ANOTHER SUPPORTER OF THE "THEY SHOULD HAVE DROVE TO WASHINGTON D.C." IDEA

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Truth With Speedzzter previously suggested that the Detroit 3 CEOs should have lead a "Washington Dream Cruise" convoy new products together with a few thousand of soon-to-be-unemployed workers to the Senate "bailout" committee "turkey shoot" this week.

Instead they failed to grasp an impending public relations debacle and flew in their "private jet/flying conference rooms" at great expense to weakly ask for more money.

Now others are suggesting similar plans. CNBC's Mike Huckman is one of them:

"The "Detroit 3" (I can't call them the "Big 3" anymore) CEOs knew they were sitting ducks, that Congress would be loaded for bear and ready to haul these guys out to the woodshed. So, what did they do? They each flew in corporate jets to DC. I get that bigtime CEOs are busy and that there can be security concerns. But at a time when the American automakers are burning through cash at an alarming rate, laying people off left and right and asking the feds for billions of dollars to help them survive they or their handlers couldn't see the benefit of traveling on a budget?"

"For example, imagine the media bang General Motors could have gotten if Rick Wagoner had driven himself to Washington in one of the new Chevy Volt electric hybrids?

"

Certainly the Volt would have been an out-of-the box grandstand play. But what about a whole fleet of Detroit's latest world-class products. It could have been a moment as grand as the dramatic ending of Francis Ford Coppola's "Tucker: The Man and His Dream," albeit on a much larger and more blue-collar scale.

Sure, it would have cost a lot more in lost production and expenses than $20,000-$60,000 in private jet time. It would have been a logistical nightmare to organized on such short notice.

But America couldn't have ignored the streets of D.C. filled (and shut down) with American automobiles and trucks driven by hard-working fellow Americans who are poised to lose their jobs and homes if Congress fails to act. Nor could it have ignored a "Hot Rod Power Tour" phalanx of new, quality products that should make all fair-minded consumers forget about the dark ages of the 1970s and early 1980s.

They could have even added into the mix a few of the celebrity professional racers who depend on the Detroit 3 for their livelihoods. Why not even ask Jay Leno to ride along? The Detroit 3 had many popular public opinion leaders that they failed to tap in their darkest hour.

Such a display would have demonstrated the urgency of the situation and the need for immediate action better than mere words from a pack of $20,000,000-per-year CEOs ever could.

Even the threat of a "Drive On Washington" would have shaken Congress to the core.

It would have been a road trip for the ages.

It would have been a real-life, legal-speed "Two-Lane Blacktop" moment on a much grander scale. (Remember, the "Two-Lane Blacktop" allegory involved mailing the titles to the race cars of G.T.O. and The Driver to Washington, D.C. -- a metaphor for the impending loss of automotive freedom symbolized in the film)

Alas, the Detroit 3 CEOs played into virtually every negative stereotype the general public holds against them. And they lost . . . for now.

DID WILLIAM CLAY FORD, JR. AND THE UAW UNWITTINGLY HELP THE LIBERAL GREENS LIGHT THE FIRE THAT'S BURNING DOWN THE DETROIT 3?

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Although Ford Motor Company is probably a little more "fireproof" than the rest of the Detroit 3 in the economic conflagration that is scorching the remains of the U.S. auto industry, Truth With Speedzzter has been consistently critical of William Clay Ford, Jr.'s weak stewardship of the company.

But does Bill Ford have even more culpability for the Detroit meltdown?

Sure he was a flop as a manager. He missed a lot of opportunities (see Ford Mistakes sidebar for some examples), did not push hard enough for getting technological developments into the hands of consumers, listened too much to the controversial bean-counter Allan Gilmour, did not "fire" himself from the CEO job soon enough, wasted the Mustang's period of exclusivity, and did not demand better small-car contingency plans. But did he actually work to the detriment of the Detroit 3?

Steven Milloy of http://www.junkscience.com and adjunct scholar at the Competitive Enterprise Institute suggests so.

"[F]or decades, the Big Three and the UAW overlooked the linchpin of all these “good times” -- the cheap gasoline that fueled SUV sales. For some strange reason, neither the companies nor the UAW had the foresight or courage to challenge the Green chokehold on our gasoline supply."

"While the Greens blocked oil drilling offshore and on public lands, like the Arctic National Wildlife Refuge, the Big Three and the UAW looked the other way. When the Greens worked to block the expansion of gasoline refineries through both direct opposition to plant expansion and through stringent EPA regulation that made refinery expansion expensive and unprofitable, the car industry snoozed. Only Ford CEO Wiliam Clay Ford Jr. was active on the Green issue -- but not in a helpful way. He advocated higher gas taxes to incentivize the public away from buying SUVs."

Lil' Billy Ford has tried to play both side of the greeniac fence, to the satisfaction of no one. He has talked plenty of touchy-feely, Zen-garden, green-extreme nonsense which undermined legitimate industry skepticism about the headlong rush to judgment and freedom-sapping, big government "fixes" for the alleged "problem" of anthropogenic climate change. Yet the greens were never satisfied with his often flaky and inconsistent pandering to the verdant left. They lambasted the market-driven sales of the very vehicles that generated the money for Lil' Billy to spend on "green initiatives" and Allan Gilmour's sales-killing pet social activism projects.

If it can be said that he understood the "problem," he certainly didn't position Ford Motor Company very well to take advantage of the "solutions" (i.e. the higher gas prices he supported).

But, if as Steven Milloy posits, Lil' Billy was actually giving aid and comfort to Detroit's sworn enemies instead of working to protect FoMoCo's business, his tenure at the top was even more failed than some have previously opined.

The United Autoworkers Union leadership is on everyone's short list for villains in the crash of Detroit. Their inflexibility in work rules, outdated "worker versus management" mentality, market-ignoring "job protection" practices (e.g. the infamous "job bank," limits on cross-training, resistance to Japanese "total quality" methods), failure to unionize any of the Japanese "invader" assembly plants and spread the legacy and labor costs across the entire industry, and their obnoxious extortion of unsustainable wages and benefits did more to kill the American auto industry than anyone else, short of the federal government that made it all possible.

But the liberal UAW leaders have been so clueless and so in lock-step with the international green-socialist agenda that they apparently could not see the seeds of their own destruction being sown.

Bill Ford and the UAW. Two peas in a rotten pod.

REID, LIBERALS TORPEDO HOPES FOR A 2008 DETROIT 3 "LIFELINE" DEAL

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Senate Majority Leader "Dirty" Harry Reid (D-NV) upstaged a bipartisan news conference on a supposed plan to rescue the Detroit 3 automakers.

No deal and no possiblity of one until General Motors, Ford and Chrysler can prove "viability." Nothing is expected to happen until after the plans are due on December 2.

WHY NOT JUST FILE BANKRUPTCY?

A viability plan sounds a lot like a "plan of reorganization" in bankruptcy.

So why not cut out Congress, file bankruptcy, reject the current UAW contracts and obtain the other protections of a debtor-in-possession?

It's all about customer confidence.

The marketing studies that the Detroit 3 have undertaken suggest that too many consumers would lose confidence in a bankruptcy scenario.

Risking $500 on an airline ticket is not really the same thing as buying a complex $50,000 vehicle that may at some point need a warranty or collision repair (even the Japanese "invader" dealerships have service departments). Not enough consumers would be willing to risk $15,000 to $50,000 on a company that might not be around until the product warranty runs out.

Loss of consumer confidence doomed Studebaker, Packard and others in earlier times.

For a successful chapter 11 reorganization, the automakers would need sufficient post-petition sales to generate enough cash flow and post-petition financing to confirm a workable plan of reorganization. Otherwise, the case would become a "liquidating 11" or be converted to a chapter 7 liquidation.

Moreover, in the current credit crunch, post-petition financing is a real issue. To successfully emerge from chapter 11, the Debtor-in-possession has to have post-petition financing in place BEFORE FILING. If the Detroit 3 could raise that kind of money, why wouldn't they have already tapped it?

Sure, the UAW is a huge part of the problem. But the companies have to stay afloat long enough to address it.

Denying the Detroit 3 a "lifeline" is like complaining that a drowning man is too fat for rescue. "He'll just die anyway. We're prolonging the inevitable" Pull him out of the water first, then work on necessary diet and exercise.

Washinton's policies created this problem and Congress should be responsible enough to start fixing it in a timely manner.

Bankruptcy is not a realistic option. Neither is waiting on more Congressional fumbling of the football.

IS IT A DEAL OR JUST WISHFUL THINKING?

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The bipartisan deal appears to be retasking some of the "green" money already authorized.

Liberals in the House -- who are beholden to environmental special interests -- may not go along.

The compromise is clearly a common sense measure to push the crisis a little farther down the road into 2009. But common sense is often in short supply inside the Beltway.

WSJ: GM'S BOARD IS STILL WITH WAGONER

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Rick Wagoner's junket to Washington D.C. may have flopped (or not according to a story of an emerging secret bipartisan deal posted on the Drudge Report), but "the wheels have not come off of the Wagon[er]" in the eyes of General Motors' Board of Directors.

GM's board has continued to support Chief Executive Rick Wagoner, despite big losses over the past three years, in part because he was able to negotiate big labor and health-care cost cuts with its unions. A defeat in Washington followed by a bankruptcy filing might undermine his position, a person familiar with the matter said.

The board hasn't changed its support for the CEO, said GM spokesman Tony Cervone.

IS RICK WAGONER WASHED UP AT GM?

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It looks like Congress will adjourn for 2008 without doing anything to douse the economic firestorm that is consuming what's left of General Motors, Ford Motor Company and Chrysler.

Monday, November 17, 2008, the New York Times asserted that:

"DETROIT — Rick Wagoner cannot afford to leave Washington this week without at least $10 billion in federal aid to keep General Motors in business."


"Rick Wagoner, G.M.'s chief for the last eight years, has to convince Congress that the automakers need federal loans."

"But a major question for Mr. Wagoner, G.M.’s chief executive for the last eight years, is whether he will return to Detroit with his job as well."

Wagoner jetted into town on a "luxury corporate jet," got brutally punished in a sadly typical U.S. Senate "show trial" "photo op" joke of a "hearing," and did not even obtain so much as cab fare for GM.

Wagoner failed to "circle the wagons" when it mattered most. Now GM will be forced to either file for bankruptcy or go into a "starvation mode" in order to hang on until President-Elect Obama and a larger Democratic majority takes over in late January 2009.

This will likely be the longest sixty days of Rick Wagoner's life.

However the inescapable question is: Will Wagoner even survive that long as GM's CEO? Or was Wagoner's infamous begging trip to Washington D.C. in the GM executive jet one of his last?

Wagoner basically has put all of his clout and reputation on the line. His "bet" came up empty. He struck out in the bottom of the ninth with the whole World Series on the line. He missed the "Hail Mary" shot at the buzzer that would have prevented a certain loss and put the contest into overtime.

Moreover, some have undoubtedly concluded that how he has mishandled this has actually HURT GM's cause. A near universal chorus in the halls of Congress and the lazy, sycophantic media is that GM's management is to blame for the crisis. And that "buck" stops with the guy who failed to "close the sale" by not bringing home the bucks this week.

High-profile management upheaval will likely be necessary window-dressing to any future deal as well.

Wagoner is the last of the traditional "Detroit insider" CEOs. The popular canard that it will take brilliant folks who have not grown up in inside the auto industry to save it is a career-flattening steamroller for company men like Wagoner.

He may not have made the mess and he may have been fighting for restructuring long before anyone in Congress ever even heard of the concept, but he's most likely to take the fall for generations of GM managers that are long gone.

It maybe totally unfair and divorced from the actual facts, but Wagoner might just be one of the sacrificial lambs in the titanic struggle to save GM.

Of course, Mitt Romney is tuning up in the green room . . . .

BUILD YOUR OWN FORD MOTOR COMPANY?

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With Ford Motor Company stock selling at LESS than half the price of a gallon of gasoline and prospects OVER for any government action in 2008 to stabilize the Detroit 3 so that the 2010 United Auto Workers contract concessions have a chance to take effect, it is a grim world for Ford enthusiasts.

And if the bankruptcy dominos fall, resulting in a chapter 7 liquidation of the Detroit 3, what will those with "Ford Blue" flowing in their veins do?

One grassroots enthusiast already has his own answer. He built his own model Ford Motor Company!

Sure, it may not be a real or realistic solution to Detroit's meltdown. But maybe it is a way some enthusiasts will keep memories of the storied brand alive if the end were to come because of UAW greed, bean-counter myopia, and political stupidity.

“DEATH MARCH” OR “PLANE CRASH” IN D.C. FOR THE DETROIT 3

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The Big Bankrupt Three Detroit automakers crashed and burned in front of Congress.

The poverty pilgrimage of Ford Motor Company’s Alan Mulally, General Motors’ Rick Wagoner, Chrysler’s Bob Nardelli and the United Auto Workers’ Ron Gettelfinger was an Edsel-sized disaster. A fiasco. A flop.

In a breathtaking show of tone-deafness, the hat-in-hand witnesses reportedly breezed into town on a fleet of “luxury private jets.”

A skeptical media – the same one that couldn’t be bothered with doing real stories about President-Elect Obama before the election – noticed the irony . . or the hypocrisy.

One would have thought that somebody in the huge public relations operations would have dreamed up something better. Something more symbolic.

A bus ride.

A convoy with thousands of employees who would get fired and lose their homes when the Detroit automakers are parted-out and stripped like a stolen Corvette in bankruptcy.

On the other hand, the dwindling cadre of logical engineers as well as the myopic bean-counters who plague Detroit would recognize that flying by private jet to Washington D.C. undoubtedly saved 3-5 hours of travel time (not insignificant when your time is worth $1,000/hour or more to your employer). It allowed Mulally, Wagoner and Nardelli the option to surround themselves with advisers and staff. It permitted them to conduct rehearsals and other work in flight (not possible on a commercial flight). It was also more secure than commercial air travel.

$20,000 in travel costs is chump change when you need $25-100 Billion! When Senators junket to exotic locales on “fact-finding” forays, they often take even more expensive military aircraft. And these same Senators vote to spend billions earmarks for “landscaping,” “nature walks,” “bicycle trails”, “beautification” and a museums for arcana such as the Woodstock Music Festival.

Nonetheless, all of that logic will be lost in the battle for public perceptions. It was as tone-deaf as driving a 1960 Corvair to a Ralph Nader birthday bash. . . .

Maybe they could have call the jets “air ambulances . . . .”

As for the main event -- the scene exuded all of the foregone “drama” of a Figure-Eight Jalopy race.

As Autoextremist Peter M. DeLorenzo put it:

"The din out there in the media right now is so anti-Detroit, anti-'bailout' that I welcome the opportunity to present the other side of the debate, even if it appears with each passing day that Detroit is running out of time and unable to break through the negative media clutter that envelopes the industry at every turn. And after that death march of a hearing before the Senate Banking Committee yesterday, I’m even more pessimistic.

When Alan Mulally, Rick Wagoner, Bob Nardelli and Ron Gettelfinger sat down in front of the microphones, I knew it wasn’t going to be good . . . ."

In fact, it was a total set-up from the get-go.

Later, even the hapless Mitt Romney weighted in, reminding everybody that his Daddy was among the old-line of Detroit managers who barely kept now-defunct American Motors afloat back in the halcyon days of the 1960s with frugality.

Mitt even claimed that helping the Detroit 3 avoid certain liquidation in bankruptcy would virtually guarantee the “demise” of the Ford, GM and Chrysler! (Don’t worry, Flipper Mitty will probably flip-flop to supporting aid . . . after it is too late.)

The journalists also dredged up the example of nationalized U.K. automaker British Leyland as an example of why “bailouts” won’t work.

Of course, the bulk of British Leyland did survive into the 21st century – which it likely would not have if the ratchets of over-regulation, hyperinflation, and government coddling of labor unions had not been leavened by bridge loan funding.

The vandals and visigoths seeking to burn down what’s left of Detroit conveniently ignore any success stories. They just don't fit the narrative.

Chrysler’s resurrection in the early ‘80s is wholly discounted as “prolonging the inevitable” even though every taxpayer dollar invested was fully repaid ahead of time and with interest.

“[T]he case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.”

“The French government help for Renault also came amid increasing losses for the company. . . . [U]nlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.”

Renault even picked up the dregs of the weakened American company that Mitt Romney’s frugal Mormon pappy ran!

None of this matters to the Toyota-driving, Consumer Reports-worshiping, know-it-all Mob who want Detroit to “pay” for not eradicating the UAW forty years ago and who erroneously believe Vegas and Pintos accurately represent the quality of Detroit’s current products.

None of this matters to a hoard of finger-in-the-wind politicians who would spend billions more on pork and special interests, and anticipate heaping on billions more in unfunded mandates, but who will not lift a money-grubbing finger to save one of our most basic industries.

Romney, of course, is right when he says that the wages and benefits for UAW-represented workers must track with those of their “scab” counterparts in the right-to-work Southern and Midwestern assembly plants of the Japanese invaders. Yet, nobody in Washington D.C. has the bravado to suggest that the political branches of government have the power to make this happen. After all, it was FDR's "New Deal" that saddled the Detroit 3 with decades of labor trouble. Washington broke it and now they should fix it.

Instead, the Democrats and the GOP continue to squabble over the meaningless minutae of whether the already-appropriated $25 Billion for fuel efficient cars can or cannot be diverted to the more pressing need of avoiding a total shut-down of the industry. Stupid. Selfish. Tragic. Politics as usual.

Detroit is burning to the ground. Meanwhile all of those with fire extinguishers are acting as if they think fire is good.

THREE MYTHS SPREAD BY HATERS OF THE DETROIT 3.

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As prospects for a "Save GM" deal between the Bush Administration and Congress dim, the GM haters are out in force.

Analyst James West opines that

"The reason GM should be allowed to fail is because in its current state, its production overcapacity, if maintained by government money, can only churn out even more cars that nobody wants or can afford to buy. In other words, it would only prolong the inevitable."

An astute respondent (usanowGMelect)to West's claim pointed out the vicious "hate Detroit" myths behind West's attack on GM:

Myth No. 1: Nobody buys big 3 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 about 560,000 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 or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

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 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.

The problem, of course, will be finding enough money to stay in business long enough for these myths to be fully debunked.

Given the current partisan approach to the Detroit 3 crisis, sadly that may be a long shot indeed.

A "MUST SEE" VIDEO ON THE IMPACT OF A DETROIT 3 COLLAPSE

http://gmfactsandfiction.com/

"[T]he collapse of the U.S.-based auto industry wouldn't just impact the more than 239,000 Americans directly employed by the Big Three. One out of every 10 people in America is employed in a service that is related to the U.S. auto industry. If a plant closes, so does its suppliers, the local stores, the hot dog vendors, and the local restaurants. The effect would be devastating in ways of which you never have thought:

Nearly 3 million jobs would be lost in the first year alone – with another 2.5 million to follow over the next two years.

Personal income in the United States would drop by more than $150.7 billion in the first year.

The cost to local, state, and federal governments could reach $156.4 billion over three years in lost taxes, and unemployment and health care assistance.

Domestic automobile production would more than likely fall to zero – even by international producers, due to supplier bankruptcies."

IS IT CONSERVATIVE TO HELP THE DETROIT 3?

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It is not just the half of American consumers who buy imported vehicles who hate the Detroit 3.

Nope. It seems that a fair number of Republican pundits and politicians are anticipating the end of General Motors, Chrysler and maybe even Ford Motor Company.

The echo chamber of last Sunday’s news television was a hostile environment for any talk of helping the Detroit 3 deal with “double whammy” of economic downturn and $100 Billion Dollars in new fuel economy/greenhouse gas regulations.

“Let’em die” was almost the universal sentiment among those who claim to be “conservative.”

Adam Smith be praised and millions of auto-related jobs be damned.

For example, “Senator Richard Shelby (R-Ala.), a member of the Senate Banking, Housing, & Urban Affairs Committee, said: ‘The financial straits that the Big Three find themselves is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force. . . . I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.’"

Of course Alabama’s Shelby (not to be confused with Carroll Shelby) is merely doing the bidding of a host of import invaders.

“In Alabama, Asian and European auto companies have set up manufacturing in recent years. Once decimated by the loss of textile jobs, Alabama has attracted assembly plants from Mercedes-Benz (DAI), Hyundai, and Honda, as well as a roster of supplier companies feeding those plants. Foreign auto companies are attracted to the Southeast, where the United Auto Workers have no presence, rather than acquiring empty plants in the North that were organized by the union.”

Senator Shelby is reflecting the quasi-laissez faire “consensus” among elite conservatives (most of which have never deigned to even change a spark plug, much less understand the complexities of automaking) and a universal hatred for unionization in conservative circles.

To be sure, the United Auto Workers Union is a central player in the demise of the Detroit 3.

FDR-era union organizing laws forced unions on the Detroit 3 in the 1930s. By the 1980s, when the Japanese invader assembly plants started locating in “right to work” states, such as Senator Shelby’s “Sweet Home Alabama,” federal labor policy created a stalemate.

In other words, GM, Ford, Chrysler, American Motors and their various “rust-belt” suppliers were virtually powerless to shed themselves of unions, while their foreign invader competitors received a panoply of tools to avoid unionization. This resulted in a huge cost imbalance that only the gamble of bankruptcy or drastic federal intervention could possibly remedy.

The UAW’s abject failure to unionize the “invader plants” is one of the factors which know-nothings like Senator Shelby attribute to the fault of the Detroit 3.

FDR and an earlier generations of liberals saddled GM, Ford and Chrysler with expensive unions and then empowered them to hold the Detroit 3 hostage with “pattern bargaining” that was wholly divorced from the international auto labor market. This labor structure absolutely prevented and still prevents the Detroit 3 from being able to assemble small cars cheaply enough to compete with lower-wage foreign and non-unionized parts making and assembly operation.

Potential profit margins in small cars are, of course, small. Spotting the products of a Japanese invader auto plant a $1,500-$2,000 cost advantage up front is fatal.

Only a few strategies were available to the Detroit 3 that were short of destroying their businesses in bankruptcy in order to reject the UAW contracts and start from “ground zero” with new, non-union “scab” workers (which as we know didn’t work out for Firestone and directly lead to the horrible Firestone/Ford Explorer mess).

Senator Shelby, here's the options that the Detroit 3 realistically had:

First, the Detroit 3 could drastically cut costs.

They tried this and we received a generation of uncompetitive “cheap” small cars, such as the Chevrolet Vega, Ford Pinto, and AMC Gremlin. The quality of these UAW-built cars and their tepid successors (Chrysler K-Car, GM’s FWD X-Car and Ford’s Tempo/Topaz) virtually killed the Detroit 3's ability to successfully market to at least two generations of young consumers.

Second, they could move production off-shore to non-union locales.

However, the threat of strikes and “pattern bargaining” severely limited this option. Moreover, off-shoring hurts what should be one of the Detroit 3's unique marketing advantages – that their products help the American economy far more than an imported vehicle or one that’s designed and engineered overseas and merely assembled in the non-union parts of America out of mostly imported parts.

Third, they could shed themselves of parts operations and off-shore more of the subassemblies.

They did this, but the UAW’s strike threats forced them to continue to eat billions in costs from the “spin-off” parts operations.

Fourth, they could cut costs by extending design cycles and amortizing the millions in tooling costs on small cars.

They did this and got eaten alive by the Japanese four-year design cycle.

Fifth, they could comply with federal government-imposed Corporate Average Fuel Economy standards by building just enough money-losing small cars to offset more profitable larger vehicles, and dramatically raise the prices of the larger vehicles to reflect the inherent supply limitations that such an “offset” scheme would produce.

This was the Detroit 3 business model for most of the 1980s and 1990s. CAFE produces a massive distortion in the free market for vehicles. The types of automobiles at which the Detroit 3 led the world in the 1960s were virtually outlawed. As a direct result, Ford was forced to lose money on two or three Escorts or Tempos for every fuel economy-compromised, downsized V8 car it built. But in a true free market, Ford would have been free to pump up the volume on the types of profitable cars it was best at building. CAFE prevented this.

What is worse about CAFE is that it forced the Detroit 3 to market trucks, vans and SUVs to survive. For twenty years, an overwhelming plurality of Americans rejected the sorts of small FWD cars that the federal government sought to force Detroit to build. Literally to stay in business in the sorts of volumes necessary for any chance of profitability and to meet the UAW health care, job bank, and pension obligations, the Detroit 3 had no choice but to build the large vehicles that the market was demanding. They simply could not be automobiles because of CAFE standards.

Sixth, the Detroit 3 could dump the unwanted, government-mandated FWD cars into fleets.

They did this for years at great harm. Cars in daily rental and fleet service are typically abused mercilessly. Then they are dumped onto the “program car” market at below-market rates. This hurts the reliability scores and resale values. The Japanese invaders typically avoided the crucible of daily rental fleet operations (in the 1990s, the Detroit 3 held captive major rental companies like Avis and Hertz to insure enough sales to keep their assembly plants operating at minimum levels of profitability). Thus, the market wasn’t flooded every year with thousands of beat-to-death fleet cars trading at half-price.

Senator Shelby and the other “let’em die” defenders of ersatz laissez faire capitalism would have been hard-pressed to do any better, given the landscape created by federal regulations and federal policies.

BUT IS “CONSERVING” WHAT’S LEFT OF THE DETROIT 3 REALLY CONSERVATIVE?

The arrogant conservative pundits suggest that “we wouldn’t bail out small businesses.” This, of course, wholly ignores all sorts of federal subsidies for small businesses, such as SBA loans, research and development spending, agriculture subsidies, government contracting assistance, and favorable tax treatments.

The paleocons and economic purists complain that Detroit got themselves into this mess and the taxpayers shouldn’t foot the bill for getting Detroit out of it. But these same paleocons and purists conveniently ignore that the liberals saddled the Detroit 3 with unions and stood by while Detroit was held hostage to them. They ignore the horrendously expensive environmental and safety regulations that consumed billions over the past forty years in unfunded compliance costs. They gloss over Japan’s decades of protectionism that stopped Detroit from adequately investing in Japan and allowed the invaders companies shelter to develop their businesses free from active competition with Detroit. They can’t see that we’re competing with foreign governments who directly and indirectly subsidize the “invasion.”

They lament that once we stray from regulating the Detroit 3 into oblivion and actually provide some financial assistance to pay for these non-market-based regulations and mandates, then where would we stop. They claim that the airlines would be next. This argument presumes that complex industrial businesses are the same as service businesses.

But putting together a service business such as an airline (especially in the age of deregulation) is comparative child's play to starting a new U.S. automaker. It has been done repeatedly since the 1970s. Buy some aircraft and ground equipment; obtain some gate rights at airports; rent a reservation system and buy some ads. Although it takes a large investment, it is nothing like starting a automaker from scratch.

The Detroit 3 are unique, core industrial entities that cannot be readily duplcated in the U.S.A.

No one has successfully started an automaker in the Western world since the hyper-regulated automobile became the norm. No one. Raising the capital and putting together the complex design, supplier, manufacturing, marketing, and national distribution systems from scratch is a daunting task. It takes years and billions of dollars to bring a new product to market. Federal and state certification costs run into the millions for even modest changes.

Therefore, once one or all of the Detroit 3 are dead, it would take a miracle of biblical proportions for anyone to ever successfully start a domestic auto company again in the U.S.A. in the current overly-regulated environment. No new generation of Henry Fords need even try for they will surely fail. An automaker cannot be successfully grown in the U.S. like Sam Walton’s Wal-Mart or other low-tech service business.

If the Detroit 3 are slaughtered by Washington hubris, we may still have some non-union “invader” assembly plants banging out foreign designs constructed out of imported parts. But we will have lost the heart and soul of America’s industrial base forever.

CONGRESS SHOULD APPLY THE POTTERY BARN RULE FOR THE DETROIT 3

General Powell posited the “Pottery Barn” rule for Iraq: “you break it, you bought it.”

In fairness, a similar rule ought to apply to the Detroit 3.

Washington D.C.’s "auto experts" broke Detroit (with the willing assistance of the greed-soaked unions, non-laissez faire governments in Asia and Europe, and millions of myopic American consumers who couldn’t see past their own selfish interests to what was good for America as a whole). Now it is up to Washington D.C.'s "auto experts" to fix it. They “broke it,” so they should be obligated to “buy it” long enough to correct the market disruptions of the past and put the Detroit 3 on an internationally-level playing field.

At the heart of conservatism is the principle of responsibility.

Certainly, if the Detroit 3 had ruined their businesses without decades of meddling by federal and state governments, the ersatz laissez faire arguments would have some validity.

But we as a country killed the free market for Detroit 3 labor in the 1930s and destroyed the free market for their vehicles in the 1960s and 1970s.


We cannot get back to a level playing field and a free market without severe and decisive federal intervention. Those who cannot see this are either shilling for a special interest (i.e. Senator Shelby) or are so blinded by an ideology that they cannot appreciate or comprehend the current reality.

Regardless of the causes, to fail to act now out of some imaginary fealty to selectively-held "free market principles" would be the height of irresponsibility.

Conserve the Detroit 3!