As you are probably feeling by now, we are also a tired of the blame game and the lack of working solutions the news deliver with Detroit. Detroit has some interesting hybrid, HEV cars it can mass manufacture, as well as a plug-in hybrid, PHEV prototype in the Volt and a very impressive concept in the full electric Dodge EV. The problem is the inertia. Here are a few articles that will hopefully give you a clearer idea of what is happening in Detroit.
Spending Out Of Control. No matter where you stand, one thing everyone can agree on is that Detroit is hemorrhaging its cash reserves. They have done a few things, but is too little to late?
The Washington Debacle. After a rejection from Washington and being told to come on the 2nd of December with working plans, the trio went back, empty handed in their private leased jets. GM’s CEO Rick Wagoner said he wouldn’t resign to secure federal aid, Chryler’s CEO Nardelli said he would work for a symbolic $1, and Ford’s CEO Alan Mullaly seems to have cut costs, eliminated the dividend early on, revamping product plans, mortgaging assets to raise money to fund the turnaround, and improve Ford’s overall quality, in 2 years.
Trying To Show Good Faith. Since this week, all 3 companies have been desperately trying to show a wind of change. GM announced it would put 2 out of its 5 private jets it leases out of service, but Wagoner and 2 top executives will continue to fly private for all business and personal travel because of a stipulation by the board of directors. One step forward, two back. You can also read about fighting at the Supreme Court level Rhode Island who wanted to adopt California style low car emission, at a time when asking for tax payer’s money.
The whole bankruptcy deal would help the companies tackle the UAW contract mess that are making them uncompetitive against the local built foreign invasion. GM now wants to negotiate a cut in debt levels and new union work rules to win federal loan favors, according to Bloomberg. UAW President, Ron Gettelfinger is obviously in favor of federal loans but expects GM and the other automakers to make the trust-fund payments required under the 2007 contracts. In the meantime, GM is thinking about letting go of Saturn, Saab and Pontiac brands, and the infamous Hummer, according to Bloomberg. Chrysler is trying to let go of 5,000 jobs, according to Forbes but according to Bloomberg, workers are leaving finding more security in unemployment than in staying with the uncertain future of the company.
Ford is resisting cutting the CEO’s salary despite the Washington scrutiny of all 3 top management seeking emergency help from the federal government, according to the Wall Street Journal. This comes after American International Group Inc.’s chief executive announced to cut his salary to $1. Mullaly, after being asked by Congress whether he’d cut his $2 million salary to $1, he answered: “I think I’m ok where I am.” His total compensation in 2007 was $21.67 million when Ford posted a loss of $2.72 billion. GM Chief Executive Rick Wagoner’s answer was: “I don’t have a position on that today.”
What Really Happened? At this point, it is easy to blame poor management, but it is not 100% accurate. One could also argue the UAW muscled in too many benefits which eventually crippled the companies. Again, though there is some truth, there are other players. Washington has a role to play in the demise of Detroit. How? According to the Wall Street Journal, Congress’s required the ex-Big 3 to lose profits with small cars at a loss in UAW factories and added CAFE to deprive them of leverage against labor costs by removing jobs to other countries, as some U.S. companies have done. It’s debatable. The Journal’s solution? Get rid of CAFE and impose a gas tax to move to a “new energy economy,”. The Journal squarly blames the Democrats for helping out the UAW for fear of strikes and paralysis.
The $25 Billion Question. If GM makes profitable cars in China, why not import them to the U.S.? We’ll let you answer that one.
Nardelli said in the memo that Cerberus had made it clear it would forgo benefits from any government assistance that Chrysler may obtain. We wouldn’t hold our breath on that one, just yet. Chrysler, being the hardest hit, wants to pool the investment to develop a shared technology with GM and Ford, according to Freep.
Who Is On First? Obviously, Ford is ahead of the game so far, but for how long?
Are all 3 CEOs pupping on the strings of the AUW and Congress strings? It’s hard to say. One thing is evident, the overall welfare of the country as a whole is not taken into consideration again. Will the ex-Big Detroit 3 have working plans by December 2 when they come back in front of Congress? Will it have been enough? As you can probably get a sense of, this is a situation that hides an even bigger one. At this stage, it is such a mess and Congress could make it or break it.