the only ones to enjoy sucking at the government teat? Why should ne’er-do-well alcoholic kids in rich families get all the fuckin breaks?
srv
Ford and GM both have defense divisions. Who do you think makes the Hummer? All the National Security reasons you need…
Pooh
RonB, you raise a good point. However, ‘protecting’ an industry often ensures a substandard product. Which I posit is what Ford, on balance, produces. From what I read they aren’t getting much better being a generation and a half or so behind in hybrids.
In other areas, is there a way I can email you an idea?
Steve
I think the modern liberal notion is that we shouldn’t subsidize failing industries to the extent that it literally becomes corporate welfare, but if we make a judgment that certain major companies or industries can no longer hack it in the modern economy, there are at least some things government can do to ease the pain. This can take the form of job retraining, helping people with relocation costs, etc.
ppGaz
Where are you reading that? Didn’t they buy most of their technology from Toyota? Aren’t they collaborating now with Toyota? Wasn’t their Escape Hybrid the first true hybrid SUV on the road, and doesn’t it get the best mileage of any SUV?
jg
American General, which was later bought by GM.
Pooh
ppG, IIRC, Angry Engineer linked to some stuff earlier this week. Try John’s post from when the layoffs were announced? Or maybe it was on another blog.
Steve, agreed on the transition part. (And since they’ve announced these layoffs well in advance, there is plenty of time for retraining and what not.)
srv
The best thing that could happen is that Toyota buys GM or Ford. But imagine how that would fly in DC.
Bill Hicks
I sort of rememeber Bush/republicans running on the idea that conservation is for losers and that SUV’s rock. I might be wrong on this one, but I remember Ford invested heavily in SUVs and gas-guzzling American cars instead of small, fuel efficient vehicles. I sort of interpret this whole thing as Bush being an anus telling Ford they screwed up after taking his/republicans advice. Correct me if I am wrong.
Steve
Heck, we already let the Germans buy Chrysler. You do what you gotta do.
John Steven
American General, which was later bought by GM.
Actually, AM General is a consortium owned by MacAndrews & Forbes Holdings and the Renco Group. GM’s involvement is just for branding/marketing/distribution of the fakey civilianized “HUMMER”. (I’ve driven a real Humvee all around Korea and Bosnia.)
ppGaz
They did this because that’s what people were buying. The Ford F-150 is the largest selling vehicle … not truck, vehicle … for many, many years now.
Mr.Ortiz
ppGaz hit the nail on the head with his first post. Bush can’t bail them out because the only way to do that effectively would be to nationalize health care. Even suggesting the possibility of a bailout would open the door to a debate he doesn’t want to have.
That would be hilarious, since federal agencies must buy American cars by law. (The law isn’t so strictly worded, but that’s generally how it works out).
srv
OK, so I remember more from the old Ford Aerospace days, appears they and GM have fewer DoD tentacles.
Maybe Toyota would rebrand as GM. Probably would be the death of them though, I doubt they’d be dumb enough to buy either. Well, maybe after the pensions got thrown ever the fence to the PBGC.
jg
Toyota is in NASCAR, they’re american enough.
stickler
Jerry Flint, who’s been covering Detroit since 1958, had a column up in Forbes this week (now behind subscription wall, alas), where he squelched the idea that GM would be going bankrupt.
Essentially he said that companies declare bankruptcy for two reasons: 1) they can’t pay the bills, or 2) they want to get out of a union contract the fast way. Neither case applies to GM; they have $16 billion in cash, and screwing the UAW would lead to apocalyptic labor trouble. GM isn’t United Airlines (supplies of underemployed fighter jocks are pretty high, let alone wannabe stewardesses).
Although, I’d bet that Ford and GM both are hardly averse to taking a few $billion like the airlines did, if Uncle Sam offered it.
Both GM and Ford are in a world of hurt, but they’re not on the edge of existence yet. Ford actually made money outside North America, and GM had a record year in China and South America.
Plus the new offerings are not too bad. The quality differential is a lot lower in 2006 (compared to the Japanese) than it was in 1986.
(caveat: I have been a Ford driver for a long time; Ranchero in high school, Mustang GT in college, F150 now.)
Bill Hicks
To ppgaz, I agree that suvs and gas guzzlers were selling well, a few years ago (unfortunately Ford is now selling 1 million less vehicles/year than they used to; 4.5 compared to 3.5 million vehicles), the problem is that Bush promoted the continuation of gas guzzlers despite disastrous policies that helped raise the cost of oil above $60/barrel. The problem with Bush complaining about current problems at Ford is that Bush promised/implied a cheap, indefinite suply of fuel for these vehicles. Unfortunately, like almost everything Bush has touched it turned into crap and now companies who believed his bs are paying the price. So Bush is not to be commended, but instead should be pilloried for his flip flop.
Steve
Good time for this old chestnut:
Bob In Pacifica
Single-payer.
ppGaz
Yes, as much as I admire the innovation they have been showing with excellent new products, the laziness that left them moving most of their iron via Excursions and Expeditions was a headshaker. It’s not like everybody couldn’t see the higher gasoline prices coming.
They’re turning the corner with good new products, and the capacity reductions are going to help.
It’s the pensioner and healthcare costs that I am worried about.
Bill Hicks
You rock ppgaz, thanks for being reality based. I agree Ford has the primary responsibility for their problems but it really bothers me that GW Bush is being promoted as a responsible party in this debate. He is far from responsible and should more properly be considered a cause not a solution to this problem.
Pooh
Bill, you will find that while there is a good proportion of snark in these here comments, much of it is at least reality-based snark.
CaseyL
Japanese automakers have factories in the US. What kind of healthcare and pension benefits do they offer their employees and managers here? Are they very different from what GM/Ford offer?
ppGaz
I am not a Bush fan, but Ford has to take responsibility for its own business decisions. And I think they are doing that. It is hard to turn a company as big as Ford, but I think that top management is committed to doing it and is walking the walk. I hope they can get it done.
Angry Engineer
Hmm, lots of points to address here – I’ll attempt to do so in one post.
Damn straight. Back in the late ’90s, the fat return on investment from pension funds was rolled over into profits, and once that went dry, the success of the lending companies took over (in a way, that can be considered to have been federally subsidized, in a roundabout way). Let’s not forget that both companies have been able to shed non-related businesses, which has aided in keeping profits in the black (Ford would have lost money this year had it not been for the sale of Hertz).
Don’t know much about your WWII history, eh?
Had Ford and GM not pissed away millions of units worth of market share, they wouldn’t be paying that much per vehicle (and see my above comment about raiding their pension funds for the sake of boosting short-term profits). And one would assume that the Japanese automakers pay some heavy taxes in order to support that country’s health care system, but yet the after-tax profits of Honda, Toyota, and Nissan are very good. And public health care hasn’t helped OEMs such as Mistubishi, while the Chrysler Group didn’t need government-supported health care to start making money again. The bottom line is that if GM and Ford made consistantly good product instead of just a few hits here and there, those pension and health-care costs would be slight drag on profits and not a reason for the downfall of those companies.
Oh, and check with the union to see how they feel about public health care. The UAW is strongly opposed to it, which makes the union’s relationship with the Democratic party somewhat strained. The auto industry refuses to be defined by traditional political stereotypes.
Ford had to pay Toyota for a license to avoid patent infringement (with regards to hybrid patents, Toyota acted early and put up a huge number of barriers to entry). The vast majority of Ford’s hybrid technology was developed in-house, and the Escape differs significantly from Toyota’s implementation of hybrid technology. There is absolutely no reason whatsoever to say that Ford bought its hybrid technology from Toyota. The Escape Hybrid is a sweet piece of engineering, and GM has some trick-bitchin’ stuff on the way as well in the form of its so-called “two-mode” hybrid system (it was interesting enough to get DCX and BMW to buy into it). Ford and GM, though, have failed miserably so far when it came to bringing their technology to the mainstream market or convincing consumers that they give a damn about economy, however, and I don’t think history will judge them well.
I disagree with this – I don’t think either company has a load of cash on hand, and if there’s a slowdown in the economy as a whole or just in the auto market, I think it’s possible that one or both could be sitting in front of a bankruptcy judge in the next year (or sooner for GM, if the Delphi situation degrades as quickly as I think it will).
Sorry ’bout the long comment, but this topic is important to me.
Steve
Uh.
ppGaz
From a Toyota website:
From an automotive newsletter:
I stand on what I posted. Ford-Toyota cooperation on hybrids has been standard industry news fare for several years.
Ford has also bought parts from Toyota for the cars:
That’s from Detroit News; the supplier is partly owned by Toyota Motors.
ppGaz
It isn’t very often that someone posts here and manages to be as wrong as you have been on so many points in such a short time. You’ve been wrong on the facts over and over again.
Ford brought one of the best, and the SUV first, true hybrid systems to market in the Escape, and had it hailed as a great leap forward for the industry. They moved mountains and spent a lot of money to get it done and into the marketplace in a timely fashion. The conventional version of this vehicle beats the Honda CR-V’s price and gas mileage, and the model overal leads its segment in sales and has done so since introduction.
RonB
They employ thousands of American workers, I should think that would be a good reason to back them up. Putting an ideology like “capitalistic” before people seems wrong to me. We are, I believe,the only industrial society that doesn’t protect it’s homegrowns with quotas against countries who do subsidize their industries. I should think it’s only fair that we fight that.
RonB
And they aren’t protected, so what would be the difference? Perhaps there could be a way to raise standards by implicitly supporting automaking Americans in the manner I am suggesting.
RonB
I do hold them culpable for this…seems like it’s been their major failure, to cater to the big car market and ignore the writing on the wall so far as consumers wanting economy. Big cars make bigger profits, and that perhaps is where their focus was in error.
Remfin
The Japanese automakers pay MORE because their US cars are actually made in the US (unlike the “American” companies where it’s something like 50% made in either Canada or Mexico). Their plants either use actual union labor, or pay better than the union gets for the people who aren’t, depending on which plant you’re talking about. The “employee cost” garbage for why Ford/GM suck is just that…garbage
Japanese automakers don’t pay stupidly huge salaries for a bunch of management
Japanese management does not make stupidly huge expensive mistakes – sometimes because they are too conservative, sometimes because they are just smarter
And the final thing…the Japanese automakers make cars PEOPLE WANT TO BUY
charliedontsurf10
ppGaz Says:
Yes, as much as I admire the innovation they have been showing with excellent new products, the laziness that left them moving most of their iron via Excursions and Expeditions was a headshaker. It’s not like everybody couldn’t see the higher gasoline prices coming.
US Auto Companies are where they are for one reason. Short-sighted, brain-dead management. End of fookin’ story.
Thirty-five years ago, They fought seat belts tooth and nail. Then it was air bags. Then it was every emission or fuel efficiency standards.
Of course, the shitty cars they designed didn’t do them any favors, either.
You don’t blame the guy who puts on the left front wheel all day long for the quality of the car. He didn’t design it and green-light it, management did.
The non-competitive cost factor is always gonna be a problem until we have Nationalized health care and guaranteed pensions, but management has only themselves to blame.
This “we’re just givin’ the public what they want” crap has gotta stop. Evidently, they’re not. Imports wouldn’t sell like they do if that were true.
You don’t keep pushing pork chops and bacon on everybody when they’re concerned about their cholesterol and turn around and go, “how were we to know?”
Angry Engineer
Did they do that, or did they buy their technology from Toyota? You don’t seem to be able to decide which they did. Besides, on this particular point, I said they “failed miserably so far when it came to bringing their technology to the mainstream market”. GM, Ford, and DCX have been working on hybrid technology as part of the DOE FutureCar/FutureTruck project for a decade now, all three showed some remarkable vehicles at the 2000 SAE Convergence show, and then there’s GM’s work on hybrid buses. Yet, the net sum of this is a total of perhaps 20,000 Escape hybrids sold so far – not exactly a resounding success. I personally think that the Escape is as good or better than Toyota’s hybrid products, but it hasn’t been nearly as successful in the market, and ultimately that’s what counts. The fact that Ford won an obscure industry award matters little. Ask 100 people on the street in Detroit who won the 2005 North American Truck of the Year, and then ask those same people which company sells the most hybrid vehicles – I can safely say which question receives the most correct answers.
With regard to the whole Toyota/Ford relationship, it’s easily understood if one has experience with how patent disputes arise and are resolved in the auto world. If you hear that Company A is “licensing technology” from Company B, it is almost always the result of Company B having won the race at the USPTO. In this particular case, there are significant technical differences between the Ford and Toyota execution and implementation, and it’s quite clear to see that the only relation between the two has to do with intellectual property laws (on the other hand, if you want to see a true transfer of technology and IP, there’s the relationship between Toyota and Nissan on the upcoming Altima hybrid). Go look at a schematic of Ford’s transaxle, check out Toyota’s, and then get back to me. You can either demonstrate to me a basic understanding of how each system works, or you can keep quoting a newspaper article – I know which one I’ll listen to. But, hey, here’s one right back at cha.
I’m quite familiar with the keiretsu relationship between Aisan and Toyota, but maybe you know of some other sources for hybrid transaxles; if so, get with Ford and see if you can give them a hand. The fact that Toyota has developed their own sources for hybrid components and Ford hasn’t speaks volumes about each company’s core purchasing philosophy, but that’s a topic for another day.
Angry Engineer
Steve, from the UAW New Directions Movement:
There’s a serious amount of dispute within the UAW with regards to national health care – it’s a much more complex issue that most would like to believe. I will say that my initial statement on the topic was not entirely correct – sorry ’bout that.