The Automotive Industry Slows Down Even More

On top of the millions of jobs already lost in America since the beginning of this recession, another 190,000 jobs are now in jeopardy.

Yesterday, Chrysler announced the termination of nearly twenty-five percent of the company's dealer-franchises. Today comes the news that GM will drop many dealers as well:

...The ailing GM and Chrysler say they have far too many dealers. Chrysler announced on Thursday that it is cutting 789 of its 3,181 dealers, but Friday may be far worse: GM is scheduled to begin notifying more than 1,000 dealers that they are being dropped.

As sensible as the cuts might seem, most of the dealers are small businesses, and many...have deep roots in the community. They typically employ about 50 people, and some are substantial donors to local causes. Their potential loss is sending ripples of concern through many towns....

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The National Automobile Dealers Association has argued that the automakers should not simply cut stores. Instead, they argue that the companies should allow market forces to cull their ranks.

Instead, the automakers are reviewing each of the dealerships, examining their market, sales and financial wherewithal, and deciding which should stay or go.

This article in the Washington Post relates some of the impact on family-owned car dealerships in the Washington, D.C., area:

In 1915, at the dawn of the automobile era, Lewis Reed opened a Dodge dealership on Rockville Pike.

Yesterday his grandsons gathered startled employees together to tell them that the firm's 94-year run as a Chrysler-Dodge franchise was coming to an end. Chrysler was dumping them.

"It's not a good feeling," said Richard L. Gartner, one of Reed's grandsons, and the president of Reed Brothers Dodge.

Just after meeting to inform employees about 3 p.m. yesterday, he looked fazed, his face flushed.

"We have been with Chrysler for a very long time," he said, pausing. "We were kind of looking forward to a 100-year anniversary."

Similar stories played out all over America yesterday and will be repeated today. On a personal level, the Chrysler dealership where my parents bought each car they owned from 1966 through 1998 announced that the hammer had fallen there as well. One more landmark in Northern Virginia soon to be gone.

Not unexpectedly, the Obama administration is denying any role in the termination of the franchises:

In anticipation of the hard feelings that are erupting with the dealership closures, the Obama administration issued a statement yesterday emphasizing that the list of targeted dealers was drawn up by Chrysler, not the U.S. government.

"The Task Force played no role in deciding which dealers, or how many dealers, were part of Chrysler's announcement today," the administration said in a statement. "The sacrifices by the dealer community . . . are necessary for this company and the industry to succeed."

Actually, not only "the dealer community" is making sacrifices. The effects of closing dealerships ripple a lot further as many dealership-sponsored activities and charities will grind to a halt. That ripple effect will not become apparent immediately, but it will happen. No longer will former employees of any particular dealership have as many options for employment in the field for which they were trained, often at significant expense and ongoing expense, the latter particularly for automotive mechanics who must usually buy their own tools throughout their careers. In addition, terminated employees and their families will lose their benefits packages, including health insurance.

Many dealerships are blaming the Obama administration for accelerating yet another hit to the automotive industry:

The dealers generally agree that there are too many outlets. But they say that instead of being summarily cast off, the automakers should allow market forces and attrition to shrink their numbers. That, they acknowledge, is a slower process.

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Because the Obama administration is involved in the restructuring of GM and Chrysler, many among the dealers blamed the government for the dealer eliminations...

At a meeting at Darcars Chrysler of Fairfax, owner [Iranian immigrant] John Darvish, 72, gathered about 40 employees in the company's service area. He assured them that they would all still have jobs -- the company owns dealerships that offer other brands. But that did little to mitigate the sense of frustration.

"I don't think the government is qualified to run the car business -- what do they know about the car business?" said Ron Frye, 57, a parts manager at Darcars for 29 years....

I'm sure that Mr. Darvish of Darcars Chrysler of Fairfax means well when he offers the hope that all his employees will still have jobs. However, is it likely that all his employess will still have jobs? The entire automotive industry at all its various levels is on the skids and has been for some time now. Furthermore, even if Mr. Darvish is able to salvage the jobs of his employees, how many of those employees will have a much further commute and have to lay out added capital so as to buy different tools for working on different makes and models of vehicles?

Did those who voted for BHO expect this much sacrifice with this much impact on local communities, or were the utopia seekers foolish enough to believe that all the sacrifices would occur at the rich-guy level?

Turn the page ....

BHO As CEO

Dick Morris opines that BHO's forcing out of GM's Rick Wagoner will backfire.

Excerpt from this column at The Hill:

...By replacing the head of the company and demanding a restructuring of its board in return for further TARP aid, Obama has taken upon himself the responsibility for the future of the company....

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This move will backfire big time! The auto giant is very, very unlikely to be saved by this current TARP infusion. Doubtless it will need more in the near term. But the resentment now focused on the management of the company will then turn to Obama. Having demanded a replacement of the management, it is he who will be held responsible for the company’s future.

And each time GM asks for more money, Obama will face a choice: take personal responsibility for laying off 100,000 auto workers or anteing up the additional cash. By inserting himself so deeply into the management of the company, Obama makes himself central to its future. If Obama lets the company fail, having already extended credit, he will have all of Michigan on his case. If he keeps coming up with more and more tax money, he will earn the contempt of the voters.

Socialism has its price. By taking over the management of a company, you become the determinant of its fate in the public’s mind.

Obama does not seem to realize that government takeover is the beginning, not the end, of the problem. He should have stuck with being president and left making cars to others.

Read the rest HERE.

Statist that he is, BHO successfully demonized GM's corporate management. Continuing the socialistic power grab, he continues to demonize in moralistic tones all sorts of corporate managers and, thereby, presents himself as "The One" who can save us peons from evil management. In his runaway bestseller Liberty and Tyranny, Mark R. Levin explains that kind of maneuver in some detail in Chapter One.

The purpose of this post, however, is not to discuss the same issues as those discussed by Mark Levin in his book, although I recommend that all of my readers obtain their own copy and wade in. Instead, my purpose here, as one who comes from a long line of automotive mechanics, is to ask a few questions about BHO as CEO....

1. Is BHO, or anyone he chooses to manage GM, an experienced CEO?

2. What does the new CEO of GM know about the auto industry?

3. Did BHO's forcing out of Mr. Wagoner amount to extortion?

I know that my analogy below isn't perfect. Nonetheless, BHO's move to push out Mr. Wagoner reminds me of the machinations of the efficiency expert:

A specialist who seeks to increase the productivity of a business or an industry by improving the efficiency of its operations.

Any mechanic can tell us just how efficient such experts are. The mechanic's comments are unprintable in polite company.

Maybe Mr. Wagoner needed to go. I don't know. But will whoever takes his place be any better?

Meanwhile, we also have BHO trying to force Chrysler to team up with Fiat, which, in the past anyway, used to be referred to by mechanics as Fix It Again Tony:

...[M]any auto experts think the proposed alliance between financially healthy Fiat and nearly dead Chrysler can work, when the Daimler-Chrysler linkup is considered to have failed. Fiat, it is argued, builds excellent small and midsize cars - exactly where Chrysler is weakest....

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[E]ven the most optimistic experts aren't sure whether Fiat and Chrysler will be a marriage made in heaven - or, like the Daimler and Chrysler tie-up - one made in purgatory....

One can only, pardon the expression, hope that Fiat has improved over the unreliable vehicle is used to be, when even auto salesmen advised buyers, "If you love your wife, don't buy her a Fiat."

In spite of being vilified by various media, Ford Motor Company may have shown great wisdom in refusing bailout money. By refusing federal funds, Ford has disallowed federal control of the company's management. In any case, those of us who rely upon our cars for transportation to and from work are going to find out exactly which makes and models keep us moving on down the road. Perhaps so as to cover our bases, all of us should invest in towing companies. Heh.

Turn the page ....

Hey, Federal Government! How About Removing The Beam From Thine Own Eye First?

(with at hat-tip to Tom's Place for the cartoon and the first link below)



Below the fold, "Seven Myths about Detroit Automakers" by Mark Phelan:

7 myths about Detroit automakers

BY MARK PHELAN
FREE PRESS COLUMNIST

This column by Free Press auto critic Mark Phelan originally was published on Nov. 17 and has been updated.

The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are seven myths about the companies and their vehicles, and the reality in each case.

Myth No. 1: Nobody buys their vehicles

Reality: General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of nearly 700,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2: They build unreliable junk

Reality: The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers."

The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high as or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

J.D. Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3: They build gas-guzzlers

Reality: All of the Detroit Three build midsize sedans that the Environmental Protection Agency rates at 29-33 miles per gallon on the highway.

The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic.

A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

Myth No. 4: They already got a $25-billion bailout

Reality: None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.

Myth No. 5: GM, Ford and Chrysler are idiots for investing in pickups and SUVs

Reality: The domestics' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry.

The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel-economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6: They don't build hybrids

Reality: The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.

Myth No. 7: Their union workers are lazy and overpaid

Reality: Chrysler tied Toyota as the most productive automaker in North America this year, according to the Harbour Report on manufacturing, which measures the amount of work done per employee. Eight of the 10 most productive vehicle assembly plants in North America belong to Chrysler, Ford or GM.

The oft-cited $70-an-hour wage and benefit figure for UAW workers inaccurately adds benefits that millions of retirees get to the pay of current workers, but divides the total only by current employees. That's like assuming you get your parents' retirement and Social Security benefits in addition to your own income.

Hourly pay for assembly line workers tops out around $28; benefits add about $14. New hires at the Detroit Three get $14 an hour. There's no pension or health care when they retire, but benefits raise their total hourly compensation to $29 while they're working. UAW wages are now comparable with Toyota workers, according to a Free Press analysis.

Reaction to the UAW's statement this morning [Reuters report here] upon the Senate's refusal to bail out Detroit are ongoing, including this possibility offered by the White House.

What say you, readers? Bail out Detroit or not?

Turn the page ....