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Obama adviser issues warning to auto makers

JIM KUHNHENN

The Associated Press

Latest comment posted at 11:04 AM EST 24/11/08

Without plan to retool and restructure, there's little taxpayers can do to help, says David Axelrod ...Read the full article

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  1. Volatility Stalker from Canada writes: This dance has been done before.

    The problems in Detroit date back decades. The 1960's are over and the big three have tried to preserve the prevaling social compact of that time.

    When Toyota and other foreign auto makers setup in North America they pay less for line workers, are non union shops and have more robotics and less employees. Its not a level playing field for the big three even in their own backyard.

    GM cannot produce cars at a profit. The only sector GM and Ford were able to make money on were trucks and SUV's - a sector they dominate. But even as they have some fine luxury vehicles and even small cars like the Ford Focus (among too many other turkeys)- they can't make money selling cars.

    Hopefully the Obama administration's stern line here is not just for show. There needs to be a solid restructuring plan. But this is the same tune played at the last restructuring juncture.

    The truth is, GM used to carry America. But for decades now, America has carried GM. Time for a change indeed.
  2. Kevin Cochrane from Virden, MB, Canada writes: I would have to agree with that unfortunately Stalker, I myself do not buy foreign because it is non-union built product. However, Toyota et al. are now in North America and cannot be removed the Big 3 have to compete with that. I don't entirely blame the Big 3 for the position they are in, the crisis happened quickly and with little warning, and due to speculators playing the market the price of oil was driven to an impossible price which is only now being corrected. The profit margins on trucks and SUV's was attractive,obviously, and how can you blame a company for producing what makes money? It certainly is not up to Detroit to tell us what we shouldn't be buying. I think the Big 3 will survive but in a very different form and it will hurt southern Ontario and Michigan as well but it is all part of the evolution of the 'global economy'.
  3. Joe Cool from Canada writes: These guys have been flying so long in corporate jets that they probably don't even know there are other ways so go such as on commercial flights.

    I hope their "Plan" - if they ever come up with one that's worth anything - includes projected salaries, wages and benefits for every position in the company - top to bottom!
  4. Joe Cool from Canada writes: The construction industry has always gone through booms and busts and is starting to go through a lean time now but you don't hear cries from the construction unions for government hand outs to save the industry and their jobs.

    Construction workers enjoy the good times, work hard with lots over overtime, make good money but unlike auto workers, they save for the downturns they know will come - usually in winter. They then enjoy the winter months in Florida spending the money they saved in the boom times and are ready to start work again in the Spring.

    How come the auto workers don't do the same instead of spending every cent they make when working and then expecting tax payers, most of whom make far less thean they do, to support them when there is a slump.
  5. Jeff Pritchard from Canada writes: Not only are these idiots incapable of building cars that people want to buy, they are also apparently incapable of coming up with a plan or of making a convincing pitch to congress.

    The fact that the bums in charge of these companies persist in their jobs, and continue to rake in millions is an injustice and a fraud. And yet further proof (if any were needed) that free-market capitalism is not even close to being a meritocracy.
  6. Brosco PERTWEE from United States writes: To Joe Cool. I will just remark that Nancy Pelosi travels in her own "corporate jet" all the time. She gets free use of an Air Force jet for herself and her family any time she wants one to travel anywhere. She does not stand in line at security, strip down to our underwear, get sniffed by chemical sniffers, and then fly steerage like the rest of us peons. She is a fine one to talk. Last time I looked at the US budget, it was in worse shape than GM. They have a batch of "legacy costs" aka Social Security and Medicare coming due over time without any plan as how they are going to deal with them.

    No problem with the autos putting forth a business plan. I doubt there is a congresscritter in existence that could read a balance sheet anyway. Ford, at least, does have a plan and is executing on it.

    The question is one of who is going to assume the costs of the retired folks. If you limp these guys along, it may not be the government. If you don't, you can be guaranteed that the government picks up the tab.
  7. jay henryk from regina, Canada writes: I get a kick out of all these politicians thinking they can dictate terms to the three American car companies. They can posture all they like and make themselves feel good but they know that in the end they will have to keep these companies afloat. They can put all kinds of conditions on the assistance, again making them feel like they are dictating the terms, but they will end up giving them what amounts to a blank cheque in the end. Why? Because they have no choice. If any of the three car companies goes under, the U.S. economy is headed for the deepest recession since the 1930's. Way too many jobs depend on this industry to let it go under. So let's get over the posturing and get out the cheque book. That's what is going to happen eventually so it might as well be sooner rather than later.
  8. john near lake ontario from Wellington, Canada writes: Finally some sense seems to be prevailying here. Lets hope they look at the complete plan these companies bring forth. ( Including what the CAW and UAW are going to contribute. ) There maybe hope for the taxpayers yet out of this mess.
  9. Iron Trader from Abbotsford, Canada writes: We can make all the excuses we want. This crisis has not just now happened. The big 3 have just done a terrible job these past 20 or so years. Their products have been of questionable quality and just downright shoddy in many instances. Their arrogance, refusal to listen to their customer's wants and needs, pricing, plus extreme lack of responsible management has given the market to the other manufacturers. (Why are domestic dealers buying up "import franchises?") The signs, such as the decline in customer acceptance have been there for years and "mismanagement" has chosen to ignore the obvious. It is a very competative market out there and there is more competition on the way. We definately need the North American auto industry but it won't survive without serious changes in management and union expectations. No sustainable plan - no dollars. If funding is made available it must carry serious, well thought out performance clauses and be monitored by someone who has some auto industry understanding - not politicians.
  10. Kim Morton from Canada writes: They do have a plan. Get the taxpayers to support their lifestyle because they don't have the ability to do it on their own.
  11. michael moore from toronto, Canada writes: Sadly, the Big Three are not ready to talk reality. 1) They still act as if they are the only game in town. If they go down, so will all their suppliers. Baloney. People are still buying cars and will still buy cars. If all three of them closed tomorrow, more people would buy from Honda and Toyota and the others and these companies would buy more from their suppliers -- who are the same companies that supply the Big Three. It would be bit of a wrench, but the economy can do without the Big Three. They won't talk reality until they realize this. 2) They pretend that the only criticism of their vehicles is that they were caught building gas guzzlers when the market wanted gas sippers. Hold on a minute, guys. There is a huge and growing number of customers -- me included -- who would not buy the most efficient car in the world from you because they do not believe it would be a good car. You no longer have the market to yourselves. The Japanese build cars that have a reputation of substantially outlasting yours, running better for longer, and thus being better value. And as long as you brag about your short-term quality, you just reinforce the belief that you can't deliver long-term quality. 3) The Big Three need the U.S. market a lot more that the U.S. market needs the Big Three. Last week's pitch in Washington shows that this message has not even started to sink in.
  12. Tim Peterson from Somewhere on the Prairies, Canada writes: What a mess! I feel far more sorry for those who are about to lose their jobs building cars than I do for any corporation going bankrupt on their own mismanagement. On one hand the union wages seem to be an issue but what about the millions the do-nothing CxO's pull in. Why they recieve a bonus for anything is beyond the borders of common sense and stupidity. As with any system, Capitalism is showing some cracks caused by the pressure of greed. The domestic auto industry could use another Lee Iacocca and cars consumers want to buy (ANYONE HEARD OF ELECTRIC CARS???). GM going under would be Karma for crushing the EV-1 program.
  13. Roger Cooper from Canada writes: Yes, this is Act II of similar restructuring and government assistance that happened back in the 80's, when AMC was swallowed up by Chrysler, and the Big 3 scrambled to forge alliances with Japanese and European manufacturers.

    Obama and Congress are holding the delicate, manicured feet of auto executives to the flames, hoping that they will experience a reality check and actually produce a detailed restructuring plan for the industry. However, it is unlikely that they will be able to produce anything that will convince Congress before year-end, if ever.

    The best reality check is bankruptcy. Let these firms enter Chapter 11, reorganize themselves, rid themselves of their overpaid executive (and without the golden parachutes and platinum pensions), renegotiate labour agreements, health care benefits, and pensions -- and THEN approach Congress for assistance.

    Propping up obese and moribund companies will not work in this economy.
  14. s like from Canada writes: I think Apple should buy Chrysler and Microsoft should buy GM. I don't know who should buy Ford.
  15. CallofDuty . from Toronto, Canada writes: i saw a women with a Brand new Cadillac SUV. She didn't look like the type with a lot of money. They must be selling these GM suv at rock bottom prices.
  16. john near lake ontario from Canada writes: I will probably never buy another Big 3 car again ! Bought 3 GMs, 1 Dodge had nothing but trouble ( GM headgasket leak ) Their dealer service is terrible ( think customer relations ) Now have a Toyota Sienna ( 2005 ) so far so good.
  17. Syed Abbas of Toronto from Seattle WA, United States writes:

    The Executives of the Big 3 flew to Washington DC on three separate Business jets, all leaving the same city at the same time.

    It is like driving an SUV all alone, hauling a lot of air.

    Could they have not shared a big one?

    Should the public give these profligate wasteful guys more money?
  18. Syed Abbas of Toronto from Seattle WA, United States writes:

    john near lake ontario: Greetings

    " ..... Bought 3 GMs, 1 Dodge had nothing but trouble ( GM headgasket leak ) Their dealer service is terrible ( think customer relations ) Now have a Toyota Sienna ( 2005 ) so far so good..."

    Same here. My first 3 cars were GM. They spent as much time in garages as on road.

    My last 4 have been Japanese. They can go on and on without servicing, not to speak of the low consumption.

    Took my Sienna for servicing yesterday. Was promised an hour, was out the door in 50 minutes (useful at that as dealership had free internet, newspapers, and brewed coffee/tea/chocoloate on the house).

    And all the staff was not from Japan, but locals. Why can the Big 3 not make their own work diligently?
  19. Syed Abbas of Toronto from Seattle WA, United States writes:

    s like: greetings

    " ... I think Apple should buy Chrysler and Microsoft should buy GM. I don't know who should buy Ford ..."

    I know of someone. I gave 50 cents to a panhandler yesterday. He could buy Ford with change to spare.
  20. Lauren Norris from Victoria, Canada writes: from Michael Moore: "People are still buying cars and will still buy cars. "
    I agree. Isn't this what a free market is all about? I bought one new Ford car in 1980 and will never buy another big-3 car again- new or used. I have bought German and Japanese since, the Japanese ones being the best for low maintenance and long life.
    Get with the program, GM, Ford and Chrysler. You have seen the market change for 30 years but continue to do things your way.
  21. Normand LaBine from Winnipeg, Canada writes: Now there's Democracy in action! A senate and a congress (HOC) that has to impress it's constituents. Not in Canada. We put those muted puppets in their seats for 4 years and they tow the party line. They're never reminded that they have to speak for their regional issues. Here's little Manitoba, developing a global transportation hub, with all kinds of parts warehouses for the Automotive Industry (Buses, Tractors, Semis, Trailers and all the major consumer vehicles, and our MPs are busy with Liberal leadership contests, NDP poverty critiques, Conservative blatherings about high crime rates, and nothing about alternatives to Big Three doom and gloom. Man! You look at the US congressmen or senators, and those opposed to a bailout come from States that have Asian plants and Big Three plants in the same state! And they're fit to be tied! To heck with Party Line or backbench fears! Not In Canada. Sad system. The only downside is that we'd be in Election Mode, all the time, but the upside is that we'd regain our sense of Nationhood again! Now, we're just an economy of miners and lumberjacks again.
  22. D P from Canada writes: What bad theater, now shut up and fork over the money. Like an economic recovery is possible if one hollows out their manufacturing base.
  23. All Just Runawaymunkeys from Canada writes: Unless Obama hears something from the Big Three that ties into greening the economy, they're finished. Goverment probably will help out one way or the other, but this latest crisis seems to have tipped most consumers in favor of the better products coming from the other companies that have stayed current with the changing times. Probably also worth noting that todays generation of consumers probably has less hang ups about supporting the national brands than generations past. My Dad wouldn't park a foreign vehicle out front if it were free, i am just about the opposite.

    Big Three.... Go green or go bust.
  24. Right Said Fred from Canada writes: There you have it. Don't come back looking for money unless you have a plan for the future. I don't think they have any kind of plan other than saying how many jobs will be lost. Oh well some places are doing quite well thanks to other auto manufacturers:

    http://www.cnn.com/2008/US/11/20/honda.town/index.html
  25. R. M. from Regina, Canada writes: The issue of the way the executives got to Washington is really a red herring although it does make wonderful media. I wonder how many of the congressmen and congresswomen have cut their staffs in half, have turned their backs on all their perks and allowances. They make enough money to pay for their own food, drink and rooms thank you very much. This is a case of the privileged trying to make the privileged look bad. Turn the spotlight the other way and I am sure you would be amazed at what you would find.
  26. Knuckles Muldoon from Etobicoke, Canada writes: GM is still running Hummer commercials on football telecasts this weekend. They still don't get it.
  27. Roger Bell from Canada writes: Media buys for major sporting events and seasons (and also hit television shows) are done anywhere from 10 to 12 months in advance with the leagues and TV networks. GM most likely bought those times and slots during the current football season telecasts a year ago. They are paid for and non refundable. That's why you see Hummer commercials during football games. These aren't new spends.
  28. Joe Cool from Canada writes: BROSCO You are quite right but Nancy Pelosi doesn't earn $13 million a year and isn't the one with her hand out asking for $25 Billion. Don't these guys have an ounce of common sense, if they are going to plead poverty at least look as if they need the money. Get rid of the $'000 suits, fly steerage and arrive late saying the bus from the airport was held up etc -
    OK, I know I'm exagerating but after many years as a midlle manager that had to present a multi million (not billion!) dollar budgets for approval I quickly got to know how to squeeze out the last dollar, and it sure wasn't by displaying extravagance whether it was justified or not,
    The trouble is that these guys have come to think that the taxpayers of the US and Canada owes them a living with a Board of Director that has agreed to their every request, Now all of a sudden soneone is asking them to justify their budgets and policies.
  29. Normand LaBine from Winnipeg, Canada writes: Joe Cool. Good points, thanks. But if you trace back how long Government has passed legislation involving vehicles, the Corps figured that the more they protested or made it look hard to produce efficinent vehicles, the more money they could suck up. The $25 Billion EPA money is there for them, but it's too much red tape. It's been there since before the new models came out. They don't want to touch that yet, unless they get to see if they're around longer than their warranties. Anyway, the CEO's have full 'Government Liaison' execs and departments and have to know what's coming. I imagine they've got people working at State and Provincial levels as well, to address blind-siding legislation. So running a business isn't just 'the business' anymore. It's complex. The Feds should've learned to drop incentives and demands on manufacturers and pushed the consumer to buy the vehicles that meet the road, the way we want it. Cut demand for gas guzzlers, and you shape the market. Force change on a market-responsive global producer, and you get this mess. Since 1965's AutoPact and Round One Acid Rain laws, to today's Green and CAFE legislation, which is still short of Japan's 45MPG CAFE laws, we've made them dependent on Federal Guidance with carrot sticks. Yemen claims it will run out of Oil by 2017, with no money invested in the 'Morning After'. Others will pop up more frequently. A visionary producer should plan beyond their Mortgage Life, to convince investors, but it seems to change in a reactionary knee-jerk style of management. In theory, they pay these CEO's to be visionary, but Ford seems to be the only one with foresight. It's no different today, but there are fewer competitors who can be gobbled up. GM was the biggest gobbler, with Chrysler right behind. They took over Buick, Pontiac, Oldsmobile, Cadillac, and many others. Chrysler bought LeBaron, Desoto, Dodge, and others. Ford? They bought the "Not Invented Here!" slogan and focussed.
  30. Alistair Thomson from Canada writes: The Pacific rim leaders are going to solve the current economic mess in 18 months? Forgive my skepticism. Is there a game-plan? Have they really anlyzed which counter-cyclical measures would be the most effective? Are they going to pour billions of dollars into the economy without requiring the dismissal of corporate executives whose criminal incompetence and greed caused this mess? This awful mess will repeat itself if the government does not require accountability and consequences in the private sector. For example, the GM executives who used company owned jets to travel to Washington should be fired. How can they ride in the lap of luxury when they travel to Washington to beg for billion dollar bailouts? The financial sector executives who dreamed up the asset backed commercial paper swindle should be fired, if not charged under criminal law.
  31. W M from Canada writes: Axelrod is sending the right signal. Firm, measure, pragmatic. I don't know whether the Obama admin is getting off to as good a start as I am feeling like they are, or whether I am exagerating their performance due to the contrast with the extraordinary ineptitude of the outgoing admin, but I am going to enjoy and feel optimistic about it, while I can!
  32. W M from Canada writes: Roger Bell from Canada writes: Media buys for major sporting events and seasons (and also hit television shows) are done anywhere from 10 to 12 months in advance with the leagues and TV networks. GM most likely bought those times and slots during the current football season telecasts a year ago. They are paid for and non refundable. That's why you see Hummer commercials during football games. These aren't new spends.
    ===============================

    They may have bought the time a year ago, but nothing is forcing them to run Hummer ads in that time. That is their choice. If it seems like a dumb one (i.e., politically tone deaf, if nothing else), then I have to wonder about the people making it.
  33. Vic Hotte from Canada writes: I'm not sure why the Big Three in Detroit are trying to build a wall around their North American losses, especially since they have been paying a lot of attention to emerging economies. Obviously, GM and Ford have wangled some concessions and are enjoying the low-cost virtually unregulated markets abroad. As The Economist noted in its recent November 13th issue: "GM has been as nimble abroad as it has been flat-footed at home, an early-mover in China, Brazil and Russia, it holds strong positions in all three markets. Ford is not far behind." Apparently, GM and Ford are doing very well abroad. Is that how their executives afford those private jets that flew them to Washington to beg for a $25-billion bailout? Honda and Toyota are not asking for bailouts -- they are adapting to current market conditions by producing fewer vehicles. We can't afford the Big Three anymore. Let them go. Corporate welfare is not the answer.
  34. George Duncan from Canada writes: The Big Three represent a classic example of being managed by incompetence notwithstanding the compensation packages were exhorbitant!
  35. Justin Kase from Victoria, Canada writes: Get rid of the unions, and I will buy your cars again. No one dares to say it, but the unions are largely to blame for this mess. There was a time for unions many decades ago, that was then, this is now.
  36. Donald Wilson from Canada writes: For CAW workers , for a period of time after being laid off in Canada , they get EI and a supplement from the union that results in an after income tax take home that is nearly as good as working . Thus the economy won't tank because there are some layoffs . And if consumers don't buy a Big 3 auto or pickup , they will buy something from one of the others that will have to increase production to keep up . The parts suppliers will simply make seats, etc for a company that is increasing production to supply the sales . The UAW and CAW may lose union members and that is what they are so upset about and are lobbying for government support of inefficient manufacturers . Labor costs per vehicle at union assembly plants is simply too much . Some of this isn't the dollars per hour paid out but has to do with restrictions put on workers that reduce individual productivity . Hopefully the Big 3 domestic manufacturers will be forced to make the necessary labor changes to be competitive along with a better product mix . Ford Motor has it's plan , but GM and Chrysler still have much planning to do . If they don't make a competitive plan soon , even a bailout won't keep them in business beyond another year .
  37. Paul Bowler from Canberra, Australia writes: Syed Abbas of Toronto/Seattle: Good first post - but take it further, logically! These 3 guys head up car companies - making and trying to sell cars, right? So, why not drive down, together, to Washington (550 miles approx, so allow an overnight in , say, Pittsburgh) in one of their products - a big Caddie, or a Lincoln or a 300C (that would be my choice!). Whilst in Pittsburgh, go visit a couple of their dealers and talk to them - how's business? how can we improve things? what are customers' main gripes? &c. Then, the 3 amigos arrive in town, coutesy of their own transportation product, and are able to address Congress with some knowledge of the actual world! Very easy and elementary, my dear Watson! But, they say, we are very busy executives and we don't have the time! Well, sirs, if you don't have the time to travel in your own products, and you don't have time to listen to your dealerships, then maybe it is time you were not executives anymore! And hey, when you leave, take your PR teams with you!!
  38. Bryan Grant from Ontario, Canada writes: Boon Pickens, Zenn Motor Company and lincvolt.com all have plans. The future of secure jobs and safe economies will not come from the old traditional auto makers that will not even travel in their own product when the world is watching.
  39. Donald Redhorse from TAMPA BAY, United States writes: The big three auto makers should have got the message when Volkswago-bug sales displayed a need for smaller cars in North America.
    The executives who came to the Hearings were unprepared, unwaware of public relations by flying in private jets and woefully UNCONTRITE.The Union may share the blame
    The millions of workers deserve help. The "tank-makers" are dumb.
    DFR

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