Should we let Detroit go under?

You know, I’m leaning more and more that way. If we let GM et al. go bankrupt, something would take their place, and that something would be geared more to making the cars that the world actually wants with a more reasonable production cost.

A lot of things are pushing me that way, such as:

  • The George Will piece I ran today, which effectively painted the former Big Three and UAW as wedded to failure, and wanting us to subsidize it.
  • The consideration that here in the South we have an example of what is likely to replace Detroit, and it’s certainly a lot more attractive than what we’re being asked to prop up.

This time, Mark Sanford has a point:

Gov. Mark Sanford of South Carolina recently wondered whether BMW
would have ever built its plant in Spartanburg if the government had
been handing out money to its rivals, and Rep. Lynn Westmoreland of
Georgia voiced similar concerns about the state’s Kia plant, which
could bring 2,500 jobs to his rural district.

"Let’s face it, who would want to come over here and put their
investment into this country if they knew the government was going to
be subsidizing their competitors?" he said. "It’s just not right. It
just goes against the grain of the free-enterprise system."

It’s too bad he reacts that way to EVERYTHING that involves government action. If he’d only say this stuff when it actually makes sense, people would listen to him more. And this time, it makes sense.

Of course, if it were only good for South Carolina and bad for the country, I don’t think I’d support what he’s saying (at least, I hope not). But the fact is that increasingly, I don’t think propping up the disastrous business model of Detroit is in the country’s, or the planet’s, interests.

That said, Ben Stein gives me pause, warning that a GM bankruptcy would be bad for national security (Shades of "Engine Charlie" Wilson and his notion of "what’s good for the country"). Bueller? Bueller?

But what do y’all think? Bueller?

24 thoughts on “Should we let Detroit go under?

  1. martin

    I agree with Ben Stein and Gen. Wesley Clark. We can’t rely on Honda, Toyota, BMW and Mercedes to be available if something unthinkable happens and we have to convert the auto industries into a war machine. What if the Japanese and German manufacturers won’t kowtow to what we see as our national security needs and let us convert their companies? Humm. Why would we think they would necessarily go along with us?
    Globalization has taken away our common sense (kind of like Greenspan believing the investment banks would regulate themselves). We, OUR country, HAVE to be self sufficient in SOME things. A lot more things than we currently are.
    By the way, I heard on one of the news shows this AM that Japan and Germany are providing hundreds of Billions to their auto industries to keep them going in this crisis, not just $24 B split 3 ways. Have you heard Honda and Toyota sales are way off, too?
    I think, I know, this and any American industry, has the capacity to see the error of it’s ways and do what needs to be done to get on the right track.

  2. bud

    NEW DELHI (AP) — An Indian naval vessel sank a suspected pirate “mother ship” in the Gulf of Aden and chased two attack boats into the night, officials said Wednesday, as separate bands of brigands seized Thai and Iranian ships in the lawless seas.
    -USA Today
    Where’s the U.S. Navy? We spend 3/4 of $trillion a year on the military and it’s the Indian Navy that sinks these thugs. I know we have the capability to defend the shipping lanes. So what gives?

  3. SpencerGantt

    Let ’em sink. They’re just going bankrupt, not out of business. Whatever (and whomever) replaces them should be better.

  4. Capital A

    bud, I have been singing that song for years. Why are pirates still in existence in the year 2008?!? It boggles the mind of anyone who chooses to take a mental walk down that plank of thought. If Al Queda and those sea scum united, imagine the high seas horror in the wake of that unholy union.
    The typical excuses I come across in researching the issue is that the area is too large and costly to patrol, the pirates hardly ever harm anyone as they are mainly out to get ransoms and the vessels they use are the same ones stolen from those on which they prey, making them hard to track.
    Heck, if Steve Zisou can do it, the US Navy certainly can. Instead, their official stance is to suggest private security for shipping companies by shady firms such as Blackwater, that Tarheel profferred production that is doing such a “fine” job in Iraq right now.
    I guess we will have to wait for movement on this front after another supertanker full of oil is stolen. Until it hits us in the pocketbook, I don’t see a wave of people clamoring to send this scum to Davy Jones’ Locker.
    If we hadn’t wasted time, lives and money in Iraq, I would be for the complete immediate annihilation of these pirates and their shipmates and docks in Somalia. Though we can’t afford it, we still may have to engage because if these terry-bles and the pirates are allowed to sail on unfettered, they’ll be coming for more than yo-ho-hos and bottles of rum.

  5. CE

    I know too many Big 3 employees who are still under “lay off” status, making 80% of their salaries when they left the company. That’s been going on for some of them for YEARS. You can’t have a solvent company for long if you follow those kinds of biz practices–driven by the unions. The Big 3 should take their tin cups to the UAW and see how much $$ they’ll get from them! SC politicians, don’t you dare support this!!

  6. CE

    I know too many Big 3 employees who are still under “lay off” status, making 80% of their salaries when they left the company. That’s been going on for some of them for YEARS. You can’t have a solvent company for long if you follow those kinds of biz practices–driven by the unions. The Big 3 should take their tin cups to the UAW and see how much $$ they’ll get from them! SC politicians, don’t you dare support this!!

  7. Doug ROss

    Of course the Big Three should be allowed to sink or swim on their own. Otherwise we will continue a trend that never should have started with the bank bailouts.
    Next will be the housing industry which is showing the worst rate for new construction in 40 years. Why should the taxpayers bail them out for their poor business sense during the mortgage boom? I see a 100 acres of bare ground cleared six months ago near my neighborhood for the next batch of cheap slab homes that will never be built. Too bad our local zoning boards didn’t have some sense to stop the madness.
    The housing industry is already starting the lobbyist dance to try and grab their share:
    “In recent weeks, homebuilders have ratcheted up pressure on Congress to take steps that go beyond trying to reduce foreclosures. The industry wants lawmakers to enact new incentives aimed at getting reluctant homebuyers back into the market.
    Specifically, the group is asking for a 10 percent tax credit of up to $22,000 for homebuyers that purchase a home over the next year, and a temporary interest-rate reduction on 30-year mortgages.”

  8. Lee Muller

    I have consulted in designing robotic automobile manufacturing since 1982, and have been inside a lot of factories, US, Japanese, German, and Italian.
    Most of the opinions I hear from pundits, politicians, columnists, and even some Wall Street commentators, are just making comments off the top of their heads, not any knowledge of the situation.
    From a military standpoint, we cannot afford to lose our ability to design and manufacture trucks, airplanes and ships. That doesn’t mean we have to be held hostage by the UAW.
    The problems were created by Democrats and their union pals in Michigan, Ohio and Indiana. The bailout is a payoff for the 3,000,000 union votes in the election.
    Most of the proposals are pure nonsense:
    * $50 BILLION of bailout money will only postponed closing down by 8 months. If radical changes are not made to stop the cash losses, there is no point in giving Detroit one red cent.
    * The industry has to stop their operating losses NOW, in the next 30 days.
    * Detroit is not “making junk”. Detroit is making good cars that deliver very good MPG with higher payload capacities than the foreign cars.
    * Detroit is not “making cars no one wants”. The same models which were backordered last year before the oil price escalation, are now sitting on the lots. Toyota and Honda are also down in sales by the same volumes. Demand is an industry problem.
    * Any shackles imposed by the government mandating new models to satisfy the environmental kooks will just consume the bailout money needlessly. None of those people proposing such mandates has ever designed, engineered, or done a marketing study for any vehicle.
    * “Retooling” is nonsense. Detroit does not have time to retool, and there is no guarantee that it would solve their sales problem. It takes 5 years to design a new vehicle and retool the factory to build it. This is a 90-day-or-die situation.
    * No money should be given until the UAW tears up the contracts and makes concessions which stop the operating losses.
    The UAW burden rate is $73.00 an hour. Toyota and Honda are $48.00 with their union plants, but fewer retirees. Mercedes, Volvo, Nissan and BMW in the South are much lower.
    The UAW wage has to be cut at least $25.00 to match Toyota, and that is not enough. They will probably have to cut the wages and benefits in half for workers, and for retirees.
    The UAW needs to make the concessions by Monday, the 24th, effective immediately, if they want to leave enough time for Congress to pass legislation and actually get any loans or bailout money in any form to the industry in time.

  9. jfx

    The national security angle is an interesting ideological take, although our mega-military-industrial complex seems perfectly able to crunch out large amounts of Predator drones and attack helicopters with total disregard for the plight of parallel civilian industry.
    I’m under the impression that the present moment is a very unique and sensitive time, and letting Detroit die of self-inflicted wounds NOW could actually cause a much greater national wound, tilting us into a full-on Depression (capital D), with all the long-term economic and national security vulnerabilities that entails.
    Now, I don’t know whether that’s true, but it seems like the most critical question. Context, context, context. What is the probability that, if Detroit gets flushed, a lot of other stuff follows it down the pipe? I am definitely concerned that, in the present historical moment, the loud failure advocacy I’m hearing from the right, though couched in appealing tough-love rhetoric, may be a kind of ideological Russian roulette.

  10. Brad Warthen

    And to think, I was going to post something about the pirates, but thought y’all wouldn’t be interested. Silly me.
    Fellas, you’re showing your ignorance of what is and isn’t possible militarily. Aren’t y’all the guys who said we couldn’t succeed in Iraq? And you think it’s a snap for even the world’s largest blue-water Navy to prevent small craft from taking UNarmed merchant ships in a section of ocean three times the size of Texas? The supertanker was 450 miles off Mombasa. Look at a map. Think about it.
    Folks, the U.S. Navy IS working hard on the piracy problem, along with the Brits, the French, Italy, Canada, Greece and Denmark. And, obviously, the Indians.
    You know what would have been the best thing we could do to stop this piracy? Not abandon Somalia to chaos back in 1993 — a retreat on our part that incidentally persuaded Osama bin Laden that it would be easy to take down the U.S.; just inflict a few casualties? Piracy works in the Gulf of Aden because the pirates have a safe place to hide the prizes, since the “government” of Somalia is useless.
    And that will continue to be the case as long as we have failed states in East Africa. That’s why (ahem) the United States has to employ a full-range policy of forward engagement in the world.

  11. WWB

    It appears that some folk want the auto manufacturers to file for bankruptcy just to “bust” the unions. If that happens the pensions of the 480,000 retired auto workers will be dumped on the Pension Guarantee Fund which will seriously stain its ability to meet obligations. When that happened to my mother when her non union company went belly up, her hard earned pension was cut by more than half.
    Also, if we ever do have to fight a major landwar in the future, do you suppose China will build us some tanks and trucks?
    Just a thought.

  12. Ralph Hightower

    Dear Governor Sanford,
    I don’t know if you have noticed or not, but not every citizen in South Carolina can afford to buy an automobile made in South Carolina.
    I for one don’t see why I should have to pay $35,000 for a car (BMW) when a Chevy or a Saturn suits our family just fine.
    Therefore, I won’t be supporting the South Carolina auto manufacturers by buying a BMW and I won’t be supporting Alabama by buying a Mercedes. Buying a Kia from Georgia? We may buy a Honda from Alabama, or a Toyota from Mississippi if GMC goes under.
    But the foreign cars made here don’t suit all needs. Yes, we have a passenger car (Saturn). But we also have a full-size van for taking our dogs to compete in dog shows.
    Ralph Hightower
    Now back to Brad’s blog (and for those that can’t recognize satire or irony, my letter to Sanford is intended for the blog)
    In 1984, we bought a Chevy van for $13,000 and put 233,000 miles on it over 15 years. It was replaced in 1999 with a GMC 15 passenger van (we removed two bench seats) for $30,000.
    Right now, not only are American cars sitting in dealer parking lots, but foreign cars that weren’t made in Alabama, Mississippi, Georgia, or South Carolina are sitting in vast parking lots at US shipping ports.
    A Sea of Unwanted Imports:
    Foreign auto manufacturers are leasing lots from port authorities to hold all the cars shipped from overseas before delivery to dealer showrooms.
    It looks like a super-dealer showroom at the Long Beach, CA port.

  13. Lee Muller

    If the automakers go bankrupt, they will not come out of it unless the UAW cuts wages and benefits by at least 1/3 and probably 1/2, so they might as well do it now.
    As for the pipe dream of breaking up GM, Ford and Chrysler, who will buy a plant and sign the ridiculous labor contracts which broke those companies? No one. They won’t use the existing plant. They will move it South.
    As for the idiotic comparisons of drone aircraft, which I can build in my garage, to a military vehicle factory of 500,000 square feet and costing $700,000,000, well…

  14. Ralph Hightower

    Another thing to worry about is covering the pensions of those employed by the Big Three, not just the UAW members, but the secretaries, engineers, and others.
    Pension Benefit Guaranty Corporation:

  15. Capital A

    You know what would have been the best thing we could do to stop this piracy? Not abandon Somalia to chaos back in 1993 — a retreat on our part that incidentally persuaded Osama bin Laden that it would be easy to take down the U.S.
    Posted by: Brad Warthen | Nov 19, 2008 6:01:45 PM
    You are exactly right, but what signal does a botched invasion and occupation of Iraq show bin Laden et al, Warthime?
    Yes, we are the guys who were and are against the Iraq War…y’know, the ones who were right while you were and fellow Unwhatevers were supporting the Republican position that there were definite weapons of mass destruction?
    We were and are against the Iraq War because it was illegal, immoral, economomically idiotic and little more than an oil grab. Working to take out Somali pirates is achievable and would positively affect our economy and that of other soverign nations.
    That case should be made honestly and publicly which is something the outgoing administration had a problem doing at every turn.
    I know you have a massive amount of love for the US Navy, but no matter how you sugarcoat it, they are refusing to respond with organized force. The facts are that they are letting Blackwater foul up already murky seas.

  16. Karen McLeod

    Martin, you want the big 3 available to convert to war footage??? Have you checked out the reliability of their products? It’s arguable that it would be easier just to have our soldiers shoot themselves rather than deal with the type of technology that’s been coming out of American Auto dealers (I bought Ford once, and GM once, and I know for sure what “Consumer Reports” means by “much worse rate of repair.”

  17. Lee Muller

    Consumer Reports shows its ancestry as a New Deal socialist cooperative, the Consumers Union. CU has a bias against American cars, and against Mercedes.
    I have engineered for every division of GM, Saturn, Ford, Honda, Toyota, Nissan, VW, Porsche, Audi, Ferrari and Lexus. The quality of American cars is as good or better than many of the Japanese cars.
    American car prices could be brought down by 20%, be profitable, and be difficult for the Japanese to match – but only if the union wages are cut by 35 percent and their benefits by more than that, including the retirees.

  18. Rich

    Let ’em go bankrupt! Chapter 11 bankruptcy would result in the kind of restructuring that would ultimately preserve the auto industry and put it finally on the same footing as Japanese and other foreign manufacturers who have usually done so well here.
    The Big Three need to renegotiate their labor contracts to what the market will bear and replace their current pension scheme with something more realistic for a lifetime of unskilled or semi-skilled labor. 401K’s (to which the employer would contribute as well as the worker) plus social security and savings should be the three-legged stool upon which working-class retirement should be based.
    There is also no reason why an autoworker should make an average wage far in advance of what workers with a similar skill set in other local industries are earning. I am all in favor of a living wage, but if a person chooses not to get an education, he or she should resign him or herself to a minimally adequate wage.
    I tell my students that, if they want to better themselves, they need an education and that no one owes them a comfortable lifestyle. They must work for that all their lives and prepare for retirement with their own investments and savings.
    As for healthcare, I believe we need a national insurance scheme similar to that which exists in France. It is by far one of the most successful such systems in the world. Yes, it is expensive, but not more so per capita than our current system here in the US.
    Ours is expensive in part because of redundant operations and expensive private bureaucracy in the insurance companies and health care facilities. The thing that makes our system unsupportable is the fact that Americans are generally fat and out of shape. We eat crap all day long and get little exercise. Then we wonder why we are so sick.
    Obama has said that the Big Three should only receive money if they are willing to restructure. That’s a sop to the upper midwest. Chapter 11 will do that for the auto industry in a bracing way.
    We could do far worse than become like Toyota, Honda, or BMW right here in S.C. I own a Toyota precisely because I like the quality and am willing to pay a little more for it. With better gas mileage and overall quality, American automakers should be able to recover.
    But labor and management have got to stop living high off the fat of the land and create a business plan that will lay the future for profitability and fuel efficiency.
    Fuel efficiency is especially important if we are to continue to experience what, for OPEC and our domestic producers, is a richly deserved collapse of oil prices. That’s just so much less money going overseas to fund jihad, medrassas, and Islamic religious obscurantism.

  19. Charles Broadway

    A few points:
    1. The UAW bears a large part of the blame for the woes of the Big Three. SC being a right-to-work state helps a great deal in getting companies like BMW.
    2. There are rich people in the wings like Kirk Kerkorian who are quite willing to take over the Big Three and turn them around into profitable companies. But government bailouts and other government intrusion prevents this from happening. Essentially, we are protecting the management of the Big Three from losing jobs they no longer deserve to have all at taxpayer expense.
    3. The collapse of the Big Three opens up the market for new American car companies like Tesla Motors. Meanwhile, we have foreign carmakers building factories here. This is not the death of American automaking. It is merely the demise of bloated, stupid corporations and thieving unions like the UAW.
    4. I drive a Toyota. Toyota has risen not by being “green” because they made and still make SUV’s. They just had the good sense to diversify their product line. The Big Three didn’t.

  20. Lee Muller

    It drives me crazy to hear nonsense like, “Detroit has to diversify their product line.”
    Every American car maker has more diversity and more models than all the foreign makers combined.
    GM and Ford are making all their profits overseas. They have models that get over 50 MPG, urban compacts, and super sports cars, that they cannot even sell here because of useless crash testing, emissions standards, and other regulations.
    Those same pointless regulations also make it prohibitive for new small companies to start up and develop new models for the US market. Innovation is easier to bring to market overseas.
    Henry Waxman replacing John Dingle will be a disaster for the entire automobile and truck industry. This limosine socialist ideologue is immune to scientific fact and reason.


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