Automakers pitch for a $25B loan didn’t fly

Posted By on November 21, 2008

So what’s next for the big three domestic automakers? Their sales pitch to congress seems to have failed to convince lawmakers that the answer to Detroits’ woes is a $25 billion dollar loan; burn notice wsja loan in which was requested to bridge them “due to the current financial crisis which was no fault of theirs” (so suggests the CEOs). Without a sudden change in the U.S. economy, just how long can current “cash on hand” keep the big three afloat? (WSJ)

My business also feels the pain of the economic downturn, but unfortunately am not in an industry which has the clout (or moxie) to ask taxpayers for a bailout. Knowing what we know about the domestic automakers and the UAW, it is difficult to believe they are only in trouble “just because of the current condition.” Most in congress, and I suspect most Americans, see the problem brought on by years of mismanagement — often from the boardroom, union demands and the saddling of these bohemath companies with contracts, excessive salaries and reputation for building second rate products.

I will agree that slowly these three companies have made improvements, they have rarely shown the ability to lead the automotive industry in innovation or direction. Their quality, although improving, still follows their Asian transplant counterparts and man-hour cost is considerably higher than their competition building products that are both higher (or equal) in quality and retain significantly better resale value. How can these cash strapped companies continue to operate profitably without a major change? They can’t … unless real changes are made. Offering a loan does little to make them competitive, but only funds inefficient operations in hope that the economy makes a quick turn around. Most Americans glance at the big threes executives with their salaries and perks, ponder the generations of highly paid union workers who want to return to the ‘good old days’ and they wonder, “why should my tax dollars be used to continue this?” Even in the best of times with the best products, GM, Ford or Chrysler would have a difficult time competing when paying hourly workers an average $70 an hour (including benefits) when their Japanese competitors workers are doing the same jobs in its U.S. plants  for $40 to $45 an hour.  I’m not sure a $25 billion dollar taxpayer funded bridge loan is going to change this?

Comments

  • these automakers that are struggling have a good few things they could do, either stop manufacturing as honda have done, but still paying their employee’s, or get a short term loan, such as a bridging loan which i think is all they would require. they just need a bridge from the shortfall till they are more stable, and multi-millionaire firms are able to do this, but hey, that’s up to them i suppose! great post, keep it coming!

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  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
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