Automotive Politics

Ford is back!

RMS — Wed, 17 Jun 2009 21:03:18 +0000

It appears that Ford is starting to see real gains. Fox Business News, known for its anti-Detroit rhetoric, looks as though they have finally seen the light. Ford is back and ready to solidify their position as “America’s Car Company”.

Protected: Expensive Cars, Cheap Labor

RMS — Fri, 12 Jun 2009 16:35:47 +0000

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Praying for a prosperous and fresh start

RMS — Mon, 01 Jun 2009 09:45:16 +0000

Now that Chrysler looks about ready to exit chapter 11 bankruptcy it will be General Motors braving this highly watched and very important event. How important is a successful reorganization? Just ask the people of southeast Michigan and you’ll understand just what these institutions mean to our way of life. Yes that’s right, I said institutions. They are the very fabric of metropolitan Detroit and are apart of our identities. We take immense pride in knowing that our companies put the world on wheels, armed Uncle Sam’s troops and led the way towards building America’s middle class.

Of course this has all been said before but it’s so true and the attachment and pride we’ve had for our homegrown companies can be seen everywhere. As for myself, even the troubles of my town are now seen in the national media.

This overhaul is long overdue and I welcome it. I don’t believe that this is the end for our companies. I think that everyone should look at these proceedings as new beginnings. It is time to wipe the slate clean and start anew. With fewer financial obligations and a leaner cost structure I know GM and the soon to be foreign controlled Chrysler will be able to contribute to the US economy in meaningful ways and I definitely think that this will be a boon for the residents of the industrial Midwest. Just think, we’ve hit rock bottom and now there’s nowhere else to go but up.

The Cyclical Nature of Autos

RMS — Wed, 07 Jan 2009 10:40:04 +0000

” There is no such thing as an entrenched and unassailable position in the automobile business. There never has been and I do not believe there ever will be.”

Chrysler Corporation President L.L. Colbert, June 8, 1955

In Detroit’s Time of Need

RMS — Fri, 19 Dec 2008 16:39:56 +0000

In what looks to be a sincere press meeting today, President George W. Bush did what Congress could not do; drop a lifeline to two of America’s domestic automobile manufacturers. Just as a vast amount of Americans want US automakers to survive, so does our President. While a prepackaged bankruptcy may have been preferable to the White House, it looks as though that would have been an unrealistic option, leading only to a chapter 7 liquidation. Hopefully the incoming administration will become a serious and long term partner of our domestic manufacturers.

Thank You Mr. President

Protected: Stop Predatory Trade Practices

RMS — Fri, 19 Dec 2008 15:36:39 +0000

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Ford Loyalty

RMS — Thu, 18 Dec 2008 15:36:18 +0000

“The family has been through every cycle imaginable, including being weeks away from shutting down after World War II,” said Ford. “This is much more than a financial investment, it’s an emotional investment…. If this was just about a financial investment we would have been out years ago.”

Bill Ford talking on his family’s motivation to remain in control of Ford Motor Company.

Ford Weighs the Cost of Going It Alone, Business Week, December 17, 2008

Deindustrialization: The Road to National Poverty

RMS — Sun, 14 Dec 2008 19:26:13 +0000

It has been said time and again that the US is entering a period where we no longer need to manufacture. We no longer need to manufacture because we are transitioning to a new economy. The service economy as it is known is our new destination and experts are certain it will bring high tech, knowledge based jobs. As was the case when the US transitioned from an agrarian based economy in the mid nineteenth century to a manufacturing based economy, workers were freed from the old sector and reallocated to the new.

Industrialization set the stage for the rise of the middle class and social mobility. “Freedom” from the land was seen as a step forward. Farming became very efficient using a smaller workforce and was able to produce a more than adequate food source for the population . Those excess workers made their way to the factories where the pay and working conditions eventually exceeded those of the old agro-businesses. This was progress and seen as a natural progression in the economic development of modern society. Thanks in part to industrialization, the US became the wealthiest country in the world. Educational institutions churned out engineers, scientists, chemists, manufacturers and doctors by the millions. Those employed in factories were able to purchase homes, cars and educations for their children. Health care became an incentive used to attract good workers. The children of these workers would have a chance to become engineers, scientists, chemists, manufacturers and doctors. Job security, good pay, health insurance and pensions were the cornerstone of the factory job. Of course the factory job was the end result of work done by investors, inventors, manufacturers and engineers. Those were the people who used their mathematical and scientific creativity to make both products and factory jobs possible. Today we are experiencing a new transition. It is believed that industrialization is dead and the service based industries are the future. But what is a service based industry and what does it produce? Is it banking and investments? Is it preparing food? Or is it administrative work? My point is that while there may be service jobs that provide a good living, we are slowly beginning to see that service based jobs cannot replace work that produces a product. Wages are less, benefits are lower and retirement plans in most cases are non-existent. Economists argue that we cannot compete with countries who pay their workers less but why would we want to? Why would we allow jobs that produce items of value to be done outside the country? Even if it lowers the price of the item (in most cases it does not) should that be an excuse to send jobs overseas? It is unrealistic to believe that the “grunt work” or factory work can be done in the low wage countries while the high value jobs will continue to be done here. I think that is misguided and shortsighted. To manufacture a product involves more than “dreaming” up the item and engineering it. Building the facility and running it requires expertise and can be considered high tech also. Designing, building, supplying and running the factory are all spin off jobs that require skill. They are spin-off jobs that create supporting jobs that spin-off even more jobs all the way down to the lowest wage earner. In effect, manufacturing leads to exponential job growth. Losing manufacturing leads to massive job loss for our economy and cannot be replaced easily if at all.

The service economy is a road to poverty. Just look at the state of our economy today. The US has gone from the world’s largest creditor to the world’s largest debtor. When the US was an industrial country we were a top exporter of goods but today we find ourselves with heavy trade imbalances with all of our trading partners. This transformation is even more evident when one looks at the average citizen’s debt. We have taken on more and more debt to make up for the loss of wages thanks to deindustrialization. Those who argue that the US will be better off with a service economy fail to see reality. California, once the second largest producer of automobiles next to Michigan, no longer builds cars (or ships or planes) with the exception of one last plant. So what happened to the middle class jobs? Well, all of the old manufacturing sites are now strip malls and housing developments. Can you say retail jobs? How about Detroit itself, once the pride of the US industrial economy. One drive through the city and you will know why the Midwest is known as the “Rust Belt“. Factories that were closed in the 50′s, 60′s, 70′s and as recently as the 80′s still stand vacant and rotting. The jobs lost were not replaced and the tax base of the city and the state has been decimated. That in turn has effected the quality of city services which has led to Detroit’s decline and its current state of poverty. Deindustrialization of the United States will only bring us closer to resembling those countries we call the Third World.

Why industry matters.

A Shotgun Wedding

RMS — Tue, 09 Dec 2008 11:57:16 +0000

These last couple of months have been very turbulent for the US economy, banks, homeowners and of course the American automobile industry. General Motors Corporation, Chrysler LLC and Ford Motor Company humbled themselves and made their way to Washington DC to grovel for loans that would keep them afloat during this trying time. Since the credit markets have frozen completely, the Detroit 3 have been unable to borrow any money to keep their operations funded. To make matters worst, customers have taken cover from the financial fallout avoiding all major purchases including autos. This has caused Detroit’s revenue stream to dry up and has thrown the companies into near financial collapse. While the situation is much more complicated than this, Detroit is sending Congress an SOS. Even with all the bad press and political hand-wringing it looks like Congress is going to give Detroit a loan that will keep their operations functioning long enough for the Obama administration to step in and help Detroit right size and restructure the entire business. That brings me to the topic of this post.

Throughout the hearings it was argued that Chrysler and GM might need to merge (shotgun wedding) as a condition for financial aid. It looks like that is no longer true but it sparked my interest. One day at work I started to think, what if they did? How would that play out? What would be the best plan? So, I devised a plan that would allow Chrysler to become a productive member of the GM family without jeopardizing GM’s brand value. Read on to find out.

GENERAL MOTORS CORPORATION / CHRYSLER LLC Merger

GENERAL MOTORS CORPORATION

Detroit, Michigan, USA

CHRYSLER DEFENSE & GOVERNMENT PROCUREMENT DIVISION

Auburn Hills, Michigan, USA

Chrysler leaves the civilian consumer market
Jeep remains civilian marketer of off-road / on-road sport utility vehicles under GM
Hummer is reallocated to Chrysler Defense & Government Procurement Division (CDGP)
Chrysler sells Volt / Malibu (hybrid) as fleet vehicles under the Chrysler name thus preserving the resale value and perception of Chevrolet branded cars
CDGP will handle all GM police / ambulance fleet sales and may maintain a small dealer network in large markets to perform service and conduct sales
Vehicles sold to fleets will be stripped down versions of current GM vehicles with durability packages
Current Chrysler dealers will be bought out along with employees near retirement age using Chrysler’s portion of the government loans
While sold in the civilian market, Jeep will reemerge along with Hummer as military vehicles built for export
CDGP will handle automotive military research and will have direct responsibility for expanding and securing government defense contracts

Keep in mind this is just a summary but the idea is that Chrysler will serve as an outlet for GM products. GM will be able to differentiate between its civilian market and its government market (city, county, state and federal). By keeping Chevrolet and Chrysler separated, vehicles sold (Chrysler) to the government will not effect the value of the same vehicles (Chevrolet) sold to the civilian market. In theory this should make GM vehicles much more desirable. Another benefit of the division is its presence in the military sector. GM will be able to land lucrative government contracts utilizing its heavy truck applications for military service. This will come in handy during market dips and will hopefully stabilize profits during such tribulation. While this is a simplistic view, the idea is innovate and will give GM an upper hand when competing in the civilian market. Of course GM and its core brands (Pontiac, GMC, Saab, Cadillac, Chevrolet, Buick) will also need to be analyzed. Changes and cuts will be made but this change should be guided by the following principles:

Profitability for all divisions
Reasonable pricing and value for customer both government and civilian
Highest quality produced by an American workforce
Competitive labor rates with transplants
Long term planning that is both strategic and innovative
Lead American industry towards a prosperous and advanced business models

Protected: Buy Foreign

RMS — Thu, 04 Dec 2008 22:53:04 +0000

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