Auto Bailout Politics

Romney eked out a win in the Michigan primary. He's going to have a harder time there in November.

Mitt Romney eked out a win in his native Michigan in yesterday’s Republican primary. He’s going to have a harder time winning the Wolverine State in November.

President Obama has already been running ads touting the resurgence of Detroit’s auto industry and his role in saving it through a massive government bailout–and highlighting Republican opposition to said bailout. He doubled down yesterday with a speech to the United Auto Workers.

“I’ve got to admit, it’s been funny to watch some of these politicians completely rewrite history now that you’re back on your feet,” Obama told a UAW convention in Washington. “These are the folks who said if we went forward with our plan to rescue Detroit, ‘you can kiss the American automotive industry goodbye.’ Now they’re saying they were right all along!”

The alternative to federal help, Obama said, “was to do nothing, and allow these companies to fail. In fact, some politicians said we should. Some even said we should ‘let Detroit go bankrupt.'”

That’s something of a cheap shot at a New York Times op-ed Romney penned in November 2008.  My, initial, cynical reaction to reading this was “How many dollars per vote was that bailout?” But that’s not fair, either.

What Romney Said About the Bailout

The provocative headline of Romney’s op-ed, “Let Detroit Go Bankrupt,” was almost certainly written by an editor at the Times, not Romney. And, while pithy, it doesn’t fairly represent the message. Instead, Romney laid out a strategy that many of us–myself decidedly included–enthusiastically supported.

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

It remains to be seen whether this is right. Yes, we’ve seen a resurgence of the Big 3. And that’s good! But an infusion of massive amounts of taxpayer dollars and a write-off of significant debts ought to make the books look good three years out. Regardless of whether Romney (and Joyner) were right about the bailout, that a drastic restructuring of GM and Chrysler were necessary for long term success is surely true.

So, what did Romney suggest?

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

This would seem incontrovertible. Progressives might argue (and I tend to agree with them) that this makes the case for taking the responsibility for funding healthcare and retirement away from business and shifting it to the state–which is what all of America’s manufacturing competitors did decades ago. Conservatives might argue that it simply means labor is overcompensated. But the fact that the Big 3 can’t do business like it’s 1950 and there’s no real overseas competition is clear.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

This is just a no-brainer. To some extent, this happened as a condition of the bailouts. But the change was less radical than Romney recommended.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

This is both obvious and easier said than done.  After several more paragraphs detailing the need for restructuring the labor-management relationship, Romney concludes:

I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

This is not “Let Detroit Go Bankrupt.” Nor is it libertarian ideology masquerading as policy. Indeed, he’s calling for massive government investment in American industrial base and human capital. And he declared “The American auto industry is vital to our national interest as an employer and as a hub for manufacturing.” This is hardly  ”do nothing, and allow these companies to fail.”

Was Obama (and Bush) Right?

While I agreed with Romney’s prescription at the time and still think 95 percent of the analysis stands up to time, there’s a wee problem with the “managed bankruptcy” option: It requires massive capital reserves available to swoop in and grab a bargain.

Now, it seems obvious that the General Motors and Chrysler brands, their network of dealerships, their factories, and their highly trained and experienced people were extremely valuable. And it would seem like, stripped of their bad debts and the weight of outmoded contracts negotiated in a very different economic reality, picking them up at bankruptcy prices would be enormously attractive to the likes of Bain Capital, Warren Buffett, and others who do that sort of thing.

Steven Rattner, a prominent financier who served as Obama’s “car czar,” says this simply wasn’t the case. In his own NYT op-ed, titled “Delusions About The Detroit Bailout,” says of Romney’s plan:

That sounds like a wonderfully sensible approach — except that it’s utter fantasy. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.

I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms.

Absent angel funders coming to the rescue, then, Rattner argued there were no good options.

Without government financing — initiated by President George W. Bush in December 2008 — the two companies would not have been able to pursue Chapter 11 reorganization. Instead they would have been forced to cease production, close their doors and lay off virtually all workers once their coffers ran dry.

Those shutdowns would have reverberated through the entire auto sector, causing innumerable suppliers almost immediately to stop operating too.

Despite the relative health of its balance sheet, even Ford would have been forced to close temporarily, because critical parts would have become unavailable. And service providers — trucking companies, restaurants and more — would have been severely affected.

More than a million jobs would have been lost, at least for a time. Michigan and the entire industrial Midwest would have been devastated.

I consider myself an ardent capitalist, and well recognize the risks of government intervention, particularly the “moral hazard” of rewarding failure and the scary prospect of politics’ entering private sector decision-making.

But when markets fail, as they did for both autos and banks in 2008, government should have the ability — in fact, the obligation — to step in.

The Burdens of Command

While I bitterly opposed Bush’s bailout–not only in principle but because he did so in defiance of Congress rejecting it and by using billions of taxpayer dollars allocated for something else entirely–the 43rd president still believes he did the right thing. In a speech earlier this month to a car dealers convention, he explains why:

“I didn’t want there to be 21 percent unemployment,” Bush said in a speech yesterday to cap the annual National Automobile Dealers Association convention, attended by more than 20,000 people. “I didn’t want to gamble. I didn’t want history to look back and say, ‘Bush could have done something but chose not to do it.’ And so I said, ‘no depression.'”

The Bush administration provided loans to GM and Chrysler starting with $4 billion to each company in December 2008 and January 2009. Bush eventually provided $17.4 billion in aid to the automakers before Barack Obama’s administration expanded the rescue of the companies to $62 billion.

[…]

“I’d make the same decision again if I had to,” Bush, 65, told Stephen Wade, the dealers association’s outgoing chairman.

[…]

Bush told dealers he still believes in the free market. “If you make a bad decision in business, you ought to pay,” he said. “The problem is, sometimes circumstances get in the way of philosophy.”

Bush wrote in his 2010 memoir “Decision Points” that he met with Obama six days after the current president’s election and discussed the auto companies in the Oval Office. Within the week, he told his economic team he “wouldn’t let the automakers fail.”

“Nobody was more frustrated than I was,” he wrote. “It was frustrating to have the automakers’ rescue be my last major economic decision. But with the market not yet functioning, I had to safeguard American workers and families from a widespread collapse. I also had my successor in mind.”

Even with the benefit of three plus years’ hindsight, it’s still not clear whether the bailouts were the right call. But it’s understandably why Bush made it, especially in the wake of the Lehman Brothers disaster. His legacy will likely never recover from the Iraq War and perhaps not even Katrina. But he surely didn’t want to go down as the president who let the crown jewels of American manufacturing go under for want of $8 billion–or even $17.4 billion.

For Obama, the call was likely easier. He’s less philosophically opposed to government intervention into the economy and organized labor is a major leg in his base. And $62 billion was a relative drop in the bucket in a nearly trillion dollar “stimulus” package.

We don’t have the counterfactuals to know what would have happened had we gone with Romney’s plan–although Rattner’s scenario is certainly plausible. Or the advantage of time to know whether the resurgence of GM and Chrysler will be sustained. But I suspect any president–including a President Romney, had 2008 played out much differently–would have ultimately made the same call. It’s just easier to call for letting the chips fall where they may from the comfort of a pundit’s chair than from the pressure cooker of the Oval Office.

Such situations always bring to mind an exchange in Season 2 of Battlestar Galactica where Admiral Adama resumes command after having been incapacitated to find that Colonel Tigh had made a series of disastrous decisions while filling in. Tigh apologizes and admits he “frakked things up good” but Adama responds, “I never had much use for people that second-guessed my decisions, especially if they’ve never held a command. They don’t understand the pressure to make a call that affects the lives of thousands, and you have no one to turn to for backup.”

My takeaway isn’t that we shouldn’t question the decisions of our leaders; by all means, we should. But a reason that presidents so often make big decisions that seem antithetical to the core philosophies they campaigned on is that, presented with experts offering gloom and doom scenarios, they often do just what Bush said he did: cede principle to circumstance.

FILED UNDER: *FEATURED, Campaign 2012, Economics and Business, US Politics, , ,
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Drew says:

    I’m glad you titled the essay Auto Bailout Politics, and not Bailout Economics or Fairness.

    The buggy whip industry could thrive with output and employment levels commensurate with 1890 if voters and the government had decided to subsidize a dinosaur without limit. Witness also, today, the Volt.

    This was a travesty, taking many bad actors off the hook with other peoples money. The steel industry was not a beneficiary of such government and taxpayer largess. Yet little known, the best of the facilities thrive today after a period of management, labor and facilities restructuring.

    That’s the way it should work. But community organizers only know bofoing the productive for votes.

  2. anjin-san says:

    Debates about the bailout aside, there is one thing I can tell you for sure. I spend a lot of time hanging out with professional drivers, and they are all very excited about the cars coming out of Detroit now.

    One of my buddies who does some work for Ford showed up at the track a few weeks ago driving a Tarus SHO, and we were all pretty much blown away by it – an almost shocking increase in quality, style, and driving excitement over what Detroit was turning out just a few years ago.

    I give Bush and Obama a lot of credit for making it possible.

  3. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.

    Wait, you mean to tell me that ignoring normal bankruptcy law to wipe out the secured creditors in favor of the UAW is made it hard to find people willing to invest capital in the resulting companies? Well, I’m just SHOCKED!

    There is something of a false dilemma here, in that the only two options being considered the specific bailout that occured and doing nothing. If this was really about providing last resort capital, there are many ways it could have been structured so that the end result was less of a massive transfer of money from taxpayers to politically connected executives (of both the auto company and the auto union variety).

  4. michael reynolds says:

    Bush and Obama did the right thing. Romney and you were wrong. But as you point out, had Romney or you been in the big chair you’d most likely have done the same thing. This is why I’m uncomfortable with ideology. It exists in a fantasy zone, it’s an abstraction ill-suited to reality, and sooner or later one is forced to choose between ideology and pragmatism.

    If one chooses pragmatism, then what was the point of espousing an ideology? If one chooses ideology then one is simply an ass. One way or the other, ideology ends up being at best a waste of time, and at worst, destructive.

    I bear in mind Dave Schuler’s statement that there is no future for auto production in the US. But I note that if you extend the timeline far enough there’s no future for anything. It seems likely Detroit will survive for at least another decade, and many jobs will have been saved, and that’s good enough for me.

  5. michael reynolds says:

    @Drew:

    But community organizers only know bofoing the productive for votes.

    And how about Republican oil men? You really need to work on your act. You make it too easy.

  6. michael reynolds says:

    @Stormy Dragon:

    There are endless options in hindsight. There are always far fewer in reality.

  7. Jr says:

    He’s going to have a harder time winning the Wolverine State in November.

    Lets be honest, Romney has no chance in MI.

  8. Brummagem Joe says:

    IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

    This is the classic in the long run we’re all dead fallacy. In the meantime you could with total certainty have kissed goodbye to the US auto industry and it’s huge support infrastructure across the midwest. Both as a sound business decision (as Rattner explains) and as a matter of public policy rescuing the auto industry was a no brainer. Politically speaking Romney would have done himself a huge favor if he’d admitted as much. Now he’s trapped in defending a totally idiotic position which will imho be a major contributor to his loss of the midwest..

    Even with the benefit of three plus years’ hindsight, it’s still not clear whether the bailouts were the right call.

    Unclear? The alternative call was the collapse of the entire US financial system with the associated freezing of credit markets which would have made the implosion of the auto industry look like a tea party. Of the 12 leading banks in the country (who collectively represented around 65% of the banking business) seven of them were zombies and another two near zombies. Even under the best scenario only three would have been able to avoid closing their doors and being liquidated or more likely nationalised.

    presented with experts offering gloom and doom scenarios, they often do just what Bush said he did: cede principle to circumstance.

    You mean ideology to reality?

  9. I resent the fact everyone who wanted the auto industry to fail as they put all the blame on the workers. They wish all workers to take the most cuts in wages and benefits, Why does it bother people who have, want some not to have.

  10. Drew says:

    Wait, you mean to tell me that ignoring normal bankruptcy law to wipe out the secured creditors in favor of the UAW is made it hard to find people willing to invest capital in the resulting companies? Well, I’m just SHOCKED!

    You are one of the few who it appears to really understand the chilling effect this had. It was an absolute shock wave through finance. The sanctity of a first and perfected lien has been the cornerstone of relatively cheap financing forever. And then came along a guy who said ” screw that, I got votes to buy.”. The effects in finance continue to this day. And I bet not 2-3 people on this site understand it.

  11. scott says:

    @Stormy Dragon: Here is my problem with this narrative. The so-called bailout to the UAW was to shore up the health benefits fund which the UAW took over. If it is a bailout at all, it is to bail out retirement benefits that were already earned, I don’t know why already earned benefits are subordinate to other interests.

  12. Drew says:

    Nice straw man, micheal. Ever seen me defending oil companies tax advantages. Or GE (snicker) another bastion of economic freedom (snicker, snicker). Or blowing a cheap pol like Obama for political advantage at the price of campaign contributions.

    YOU need to sharper YOUR game.

  13. Brummagem Joe says:

    @Stormy Dragon:

    Wait, you mean to tell me that ignoring normal bankruptcy law to wipe out the secured creditors in favor of the UAW is made it hard to find people willing to invest capital in the resulting companies? Well, I’m just SHOCKED!

    Well I’m not shocked that you continue to lie about this. Normal bankruptcy laws were not ignored. They simply can’t be because there’s something called due process supervised by a court system. The process was followed to the letter. Although large in size it was in other respects a textbook working out of the process

  14. Brummagem Joe says:

    @Drew:

    The sanctity of a first and perfected lien has been the cornerstone of relatively cheap financing forever.

    And a majority of the holders of the bonds that represented this first lien voted for the bailout or it simply wouldn’t have been able to proceed. You as usual haven’t a clue what you’re talking about. There has been no huge chilling effect on the corporate bond market.

  15. Drew says:

    @Stormy Dragon:

    There are endless options in hindsight. There are always far fewer in reality.

    This is really cheap. Why not just grunt like a cave man and say I dunno?

    The auto industry needed, and still needs to rationalize. It will come out the other side better and stronger. They’ve just been given a temporary dose of crack to get them through for awhile…….so pols can get elected and union bosses can continue to live off the public teet.

    Anjin-San correctly points out that Detroit is capable of putting out great cars, but incorrectly infers that bailouts are necessary. This is crazy. I hold no brief for Detroits demise. My early career was all about supplying Detroit. But coddling bad behavior is a loser. The poster boy in idiocy is the Volt.

    I watched the steel industry in its most dire moments. But today, I’ll put the Harbor Works, US northern Indiana, the old Beth Dunes Harbor works etc against anybody, globally. Didn’t happen by some idiot law professor giving away other people’s money. It came from feet to the fire and real live appropriate investment, technology adoptment, process engineering process control. Same as it ever was.

  16. Drew says:

    BJ

    I’ve found you worthless to converse with, as you simply declare victory and move on without ever making an argument. Ive been in the world of corporate finance for 22 years and your assertions are just crap.

    You have no clue what you are talking about.

  17. michael reynolds says:

    Drew:

    Yes, so the Republican oil man — Mr. Bush — who started the bailout isn’t the problem, it’s the “idiot” “community organizer” who followed him who is all the problem.

    Let me think, what can possibly be the vital difference that makes one an idiot community organizer? Hmmm. That’s a puzzler.

  18. anjin-san says:

    Witness also, today, the Volt.

    Ah, Drew? Some products fail. Some succeed. Right now Detroit is on the right side of the W/L equation for the first time in a long time.

    Putting the Volt forward as being representative of what is happening in Detroit right now is an ideological argument, not a business argument. You like to present yourself as our resident business expert. You do need to up your game. Badly.

  19. sam says:

    @Drew:

    The steel industry was not a beneficiary of such government and taxpayer largess.

    Rick Santorum Was Wrong. The Steel Industry has Gotten a Bailout.:

    …Santorum said that the steel industry has never gotten a bailout. He even went so far as to say that he was around in the 1970s and 1980s, so he knows. Well, he doesn’t know. Below are two headlines from October 1, 1980:

    Pittsburgh Post-Gazette: “Steel executive cautious on Carter’s aid proposal”
    Pittsburgh Press: “Carter’s Aid Plan Pleases Big Steel”

    These headlines are personal to me because I was inside the White House on September 30, 1980 meeting with President Carter. Steel industry executives were the group coming in behind our group, and we crossed paths with them on the south lawn of the White House as we were leaving. I remember distinctly that they got out of their limousines smoking big cigars and making a display of their arrival. It annoyed me because the next day I was scheduled to discuss the steel industry with my business strategy classes.

    The specific issue for discussion in class would be U.S. imports of Japanese steel because U.S. steel producers were being clobbered. I was going to explain to my students that U.S. steel companies should not get support from the federal government because Japanese manufacturers were importing both coal and iron ore, converting them to steel, and exporting the finished product to the U.S. at a price that was lower than the cost of production of U.S. steel companies. It was clear evidence of the inability of U.S. steel producers to compete primarily because of their excessively high labor costs.

    It was an election year, so Carter did come to the aid of U.S. steel companies at the expense of taxpayers. In other words, it was a bailout, and Senator Santorum needs to get his facts straight. Neil Snyder [chaired professor emeritus at the University of Virginia]

  20. sam says:

    JJ, can you spring my comment from the moderation queue? Thanks.

  21. PD Shaw says:

    @Stormy Dragon:

    There is something of a false dilemma here, in that the only two options being considered the specific bailout that occurred and doing nothing. If this was really about providing last resort capital, there are many ways it could have been structured so that the end result was less of a massive transfer of money from taxpayers to politically connected executives (of both the auto company and the auto union variety).

    Yes, that’s the problem. If your going to use bankruptcy, use it right. Eliminate all of the legacy costs, restructure the liabilities and emerge as a more competitive company going forward. In hindsight this might look like one of those bankruptcy reorganizations that works for several years, but because of rosy glasses, they’ll be back again.

  22. Brummagem Joe says:

    Barry Ritholz (author of Bailout Nation, who runs his own bond book and is one of the most credible financial commentators out there) on the auto bailout. As Ritholz points out it was a ginormous winner for all, but the bizarre ideology (not to mention ignorance of financial realities and due process) of our resident economic experts Drew and SD doesn’t allow that possibility to be recognized.

    This was the single best decision of the bailout era.

    It seemed to be the only decision that was not made in a panic. It adhered to the rules of capitalism — when your company is insolvent, it goes into reorganization or dissolution. The brutal, Darwinian rules of the market and of bankruptcy applied — not the influence of lobbyists, or special favors from Senators. The Treasury Secretary’s former gig was not running an auto company, he ran a Wall Street bank — so there could be no special favors expected to come from that quarter either.

    Instead, Uncle Sam’s involvement was to provide Debtor-in-Possession financing. The bankruptcy plan was obvious: Wipe out shareholders, give bond holders a haircut, fire management, pare the company down to a sustainable size without sentiment.

    This was what was done. A turnaround plan was created and executed. If the company met its milestones, the firm would be taken public, which would allow the government to significantly reduce its stake and exposure to GM. The Fed also helped, keeping financing rates at ultra low levels.

    The long term stock sale plan would lead to the taxpayers being made nearly whole. All told, it was a wild success. Malcolm Gladwell argued that Rick Waggoner should get more credit and Steve Rattner less, for GM’s effective turnaround; many of the new models that are now doing so well were first created and planned for under Waggoner’s tenure 5 years ago.

    So what is arguably the most successful bailout of the 2007-2010 era was in fact a non-bailout: It was a bankruptcy reorganization that eliminated the most toxic aspects of a century old rust bucket of a company. The new firm has clean books, is well capitalized, is without crushing debt, has a less onerous labor contract, pension and health care obligations. Its hard not to see how this was anything but a ginormous winner for all involved.

  23. WR says:

    @Drew: Shorter Drew: Steal the pensions and give them to the bankers! Because a deal with a banker is sacred, and a contract with a worker is crap!

  24. @Brummagem Joe:

    In the meantime you could with total certainty have kissed goodbye to the US auto industry and it’s huge support infrastructure across the midwest.

    I wonder why Chrysler, now a subsidiary of an Italian corporation, qualifies as “the US auto industry”, but Honda and Toyota’s US plants do not.

    Or is “US auto industry” really code for “UAW auto industry”?

  25. michael reynolds says:

    Drew is a case study in the Money! wing of the GOP.

    He sees nothing beyond himself. He imagines nothing beyond his own needs, his own preferences, his own prejudices. Every argument he makes is from his own experience and he is incapable of grasping that his own experience is defined by his own preconceptions and is thus useful but not singularly authoritative.

    It’s solipsism as political ideology. It fits perfectly with the Rand-worship, the sense of victimization, and the absolute lack of self-awareness.

  26. Brummagem Joe says:

    @Drew:

    Ive been in the world of corporate finance for 22 years and your assertions are just crap.

    Since you’re such an expert just answer one question did a majority of the bondholders vote to approve the bailout or not. YES OR NO.

  27. Rob in CT says:

    My understanding is that there have been union concessions. So the “rationalization” process is underway, if not yet complete.

    If they have further to go, ok. The question is: was government intervention in 2008-2009 necessary in order to prevent liquidation?

    If yes, and the case has been made that this was so, then the bailouts look rational to me. I didn’t like the idea myself… much as I didn’t like TARP much. It’s just that the alternative was worse.

    Stormy Dragon claims that private sector financing was scared off by the Obama Administration. Drew concurs, in his usual manner.

    I’d like to see a full & fair examination of that claim.

  28. anjin-san says:

    It’s also worth noting that the bailout v. bankruptcy ship has sailed, regardless of how you feel about it. So do opponents carp endlessly about Detroit, many of them actually rooting for them to fail, or do we embrace the quality products now being made by the American auto industry?

    My wife needs a new car next year. I am thinking about a Ford, as opposed to yet another Honda. Prior to now, the last year that cars from Detroit interested me was 1972. She had a Ford back in the 90s that was an utter piece of crap. That I would even consider spending hard earned money on a Ford shows that things have really changed.

    Let’s put this argument to bed, take our winnings, and walk away from the table.

  29. gVOR08 says:

    @Drew: Really think the domestic steel plants would be doing well right now if Obama had allowed the auto industry to go down? It would not have been just GM and Chrysler. Ford said at the time that if GM and Chrysler went down Ford would have gone under too as their supplier base disintegrated. Toyota and Honda were planning year long shut downs until they could rebuild their supply chains. Wouldn’t that have worked out well for all of us?

  30. Rob in CT says:

    @Stormy Dragon:

    I thought a key part of the argument about the “US auto industry” was that if GM & Chrysler went down, a whole bunch of suppliers and other connected businesses would go down too.

  31. Brummagem Joe says:

    @Stormy Dragon:

    I wonder why Chrysler, now a subsidiary of an Italian corporation, qualifies as “the US auto industry”, but Honda and Toyota’s US plants do not.

    Demonstrating your cluelessness again you’re confusing brands, markets, manufacturing locations and ownership. I don’t think anyone in his right mind regards Chrysler and Jeep as anything other than US brands whose principal markets and manufacturing capacity are concentrated in the US.

  32. Rob in CT says:

    @anjin-san:

    Consumer reports apparently just came out with a ranking. Subaru tops the list, Honda & Toyota still strong. Ford dropped from 5th to 10th. Chrysler, as usual, brings up the rear.

    I’m glad that disaster was averted. That said, I doubt all is peaches & cream. And I too still have memories of a Ford POS (granted, mid-80s, which is a long time ago).

  33. Rob in CT says:

    Meanwhile, while we argue over this done deal, Netanyahu is apparently doing his level best to get us into a war with Iran. What stands between us and that insanity? A portion (but only a portion!) of our current government and (hopefully) war-weary voters.

  34. grumpy realist says:

    The problem with sticking to ideology is that it doesn’t work. The standard cycle of capitalism and Schumpeter’s “creative destruction” only holds providing a heck of a lot else is kept constant. You are assuming that in the free-trade/capitalistic “ecologonomy” that there is a population of scavengers [private equity raiders] that will come in when there has been a large kill [bankruptcy] and will recycle the stuff.

    There wasn’t. Nobody had enough cash, and everyone was jittery and sat on the sidelines. The government was the only player big enough and willing enough to act, and act efficiently.

    To hear Drew and others, we should have just sat on our behinds and twiddled our thumbs while the whole system crashed and then build itself back out along pure, free-market lines. [All hail Ayn Rand!] The fact that this would have meant 10 years or more of absolute hell for the average American is ignored. The fact that during those 10 years China would have definitely eaten our lunch and attained global hegemony is, of course, also ignored….

  35. michael reynolds says:

    @anjin-san:

    I am thinking about a Ford, as opposed to yet another Honda.

    Same here. American cars have held no interest for me until recently. In the last ten years it’s been all Germans and Japanese. But if I didn’t still have kids to drive around I’d grab a Mustang convertible tomorrow. Cadillac has some hot models as well.

  36. @Brummagem Joe:

    I don’t think anyone in his right mind regards Chrysler and Jeep as anything other than US brands whose principal markets and manufacturing capacity are concentrated in the US.

    Then you should have no problem explaining the criteria that distinguishes why the US sibisidary of an Italian multi-national is “American”, but the US subsidiary of a Japanese mutl-national is not.

  37. Brummagem Joe says:

    @Drew:

    I watched the steel industry in its most dire moments. But today, I’ll put the Harbor Works, US northern Indiana, the old Beth Dunes Harbor works etc against anybody, globally. Didn’t happen by some idiot law professor giving away other people’s money.

    This btw is another fantasy. I’m not an expert on these operations by any means but I seem to remember vaguely that the mills at Beth Dunes have been the recipients of quite a lot of federal and state help and help from the corps of engineers. I can’t be bothered to start researching it because this guy is such a fantasist but maybe someone from the area knows something about it.

  38. reid says:

    @michael reynolds: The dripping condescension is really the frosting on the cake for me.

  39. anjin-san says:

    It’s also worth pointing out that last year’s disaster in Japan showed us just how complex and fragile 21st century supply chains are. I am not confident that the dead hand of Ayn Rand would somehow put Humpty Dumpty back together if GM and Chrysler had gone bust.

  40. Brummagem Joe says:

    @Stormy Dragon:

    but the US subsidiary of a Japanese mutl-national is not.

    Would you like show me

    anywhere

    where I’ve said the US based ops of Toyota are not part of the US auto industry? However, if Toyota never sold another car in the US they wouldn’t go out of business whereas Chrysler and Jeep would. Sheeesh.

  41. anjin-san says:

    I’d grab a Mustang convertible tomorrow

    The new Shelby Mustang (650hp!) and the Camaro Z1 are both cars that I would be happy to have sitting in the driveway. I might have bought a Caddy two years ago when the lease on my 350Z was up, but I could not find a salesperson who was not an idiot and I ended up buying out the contract on my Z, which is a great road/track car.

  42. @Brummagem Joe:

    I seem to remember vaguely that the mills at Beth Dunes have been the recipients of quite a lot of federal and state help and help from the corps of engineers.

    This is an example of the problem with bailouts. While the steel industry bailouts were sold to the public in terms of saving the US steel industry from foreign competition, they were really about saving the Old Guard (and thus politically connected) integrated steel mills from the newer mini-mill operations like Nucor.

    For all the left loves to talk about opposing corporatism, they sure love manipulating the economy to benefit entrenched corporate interests at the expense of smaller less political competitors.

  43. Brummagem Joe says:

    @Stormy Dragon:

    This is an example of the problem with bailouts. While the steel industry bailouts were sold to the public in terms of saving the US steel industry from foreign competition, they were really about saving the Old Guard (and thus politically connected) integrated steel mills from the newer mini-mill operations like Nucor.

    Err..Your fellow financial expert Drew claimed they were completely modernised and restructured without government help. And I’m still waiting for you to show me where I’ve ever said Toyota’s US ops arn’t part of the US auto industry.

  44. @anjin-san:

    My wife needs a new car next year. I am thinking about a Ford, as opposed to yet another Honda. Prior to now, the last year that cars from Detroit interested me was 1972. She had a Ford back in the 90s that was an utter piece of crap. That I would even consider spending hard earned money on a Ford shows that things have really changed.

    Meanwhile, my last three cars were all Fords (1998 Ford Explorer Sport, 2004 Ford Escape XLT, 2007 Mercury Mariner Hybrid). The reason I bought them over they Honda and Toyota equivalents is that the Fords were more roomy (I’m 6’3″) and had nicer styling inside, so I went with them even though I had to pay a premium for doing so. Now I’m not planning to replace the Mercury for another few years, but so far Ford killed off the Mercury line, has been stripping down the styling on the regular lines, has killed the hybrid model, and is replacing the Escape with a significantly smaller crossover. Meanwhile Honda is getting bigger and has been improving their styling.

    When I’m in the market again in three years I may be buying my first non-American car just because Ford no longer seems interested in selling to anything beyond the lowest common denominator, but still wants to charge a premium over it’s competitors.

  45. Brummagem Joe says:

    @Stormy Dragon:

    Err..Your fellow financial expert Drew

    Oops sorry I was confusing you with the other totally clueless SD…apologies.

  46. James Joyner says:

    @anjin-san: I’d note Ford was well ahead of the Big 3 curve. They didn’t even need the bailout; they joined in because of White House arm twisting.

    I drove a 350Z Roadster until three months ago, when necessity required I start driving my late wife’s Sienna minivan. It’s late model, so I’ll likely hold on to it for some time. Oddly, despite having invented the concept, there’s not an American minivan I’d consider. And, if I were going to go the car route, my inclination would be to Z’s cousin, the Infiniti G convertible. Now, if I wanted a pickup or SUV, the US would get a very hard look.

    That said, I’m not anti-American in car selection. I drove two consecutive Ford Countours, the second a Special Vehicle Team model, and liked them. But I think the Germans and Japanese are outdoing us on performance cars and bang for the buck.

  47. @Brummagem Joe:

    where I’ve said the US based ops of Toyota are not part of the US auto industry?

    Not you specifically, but when we repeatedly hear arguments along the line of “if we hadn’t save GM & Chrysler they US automotive industry would have been gone”, one gets the impression that Toyota, Honda, etc. plants in the US don’t count. Even if GM and Chrysler has ended up being liquidated, we still would have had plenty of US auto industry in Ford, Honda USA, Toyota US, etc.

    Now if we were only talking about GM, you could at least make the argument you’re basing the distinction on where the company is headquartered, but when Chrysler (which has spent most of the last decade as a subsidiary of either a German or an Italian corporation) is routinely included as “the American auto industry” the distinction between American and non-American begins to seem rather arbitrary.

    As I said, I suspect this really about protecting union domestic car manufacturers from non-union domestic car manufacturers rather than protecting US manufacturers from foreign manufacturers.

  48. Brummagem Joe says:

    @Drew:

    BJ

    I’ve found you worthless to converse with, as you simply declare victory and move on without ever making an argument. Ive been in the world of corporate finance for 22 years and your assertions are just crap.

    You have no clue what you are talking about.

    Radio Drew seems to have gone strangely quiet. Hi Drew boy I’m still waiting for an answer to my simple question did or did not a majority of the bondholders vote in favor of the bailout. Of course I know the answer which is why this twit won’t respond. Something like 55% of the bondholders voted in favor and most abstained. As best I recall there was subsequently a court challenge by some group that held the princely amount of around $3 million of bonds but it was dismissed by the judge supervisiing the bankruptcy.

  49. Brummagem Joe says:

    @Stormy Dragon:

    Not you specifically, but when we repeatedly hear arguments along the line of “if we hadn’t save GM & Chrysler they US automotive industry would have been gone”, one gets the impression that Toyota, Honda, etc. plants in the US don’t count. Even if GM and Chrysler has ended up being liquidated, we still would have had plenty of US auto industry in Ford, Honda USA, Toyota US, etc.

    Not really. The US auto manufacturers have around 60% (40% if you leave out Ford) of the market and buy most of their major and most expensive components like powertrains, hydraulics systems, fuel pumps etc domestically, Foreign manufacturers source a lot of the more expensive and high tech stuff from home.

    (which has spent most of the last decade as a subsidiary of either a German or an Italian corporation) is routinely included as “the American auto industry” the distinction between American and non-American begins to seem rather arbitrary.

    For the second time….you’re confusing brands, markets, manufacturing locations and ownership. I don’t think anyone in his right mind regards Chrysler and Jeep as anything other than US brands whose principal markets and manufacturing capacity are concentrated in the US. However, if Toyota never sold another car in the US they wouldn’t go out of business whereas Chrysler and Jeep would. Ditto Fiat or Mercedes who have both owned Chrysler.

  50. Brummagem Joe says:

    @Brummagem Joe:

    Something like 55% of the bondholders voted in favor and most abstained.

    Most of the balance abstained.

  51. Brummagem Joe says:

    @James Joyner:

    I’d note Ford was well ahead of the Big 3 curve. They didn’t even need the bailout

    Only because Mullally had the nous to borrow I think it was $22 billion before the bubble burst in the late summer 2008. The Ford family were wetting themselves because they saw their equity disappearing completely if anything had gone wrong.

  52. It would be nice if any essay on the success or failure of the bailout and restructuring could name a true cost. It seems numbers jump all over the place, but generally stay in the tens of billions.

    Compared to a trillion in war funding, that’s chump change.

    And anyone who says “woe is me” about the autos, and not the wars, is an idiot.

  53. (I would guess that people like Drew just feel the auto costs so much more than they feel the war costs. It’s emotional.)

  54. anjin-san says:

    @ James,

    Ford did a much better job than GM or Chrysler in general, and did not themselves need a bailout. That being said, if GM and Chrysler had gone under the suction may well have taken Ford down too.

    I have been a Z nut since they came out, on my third one. I will probably hold on to mine for five more years and then get a Porsche Cayman if finances allow. I drove BMWs & Mercedes for a long time but the TCO got old. On the other had, I have always wanted a Porsche and I am not getting any younger. If you are ever in NorCal, give me a shout and we will see about getting you out on the track.

    @ Stormy

    Check out the above mentioned Tarus SHO. Some of my buddies say it will give a comparably priced BMW a run for it’s money.

    @ Rob in CT

    My sense is that those rankings are more about foreign manufactures upping their game in the face of sudden US competition than a drop in US quality. For almost 40 years Japan, Germany and others knew US cars were crap (decent trucks & SUVs though). They got a little fat & happy – look at the probably permanent damage Toyota did to their brand with the Prius fiasco.

  55. Yeah, thinking it over more, I think the GOP has an argument that only appeals to them. Preaching to the choir.

    Everyone else will essentially see success at a low cost. And scaling the bailout versus war or even the stimulii, it was low cost.

    Heh, remember. Billions just aren’t that exciting anymore. You want to talk about blows to the budget or the debt, you better find yourself a trillion.

  56. anjin-san says:

    http://www.youtube.com/watch?feature=player_embedded&v=inxnx2fPg2g

    Obama addressing auto workers, not a teleprompter in sight. Am I looking forward to him going toe to toe with the winner of the GOP clown car derby? Yes.

  57. @Brummagem Joe:

    Not really. The US auto manufacturers have around 60% (40% if you leave out Ford) of the market and buy most of their major and most expensive components like powertrains, hydraulics systems, fuel pumps etc domestically, Foreign manufacturers source a lot of the more expensive and high tech stuff from home.

    Unfortunately this isn’t true. Take for example:

    http://autos.aol.com/article/is-your-car-really-american/

    US built Chrysler’s average 61% US parts, where as US built Mercedes average 62% US parts. If you look across all the manufacturers, there’s a huge mish mash of cars built in the US from US parts, cars built in the US from foreign parts, foreign built cars built from foreign parts (even in supposedly US companies, a lot of cars are built in Mexico or Canada), and even cases of foreign builts cars made from US parts. As I said, the distinctions between foreign and domestic cars are increasingly arbitrary.

  58. @anjin-san:

    They got a little fat & happy – look at the probably permanent damage Toyota did to their brand with the Prius fiasco.

    Um. Didn’t all of those reports vanish as vapor?

    Floor mats? I think that was the best anyone ever did to prove anything.

  59. Brummagem Joe says:

    @anjin-san:

    Ford did a much better job than GM or Chrysler in general, and did not themselves need a bailout.

    Actually they were in just as bad a state as the other two but as JJ says were a bit ahead of the curve (like a year or two) in hiring Mullally who immedieately started seling off all Jacques Nasser’s acquisitions like Jaguar/Landrover, took out a huge loan and started to cut US capacity. Had they not hired him they’d have been in exactly the same boat. He got his restructuring capital before the spigot was turned off.

  60. Brummagem Joe says:

    @Stormy Dragon:

    As I said, the distinctions between foreign and domestic cars are increasingly arbitrary.

    So where are the vast majority of Chryslers and Jeeps vehicles made and sold?

  61. WR says:

    @Stormy Dragon: “As I said, I suspect this really about protecting union domestic car manufacturers from non-union domestic car manufacturers rather than protecting US manufacturers from foreign manufacturers.”

    Of course, that’s not true. But if it was, I’m not seeing the problem of a nation that believes its workers deserve good pay and benefits and not simply the lowest possible wages possible. Why libertarians worship owners and loathe workers is something I’ll never understand.

  62. Brummagem Joe says:

    @Stormy Dragon:

    Btw I don’t dispute there is a huge global interchange of part sourcing for US autos, but based on my own experience (and I used to work in the industry until about five years ago) the major customers for US made auto components were the US auto manufacturers although they also sell to foreign manufacturers with US ops. Had the two major manufacturer been liquidated the estimate of job losses is around a million. And indeed both Ford made representations to congress about the effect on its operations.

  63. anjin-san says:

    @Brummagem Joe

    How does hiring a CEO who engineers a turnaround and being two years ahead of the curve equal being in “just as bad a state”?

  64. anjin-san says:

    @ john personna

    The damage to the Toyota brand has been done. That’s the bottom line. Maybe it was an engineering problem, maybe it was a PR/damage control problem. The outcome was bad either way.

  65. @anjin-san:

    Well, as long as “pundits” don’t care if the problem was real, it will linger.

    Keep on the good work.

  66. Brummagem Joe says:

    @Stormy Dragon: “As I said, I suspect this really about protecting union domestic car manufacturers from non-union domestic car manufacturers rather than protecting US manufacturers from foreign manufacturers.”

    Ahh…so it’s all about the unions fault. It had nothing to do with protecting the domestic auto industry, it’s parts manufacturing infrastructure and distribution networks.

  67. @anjin-san:

    Or, we can file it with gas prices, under “the stupid vote.”

  68. Brummagem Joe says:

    @anjin-san:

    How does hiring a CEO who engineers a turnaround and being two years ahead of the curve equal being in “just as bad a state”?

    Actualy the Ford turnaround is still going on. I said THEY WERE AHEAD OF THE CURVE by hiring Mullally…that is they were in as bad a state before the process started….viz.

    Actually they were in just as bad a state as the other two but as JJ says were a bit ahead of the curve (like a year or two) in hiring Mullally who immedieately started seling off all Jacques Nasser’s acquisitions like Jaguar/Landrover, took out a huge loan and started to cut US capacity. Had they not hired him they’d have been in exactly the same boat. He got his restructuring capital before the spigot was turned off.

  69. anjin-san says:

    @JP

    Brand perception is a tricky thing. A failure to protect your brand is a serious business problem, regardless of the fairness, or even reality of the underlying issue(s). Either way, Toyota screwed the pooch on this one. They had a sterling, money in the bank rep, and they allowed to to be tarnished.

  70. anjin-san says:

    @ Brummagem Joe

    2008 was the pivotal point in all this. Sure, Ford was hosed earlier in the decade, but they saw the writing on the wall and got out in front of the problem. In my mind, that clearly differentiates them from GM and Chrysler. When the crisis hit, Ford was already well down the road towards getting their act together.

  71. Brummagem Joe says:

    @Stormy Dragon:

    Btw I took a look at that article and it’s a bit vague about it’s metrics. A powertrain is a lot more costly than some body pressings or plastic mouldings (not to mention having a lot more added value in terms of engineering and development)

    Chrysler says about 61 percent of the components it uses for its Chrysler, Dodge and Jeep lines come from the U.S., while about 20 percent come from Mexico and Latin America, about 10 percent from Canada and just under 10 percent from the rest of the world.

    And the Merc and BMW ops aren’t exactly in the volume sector of the auto market

    Mercedes-Benz assembles its ML-, R- and G-Class vehicles in Vance, Alabama, with a U.S./Canadian parts content of 62 percent, but both its engines and transmissions are unsurprisingly sourced from Germany. BMW, meanwhile, assembles its X-series SUVs in Spartanburg, South Carolina, with mostly German componentry.

  72. OzarkHillbilly says:

    @James Joyner:

    I’d note Ford was well ahead of the Big 3 curve. They didn’t even need the bailout; they joined in because of White House arm twisting.

    JJ, I don’t know where you got this idea, because I specifically remember the Ford CEO testifying for the bailouts because if Chrysler and GM went under they were going to take all their suppliers with them…. A large number of whom just happened to be suppliers of Ford as well.

    And that would have bankrupted Ford.

    “the company’s CEO lobbied for the bill. The company — the only one of the Big Three not to receive a bailout — feared a collapse of GM and Chrysler at the time would have hurt suppliers and, in turn, Ford itself. Ford Chief Executive Officer Alan R. Mulally also asked Congress for a “credit line” of up to $9 billion in case the economy worsened.”

    Doesn’t sound like arm twisting to me.

  73. Brummagem Joe says:

    @anjin-san:

    2008 was the pivotal point in all this. Sure, Ford was hosed earlier in the decade, but they saw the writing on the wall and got out in front of the problem. In my mind, that clearly differentiates them from GM and Chrysler. When the crisis hit, Ford was already well down the road towards getting their act together.

    Er…I thought this was what I said. And they only just dodged the bullet, it wasn’t a question of seeing the writing on the wall they they were on edge of going under when they hired Mullally. In some ways they were in worse shape than GM.

  74. Hey Norm says:

    “…I’ve been in the world of corporate finance for 22 years and your assertions are just crap…”

    There it is…just like the sun rising in the east…Drew strutting like a friggin’ peacock. Look at those big ol’ tailfeathers all plumed out. Ain’t you impressive!!!
    Folks who have to brag about what they’ve done, are folks who have to brag about what they’ve done.

  75. Brummagem Joe says:

    @OzarkHillbilly:

    JJ, I don’t know where you got this idea, because I specifically remember the Ford CEO testifying for the bailouts because if Chrysler and GM went under they were going to take all their suppliers with them…. A large number of whom just happened to be suppliers of Ford as well.

    And that would have bankrupted Ford.

    It certainly might have bankrupted Ford because had the supply chain collapsed Ford would have had to suspend operations at many plants. All these places now operate on a JIT basis so even a slight hiccup has huge ramifications.

  76. JohnMcC says:

    Just to join in the rah-rah, I’ve been buying domestic products/brands exclusively since the ’80s when I read Dr Kennedy’s book about the limits of empire and the Japanese export economy model. I’m on my 2d Mustang GT and the old one (260K miles) still starts whenever I twist the key and still will do a donut (and frighten onlookers) which brings a smile to an old retired guys face.

    And I agree with the bailout and re-organization; indeed the contracts with the working guys was equally serious a committment as the one to the finance guys. With the benefit that the UAW did not cause the biggest economic disaster since 1930.

    But there is a part of this that no one has mentioned. The world has a huge surplus of manufacturing capacity relative to the likely future of automobiles. WorldWatch points out that automobiles (I guess they include trucks and buses, which twists things a bit) amount to 3/4ths of the world’s transportation, uses 3/4ths of the world’s daily petroleum and contributes 15% of the worlds fossil fuel consumption (World Resources Institute).

    Further, at the time of the bailout, the world auto manufacturing capacity was less than 75% utilitized (WSJ of 16/11/09).

    I love cars. In particular, I love high performance American cars. But before I inhabit an urn I expect we’ll see that the subsidizing of huge national manufacturing sectors to produce them has been a great big mistake.

  77. Lomax says:

    As I recall, Ford Motors did not need or receive any government bailout money, as it had re-organized and got going again. Maybe GM and Chrysler should have looked at their programs and strategies. One must realize that at least three times Ford almost went out completely. WWII got them out of the ditch (government contracts) even though Henry had told the government where to go, he straightened up when they gave him a deal he couldn’t refuse (either make the jeeps, tanks, planes, etc., or the government would have kicked him out and taken over.) The other time their foreign sales kept them going. Disasters like the ill fated Thunderbirds of the ’70’s and the Pinto ran them into the ground.
    What the auto industry needs is someone with the free thinking of Howard Hughes, the perseverance of Edison, the vision of Henry Ford, and the mechanical genius of a NASCAR engine builder such as Jack Roush or Junior Johnson. Then you would get 50 mpg engines.

  78. Brummagem Joe says:

    @JohnMcC:

    But before I inhabit an urn I expect we’ll see that the subsidizing of huge national manufacturing sectors to produce them has been a great big mistake.

    You’re right about over capacity but we’re not about to switch over to an integrated mass tranportation system in this country. How long do you think that is going to take? And even in societies with well developed mass transport systems they still have healthy auto industires.Germany for example. You’re also forgetting the developing world. GM’s biggest export market is China.

    Btw I also checked on how much Mullaly borrowed and it was even more than I thought…nearly 24 billion at the start of 2007 and he mortgaged the entire company to do it. That takes cojones…actually more on the part of the Ford family particularly Bill Ford who wasn’t a very good CEO but he had intestinal fortitude to sign off on this.

  79. Brummagem Joe says:

    @Lomax:

    Maybe GM and Chrysler should have looked at their programs and strategies.

    Totally different situations from a corporate governance point of view. The bulk of the voting stock in Ford was held by the Ford family who have cars in the blood. Chrysler was owned by a private equity firm Cerberus desperate to preserve it’s huge investment and GM was all over the board with no single stockholder powerful enought to boot Wagoner and do the necessary. By 2008 it was too late they were running out of cash and no one wanted to lend to them. Had not Bush doled the first tranche in late 2008 they’d have been out of cash.

  80. grumpy realist says:

    @Stormy Dragon: Especially since the definition of “foreign” varies all over the place…when you’re calculating percentages, what is it by? Weight? individual unit of anything that can be taken off? Value of parts? Dot dot dot….

  81. Brummagem Joe says:

    @grumpy realist:

    Dot dot dot….

    I’m afraid this guy is more interested in ideology than facts. The giveaway was this…which is simply a total misrepresentation of what happened..it was a lie.

    Wait, you mean to tell me that ignoring normal bankruptcy law to wipe out the secured creditors in favor of the UAW is made it hard to find people willing to invest capital in the resulting companies? Well, I’m just SHOCKED!

  82. OzarkHillbilly says:

    @Hey Norm: @Hey Norm:

    There it is…just like the sun rising in the east…Drew strutting like a friggin’ peacock. Look at those big ol’ tailfeathers all plumed out. Ain’t you impressive!!!
    Folks who have to brag about what they’ve done, are folks who have to brag about what they’ve done.

    For what it is worth, I have come more and more to a position of doubt about Drew’s prowess in the financial world. The more one brags, the more another doubts. Maybe I am wrong. But I have yet to hear Drew utter a sentence that was not uttered on Fox News first. I have come to a position that Drew is full of sh*t, and he has to prove me wrong….

    Or maybe somebody else can??? Admittedly, I stopped reading Drew a long time ago because I could just go to Fox news and get it from there. Maybe Drew deviates on occasion, I really don’t know.

    I suspect that he is really a sales management associate at Wal-Mart.

    Drew…. prove to us your position on Olympus.

  83. OzarkHillbilly says:

    @OzarkHillbilly:

    prove to us your position on Olympus.

    Mount Olympus, that is.

  84. Brummagem Joe says:

    @OzarkHillbilly:

    Olympus,

    Would this be the camera company foundering in fraud?

  85. Lomax says:

    @Brummagem Joe: I wonder if the current car manufacturing corporation is really the best model to come up with truly revolutionary breakthroughs in alternative engines. Maybe an energy research center, independent of current corporations and government, would be an idea, on the scale of medical and technology research parks and the size of the Pentagon. We can see what has been done with alternative cars by looking at the Tesla. There are other ideas floating around and actually being tested, such as hydrogen and bio-diesel. The idea here is to get some of the best minds around and give them the freedom to research and test.

  86. Hey Norm says:

    Pretty much all the criticisms of the bailout get around to one thing…it was a missed opportunity to screw the workers. The same folks who scream class warfare want to Fu** the working class. But 30 years of waging that war on the middle class has left us where we are…in the midst of a demand crisis. We’ve tried their way and it has been proven a failed theory. Obama stood up for the workers. Call it union payback if you want to make a partisan argument. But at the bottom a shitload of workers are still working and creating demand. We need a shitload more…but were better off today for not listening to the critics. Because they were wrong.

  87. anjin-san says:

    For what it is worth, I have come more and more to a position of doubt about Drew’s prowess in the financial world.

    Yea, I like to give people the benefit of the doubt, but Drew keeps telling us what an impressive guy he is, yet he never seems to make any comments that impress.

    On the other hand, he does seem to know his high-end audio, and you need ducats to be in that game.

  88. Brummagem Joe says:

    @Lomax:

    I wonder if the current car manufacturing corporation is really the best model to come up with truly revolutionary breakthroughs in alternative engines.

    There probably aren’t going to be any revolutionary breakthroughs in alternative engines. Prime mover technology including all the alternative energy systems are very well known. Biodiesel has been around conceptually since the 19th century and has been in practical use for 40 years. Hydrogen as an internal combustion fuel has been known since the 1920’s at least and in fuel cell form for probably 30 years. You’re mistaken if you think the best minds are not already being applied to this. All the majors have vast research establishments engaged in engine technology research and development. Anything that happens is going to be incremental not revolutionary.

  89. @anjin-san:

    What you are really saying, whether you realize it or not, is that any company with an “unintended acceleration” case against them, must fail?

    Why? Because in the beginning they must treat the charge with respect, and investigate it responsibly.

    Later, when things go back to normal, the cases dry up, and you’ve got a million well-behaved cars on the road, people will STILL remember the investigation phase.

    There is no PR that will fix that because, as I say, the initial phase requires investigation and that the charge be treated respectfully.

    And so it is the responsibility of the public really, to sort the data afterward, and decide what was really the underlying and true story.

  90. And for whatever damage you claim for the brand, the Camry is still the best-selling car in America. Though that F-150 is still the best selling vehicle. The Prius itself makes the top 20 sales models. Data.

  91. anjin-san says:

    What you are really saying, whether you realize it or not, is that any company with an “unintended acceleration” case against them, must fail?

    Where did I use the word “fail”, or say that Toyota sales would suffer serious damage? What they lost was the public perception that a Toyota was a money in the bank, first class product. Now some doubt has crept in at the margins. From a branding perspective, that is a pretty major issue. Few companies ever attain the sterling rep that Toyota had, and one it is tarnished, it is difficult to reclaim.

    Except people tend not to work that way…

  92. WR says:

    @anjin-san: “On the other hand, he does seem to know his high-end audio, and you need ducats to be in that game. ”

    Or be a stereo salesman…

  93. @anjin-san:

    You said:

    The damage to the Toyota brand has been done. That’s the bottom line. Maybe it was an engineering problem, maybe it was a PR/damage control problem. The outcome was bad either way.

    Which says they failed, yes. You are saying there was some other engineering or PR/damage control path that would have worked for them.

    I’m saying no. It was sealed when the U-A claims went national.

    If you are seriously saying there was a engineering or PR/damage control solution, lay it out. don’t just say “this was a bad result(*), therefore they should have done better.”

    * – questionable in 2012, they’ve certainly come back stronger than Audi did in their U-A days.

  94. (Seriously Dude, Toyota has the best selling passenger car in America, and you are going on about a tarnished reputation and etc.

    I think you’ve got your own idea about Toyota, and a good dose of confirmation bias.)

  95. Rob in CT says:

    I’ll say this:

    My father had an “unintended acceleration” incident in a Camry (resulting in a fender-bender in a parking lot). Now, my father is in his 80s. It’s entirely possible that he hit the wrong pedal. But he swears this is not the case, and he’s been a very good driver all my life.

    When it happened, I quietly assumed that Dad had messed up. Then I saw news reports with other people claiming the same thing. Did they all get confused? Perhaps they did. There are a lot of Camries out there, and lots of them are probably driven by people who get confused. But I have to admit, it makes me wonder whether Dad was right.

  96. @Rob in CT:

    It is a sad fact, and one we usually do not report out of sensitivity to victims, but age of driver is the strongest correlation in U-A cases.

    (When my girlfriend’s father knocked over a fence in his yard, she and her mom got mad at the poor guy. I said “hey, when I get to be his age I reserve the right to knock down a fence.” And of course hope that’s the extent of it.)

  97. Among 19 fatal Toyota accidents where the driver’s age is known, 10 were older than 60 and five were older than 80, which may indicate drivers who were more likely to depress the wrong pedal or not brake with enough force. The median age of drivers in fatal accidents in 2008 was 39, according to U.S. fatal accident data. The median age, where the data was available in the Toyota crashes, was 61.

    Link.

  98. anjin-san says:

    @ JP

    I think you’ve got your own idea about Toyota

    I do. They did not handle this well, their brand did suffer some damage, and they still sell a lot of cars.

    I have a sawbuck that says this will be a b school case study for years to come.

  99. @anjin-san:

    But, as I say, you strangely cannot lay out a course that would have worked.

    For that reason I think you are mired in something irrational.

  100. Rob in CT says:

    @john personna:

    Like I said, it’s likely that’s the case. But you know this is a guy who *doesn’t* knock over the fence. He’d never actually had an accident before. But yeah, he was 84 or 85 when it happened. In all likelyhood…

    For me, it hasn’t really tarnished Toyota’s brand. My opinion before was that Toyota made excellent, bland, reliable and reasonably efficient vehicles. My preference tends toward Honda and Subaru. That general impression has not changed. Things happen.

  101. (It is entirely possible that the floor mats and throttle cables were a fig-leaf on the age thing. If that’s true, Toyota could not have cleared themselves without attacking the elderly. And so they chose the least damaging path in a no-win situation.)

  102. Rob in CT says:

    Yeah, I put the floor mat explanation down as “we can’t actually accuse all these people of user error. So, um, floormats.”

  103. anjin-san says:

    But, as I say, you strangely cannot lay out a course that would have worked.

    Probably because I don’t care enough about the issue to burn the daylight on it.

  104. Lomax says:

    @Brummagem Joe: I do think that a research center could provide a lot of freedom for scientists and engineers that they don’t usually enjoy. This could be financed by any number of wealthy individuals. It would be free from corporate boards and government bureaucracies and regulations. Many of these people are currently committed to other projects and research.
    Thanks for your reply and interest.