View on the non-bailout from Detroit and the Washington beltway
I went to school in the Detroit area and I still have friends who work in the auto industry. So I have been watching the auto bailout proceedings with some interest. This morning I got the following email from a buddy who has spent his career designing vehicles. I reproduce it here for general interest.
I also got a press release today from the U.S. Business and Industry Council, which I am also posting here. They have an interesting take on Tennessee Sen. Bob Corker, the Great Skeptic of the auto rescue.
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I will spend my day forwarding this to every Republican Senator that voted against the loan. I will then forward it to every journalist I can find an email for. I will then forward it to everyone I know asking them to do the same. I'm mad as hell and won't take it any more ...
— Larry
Letter to the editor from a Ford dealership owner to The Inter-Mountain
Editor: As I watch the coverage of the fate of the U.S. auto industry, one alarming and frustrating fact hits me right between the eyes. The fate of our nation's economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation. The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.
Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the 70s, 80s, and 90s. You and the uninformed journalist and senators that hold onto myths that are not relevant in today's world.
When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the U.S. GM was the world's No. 1 automaker beating Toyota by 3,000 units.
When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that were both rated over the Camry and Accord by J.D. Power independent survey on initial quality? Did you bother to read the Consumer Report that rated Ford on par with good Japanese automakers.
Did you realize Big Three's gas guzzlers include the 33 mpg Malibu that beats the Accord. And for '09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid. Ford's Focus beats the Corolla and Chevy's Cobalt beats the Civic.
When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back
$1 billion, plus interest. GM and Ford have never received government aid.
When you criticize the Big Three for building so many pickups, surely you've noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie. Perhaps it bothers you that for 31 straight years Ford's F-Series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new '09 F-150 you'll agree this won't change soon.
Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda. Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.
It's 2008 and the quality of the vehicles coming out of Detroit are once again the best in the world.
Perhaps Sen. Shelby isn't really that blind. Maybe he realizes the quality shift to American. Maybe it's the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby's disdain for 'government subsidies' is very hypocritical. In the early '90s he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes. While the bridge loan the Big Three is requesting will be paid back, Alabama's $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions.
After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!
We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently. While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise. While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost. Although many UAW concessions begin in 2010, many lawmakers think it's not enough.
Some point the blame to corporate management. I would like to speak of Ford Motor Co. The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years since the nightmare of Jacques Nasser. Thank you Alan Mulally and the best auto company management team in the business.
The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem. AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess. So when the Big Three ask for 4 percent of that of the $700 billion, $25 billion to save the country's largest industry, there is obviously oppositions. But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?
As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary. Ford currently has $29 billion of liquidity.
However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements. Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment.
So while it is debatable whether a loan or Chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayers and the economy of our country.
So I'll end where I began on the quality of the products of Detroit. Before you, Mr. or Ms. Journalist continue to misinform the American public and turn them against one of the great industries that helped build this nation, I must ask you one question. Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for 1 million retirees, eliminate 2.5 million of our nation's jobs, lose the technology that will lead us in the future and create an economic disaster including hundreds of billions of tax dollars lost, I ask this question not in the rhetorical sense. I ask it in the sincere, literal way. Can you tell me, have you driven a Ford lately?
Jim Jackson
Elkins Ford
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Press release from the U.S. Business and Industry Council
Dear Folks,
Is Tennessee Sen. Bob Corker, the Great Skeptic of the auto rescue, simply opposed to government support for key industries? Or is he simply opposed to the government support for U.S.-owned industries? You'll see revealing answers in the item below, which will be posted shortly on the U.S. Business and Industry Council's website. USBIC Research Fellow Alan Tonelson, the author, is available for interviews on this item at (202) 266-3985 (office direct dial) and (202) 746-9366 (cell). Interviews can also be arranged by calling me at (202) 266-3989. We hope you find this item and its revelations useful for your ongoing coverage of auto industry news.
Sincerely,
Sarah Linden, Media Relations, USBIC
Globalization Follies: CORKER'S AMERICANS-LAST AUTO POLICIES
How ironic was it of Senate Republicans to choose Bob Corker of Tennessee as their point man for torpedoing a realistic auto industry restructuring package? Let us count the ways.
Corker has strongly voiced skepticism about committing federal tax dollars to avert disastrous bankruptcies of the Big Three U.S.-owned vehicle makers – not to mention of the countless suppliers they would drag down with them, But he has enthusiastically supported spending Tennessee taxpayer dollars to pay foreign-owned automakers to set up shop in his home state. Thus in 1995, Tennessee gave Nissan a $197 million incentive package to relocate its North American headquarters to Franklin. And just last summer – bare months before scuttling emergency loans for Detroit – Corker helped the state throw $577.4 million more at Volkswagen to build a $1 billion plant in near Chattanooga – possibly the largest ever such giveaway to an automaker.
The story of the Volkswagen package are especially revealing. Despite Corker's emphasis on protecting the public purse, he and other Tennessee officials offered the incentives before they could specify the final costs. They used state workers and equipment to hurriedly clear the 500-acre factory site, wined and dined Volkswagen officials at least half a dozen times, and capitalized all the while on the programs and capabilities of the Tennessee Valley Authority – the quintessential New Deal-era Big Government program.
To add insult to injury, although Corker and his U.S. Senate colleagues have blasted the Detroit rescue as a futile effort to prop up industrial losers, the Volkswagen company that they courted is 20 percent owned by the German state of Lower Saxony, has lost money in the United States since 2002, and controls a grand total of two percent of the U.S. vehicle market.
Corker has called his proposals “landmark” and “historic.” We at GLOBALIZATION FOLLIES agree: We can't think of a precedent for a U.S. leader so proudly putting American companies and workers last.
Sources: “$14 billion auto bailout dies in Senate,” by Julie Hirschfeld Davis and Ken Thomas, Associated Press, December 11, 2008; “‘Choo Choo' hit right note with Volkswagen officials,” by Herman Wang, Dave Flessner, Andy Sher, and Mike Pare, Chattanooga Times Free Press, August 3, 2008; “Tennessee incentives for VW total $577 million,” by Bill Poovey, Associated Press, August 29, 2008; “Lower Saxony to fight Porsche control of VW – Wulff,” by Nicola Leske, Thomson Financial News, November 2, 2008; “Volkswagen to Pick Tennessee to Build New U.S. Plant,” by Chad Thomas and Chris Reiter, Bloomberg News, July 15, 2008; “Sen. Corker's remarks before auto bailout bill vote,” News Release, December 12, 2008, Knoxville News Sentinel.
U.S. Business & Industry Council is a national business organization founded in 1933. Its 1,500 members are mainly family-owned domestic manufacturing companies.