Friday, June 5, 2009


My predecessor at the day job still writes a weekly column for us. He's a good egg, but we don't always see eye-to-eye. Case in point: His column this week argued that the UAW fucked up the Big Three.
Here is my response:
My learned predecessor Rich Adams weighed in Tuesday with his insights on how things got so bad for the Big Three, placing most of the blame at the feet of the United Auto Workers. I re­spectfully disagree.
I come from Indianapolis, which was once home to almost as many auto workers as Flint. I knew a lot of guys who were UAW members and they all did well until the early 90s, when the plant layoffs and closings began en masse. Aside from a wildcat strike at a Chrysler plant when I was in high school, I don't ever recall any of the locals refusing to give back to companies to keep their plants open, even when it meant permanent layoffs. Profits surged, but layoffs and other cuts kept coming and coming.
Crappy management played a big part in putting GM and Chrysler into bankruptcy. By the late 90s, GM was making its money with auto and home loans through GMAC. It kept making SUVs built on car platforms be­cause the profit margins were better. It surrendered the com­pact and subcompact markets to Toyota and Honda and, lo and behold, they now have huge shares of the U.S. market.
People around here prefer trucks and SUVs for obvious rea­sons. Winter lasts 13 months per year and we need the bigger vehi­cles to get around (usually). Go south of the 45th parallel and you will see a big change. People who live in bigger towns and have to drive 20-25 minutes to get anywhere like smaller vehi­cles that burn less gas. Sure, you see a lot of SUVs there, but sedans and compacts are solidly in the majority.
As for Chrysler, it has suffered for years from increased compe­tition from Korea and Japan. It’s final owner, Cerberus Capital Management, bought it on the assumption that the federal gov­ernment would never let it go under...ooops.
The men who ran these compa­nies structured their pay around stock performance, in order to to pay the capital gains tax rate, which is lower than the top in­come tax rates they would pay otherwise. The result was an Enron-like artificial pumping up of stock prices with borrowed money for over a decade and the inevitable mountain of unse­cured debt. The federal government and states like California have tried for years to get Detroit to make smaller, more efficient cars to fight pollution and cut gasoline consumption. The Big Three and the oil companies spent billions lobbying against change, all while their European and South Ameri­can subsidiaries were producing said cars.
Who's to say where GM would be today if it had put it's EV­1 plug-in into serious production 15 years ago, rather than killing it?
I do find it interesting that GM's survival hinges, in part, on the rollout of a new model next year: The Chevy Volt.
What's so special about the Volt?
It's an electric/gas hybrid.

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