http://finance.yahoo.com/news/Workers-say-Obama-treated-apf-14789941.html
Workers say Obama treated autos worse than Wall St
Autoworkers say Obama's 'tough love' more tough than love, they get worse treatment than banks
Jeff Karoub, AP Business Writer
Monday March 30, 2009
DETROIT (AP) -- Many assembly line autoworkers reacted with skepticism and anger Monday to the Obama administration's tough tactics, which stoked long-simmering feelings that the people who put the country on wheels get treated differently than the wizards of Wall Street.
"It's the age-old Wall Street vs. Main Street smackdown again," said Brian Fredline, president of UAW Local 602 at a plant near Lansing. "You have all kinds of funding available to banks that are apparently too big to fail, but they're also too big to be responsible."
"But when it comes to auto manufacturing and middle-class jobs and people that don't matter on Wall Street, there are certainly different standards that we have to meet -- higher standards -- than the financials. That is a double standard that exists and it's unfair," Fredline said.
Many workers -- not generally known for their affection toward executives -- even sympathized with Rick Wagoner, who was forced to step down as chief executive of General Motors Corp. He was by turns called a "sacrificial lamb," "scapegoat" and "fall guy."
"We knew someone was going to have to take the proverbial `bullet,' and it would have made it a lot easier to accept that had the CEOs of the banks also been required to give up their jobs," said Jim Graham, president of a union local in Lordstown, Ohio, where GM produces the Cobalt and Pontiac G5 fuel-efficient cars.
While CEO oustings haven't been widespread among the banking industry, the government did in September reserve the right to remove senior management at American International Group Inc. as part of its agreement to give the insurer $85 billion in emergency aid. AIG Chief Executive Robert Willumstad stepped down as part of that company's bailout package, and the government hand-picked his successor.
Also, banks don't have the union and legacy costs that the automakers do, which make their products more costly versus foreign rivals.
President Barack Obama said he was "absolutely committed" to the survival of a domestic auto industry that can compete internationally. He raised the possibility of controlled bankruptcy for one or both of the troubled automakers.
Obama said the administration will offer GM "adequate working capital" during the next 60 days to produce an acceptable reorganization plan. The government gave Chrysler LLC 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker.
Many workers say the government hasn't dictated such terms to insurance giant AIG or the banks in which it's taken an ownership stake. Obama's actions come amid public outrage over bonuses paid to business leaders and AIG executives.
"To see the very people that drove this economy into the ground be rewarded through bonuses while receiving tax dollars is just galling," said Dan Maloney, a machine repairman at auto supplier Delphi Corp.'s plant in Rochester, N.Y., and a union local president. "In light of that, the administration is taking it out, I believe, on the automotive sector."
Michigan Gov. Jennifer Granholm called Obama's moves "a bit of tough love," yet recognized a disconnect between the financial and auto industries.
"Yes, I do think that there has been a different look at those who manufacture than those who make money by flipping paper and I'm hopeful that the financial industry gets as tough a scrutiny as the auto industry has," she told reporters after an event Monday in Macomb Township, about 20 miles northeast of Detroit.
Despite Granholm's criticism and what many workers saw as the president's unduly harsh treatment, Obama's actions might not have a lasting effect on voters.
"It will be accepted, grudgingly perhaps, but accepted by anybody and everybody with a brain in their heads," said Bill Ballenger, editor of a Michigan political newsletter and a former Republican state lawmaker.
Still, Bill Rustem of Public Sector Consultants, a Lansing-based nonpartisan think tank, said Obama's actions carry some risk.
"I think this could have some impact four years from now if the state's economy doesn't begin to turn around," he said. Michigan's unemployment rate rose to 12 percent in February, marking the eighth straight monthly increase.
Workers watched Obama on large-screen TVs in the lobby bar of a hotel in Detroit's Renaissance Center, home to GM's headquarters. Several wearing GM badges declined to comment afterward, but one man whose fortunes are nearly as tied to GM as its employees expressed hope for the future of the company and industry.
"It's definitely a move in the right direction," said Tony Keros, who owns a restaurant and real estate development firm in the building. "Something has to happen."
In Ohio, Graham agreed that Washington just might get it right -- if only because the stakes are too high to fail.
"They understand that there are literally millions of people who depend on the auto industry -- whether directly or indirectly -- and a ripple effect of eliminating a General Motors, Chrysler or Ford would be devastating to an economy that's already been devastated over the past eight years," he said.
Associated Press writers Ben Leubsdorf in Clinton Township, Tim Martin in Delta Township, Ben Dobbin in Rochester, N.Y., and Thomas J. Sheeran in Cleveland contributed to this report.
Showing posts with label Rick Wagoner. Show all posts
Showing posts with label Rick Wagoner. Show all posts
Saturday, April 11, 2009
Friday, March 6, 2009
Beast of the Month - January 2009
Beast of the Month - January 2009
Rick Wagoner
CEO, General Motors
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
For Americans living outside of Detroit worried about the USA falling into a major depression, be thankful at least you aren't a resident of the Motor City: it's already one there. It's bad enough for the city's rep that LA and New York hip-hop passed Motown as ground zero for African-American music. Michigan's great metropolis is now the poorest city in the nation. Unemployment has hit 21 percent and is still rising, while the average price of a home is down to $18,513. Indeed, the economic downturn is so bad, the notoriously violent city is no longer the nation's most dangerous, having been passed by New Orleans and Camden, New Jersey in 2008 thanks to the lack of worthwhile targets for crime. And to top it all off, the Lions went 0-16.
We bring this all up because naming the city's most powerful korporate executive, General Motors CEO and Chairman Rick Wagoner, The Konformist Beast of the Month seems almost like an excessive piling on overkill. After all, yes, Wagoner and his cohorts at Ford and Chrysler, Alan Mulally and Bob Nardelli, may have come off as clueless and arrogant after coming to Congress asking first for $25 billion and then $34 billion. (You gotta admire their balls, though: usually when you flub your first request for a loan, you ask for less the second time, not $9 billion more.) And yes, maybe it does seem appalling after the Wall Street bailout swindle to have another well-connected industry coming to DC begging for a handout while the working class hasn't received a dime in help from the financial crisis. And yes, for all their whining and moaning about needing help, none of the auto execs could give a convincing mea culpa and admit they have no one to blame for their crisis besides themselves.
(And yes, maybe it would have been at least symbolically wiser for the auto executives to have driven to Washington in good old fashion cars made by their companies rather than fly their in private company jets.)
But, on the other hand, the auto industry is a labor-intensive business that does actual manufacturing, unlike the parasitic, leeching deadweight at the core of Wall Street banks. That means if GM, Ford and Chrysler go down, estimates ranging from 3 to 5 million jobs will disappear with them, good quality jobs at that. And that's before any likely domino effect causes even more jobs to vanish. And while the vast majority of Americans are rightfully disgusted at the idea of another bailout after the Wall Street con, even $34 billion for up to 5 million jobs centered in the manufacturing sector is pretty damn cost-effective, and certainly not comparable to the $700 billion bankster black hole. Maybe Wagoner, Mulally and Nardelli are a bunch of incompetents creeps, but American auto workers shouldn't be left holding the bag for their screw-ups.
This is why The Konformist is awarding the prestigious BOTM prize to Wagoner after all. If workers shouldn't receive the punishment for the failures of Wagoner and his pals, neither should he receive a free pass for the plight of the people of Detroit.
And unfortunately, the auto worker ARE receiving the punishment for the auto executive failures, just as they have over the last 30 years. The framing of the debate was staged when right-wing propagandists repeatedly claimed the average worker gets paid $70-80 in wages and benefits. In fact, the average wage is $28: the grossly inflated figure is based on adding payments to retirees to current benefits and dividing the total by the current work force. But the damage has been done: the blame for the automobile industry crisis was laid at least partially on the feet of overpaid union auto workers, and the remedy was massive cuts in pay and benefits along with layoffs. These talking point barely challenged by the so-called Democratic Party. As Michael Moore rightfully put it with his usual share of deserved outrage: "After giving BILLIONS to Wall Street hucksters and criminal investment bankers -- billions with no strings attached and, as we have since learned, no oversight whatsoever -- the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America."
Okay, so the auto workers are the predictable scapegoat here, but what is the real cause of the auto market crisis? In some ways, it's just a symptom of the bad economy. After all, Toyota announced in December that it would have an operating loss in 2008, the first time it has failed to make a profit since 1938. Meanwhile, Toyota, Honda and Nissan all had drops in sales last year, all averaging over an astounding 30 percent drop in US sales during December alone.
The problem with this explanation is that while the Japanese car companies are indeed slumping, they still are doing way better relative to Detroit. While the Japanese fell from 8 to 15 percent in US sales in 2008, Ford went down 20%, GM 23%, and Chrysler 30%. All told, the Big Three's US market share fell below 50 percent last year. As far as Toyota goes, it finally overtook GM as the world's largest automaker, and solidified its lead over Ford as number two in the US market. Honda nearly overtook Chrysler as number four in the US market as well, a ranking it should decidedly own in 2009. Meanwhile, GM saw its shares fall to their lowest level since 1950, and warned it could run out of cash the first half of 2009 without help. The Detroit auto companies have become so desperate, there have been talks of merging all three into one company, or possibly all three being taken over by Chinese auto firms (something which would have major national security implications.)
So if isn't evil unions or the economy, stupid, what is the real problem with the US auto companies? The Konformist diagnosis isn't an original one, and one we (and others) have been repeating for quite awhile: the Big Three are victims of their own lack of creative thinking. Since the nineties, the US auto companies have had their focus almost solely on the SUV fad as their meal ticket. It wasn't a bad idea: over half their profits have come from light trucks and SUVs, thanks to the vehicle's wider profit margins. "But now," as The Konformist warned five years ago when we gave the BOTM prize to the Hummer, "the US auto industry seems to be falling back in a lazy, self-satisfied pattern. By hiding behind the short-term lack in economy of scales in hybrid technology to justify the non-creation of economy of scales, the Big Three may have made one of the worst decisions in business history. Meantime, GM keeps pumping out those Hummers, which in the short term is indeed profitable. But somehow we suspect that the Hummer will soon resemble another Titanic, as a symbol of the great economic disaster that may soon fall the entire American auto industry if they don't rise to the challenge of the Prius and Insight."
You would think, at this point, we would get some sort of smug satisfaction out of being once again vindicated by history. But frankly, The Konformist doesn't really enjoy having to say "I told you so" repeatedly like we're Jose Canseco discussing steroids, especially in this case where the victims are hard-working American union members. Unfortunately, the numbers pretty much confirm our prediction: SUV sales peaked in 1999, back when the price of oil was $16 a barrel. With the cost of oil passing $140 last summer (and over $4 a gallon at the gas pump) after the 2000-2008 oil price spike, even the most vain of yuppies and soccer moms had enough of the gas-guzzling behemoths. Here are some of the most noted drops in 2008 US sales: at Ford, the SUVs Explorer and Expedition fell 43% and 39%; at Chrysler, the Jeep Grand Cherokee 39% and the Dodge Dakota pickup 48%; and, perhaps most telling, GM's Hummer brand sank at 51%. Even with the recent stunning drop in oil prices, US consumers are decidedly too gun-shy to drink the SUV Kool-Aid anymore.
"How will the economics of hybrids ever match that of the internal combustion engine? We can't afford to subsidize them." This was Wagoner in a 2002 quote from Business Week, a quote that symbolized the view of Detroit executives. The Japanese took another viewpoint, and the results are now in. Put it all together, and there's a reason why Japan is replacing Detroit as the center of the automobile universe. In retrospect, Motown's double down on SUVs is a "IBM letting Microsoft own MS-DOS" kind of business blunder, rivaling as this decade's worst biz decision the AOL-Time Warner merger, Vince McMahon's XFL and Wall Street's plunge into subprime mortgage loans.
Of course, even as Detroit abandon's the SUV craze faster than you could say "Disco sucks!" in 1979, they still have an extremely difficult road ahead. Simply put, US autos are deemed decidedly inferior in quality and reliability compared to those made in Japan by consumers. The difference is highlighted by the view of Japan making more hi-tech, fuel-efficient cars. This is what happens when Japan markets the Prius and other hybrids as the symbol of their creativity. Had GM not squashed the electric EV1 (covered meticulously in the 2006 documentary Who Killed the Electric Car?) they would have something besides the Hummer to showcase as their vision.
The punch line is Detroit is actually making some excellent cars. GM hit a home run with the 2008 Chevy Malibu (named the North American Car of the Year) and the Corvette is still dollar for dollar the best sports car on the planet. The ultra-economical Ford Focus gets 35 MPG. Even the most clueless of US auto companies, Chrysler, has in the PT Cruiser wheels with a cult following usually associated with Apple Computers and The Big Lebowski. (Not to let a good thing be used wisely, Chrysler has decided to kill the Cruiser off.) But these exceptions almost seem to prove the rule, and are deemed too little too late by most American car buyers.
What could change Detroit's image quickly? As usual, Konformist ally Michael Moore presented a pretty good plan last month: making any government bailout of Motown conditional on them producing hybrid and electric cars, as well as mass transit such as trains, buses, subways and light rail. The kind of moves that also would help cure America from its oil addiction while creating millions of blue-collar construction jobs. It's also the kind of move that would be a great change of pace for the Big Three, who long have battled increasing MPG standards and any new environmental laws. (Earlier this year, GM Vice Chairman Bob Lutz dismissed global warming as a “total crock of shit" while speaking to reporters.)
Naturally, the establishment ignored Moore's idea, and instead embraced a different modest proposal: massive layoffs and wage cuts for auto workers, of course. There should be no surprise in this prescription, as it has been the game plan since the 1970s. And no surprise Cerebus, the geniuses who took over Chrysler in 2007, would embrace such a plan, as they already slashed jobs by 24K their first year. (The private equity firm has long been a champion of the "strip and flip" profit strategy: handing out pink slips to "right-size" a korporation for a turnaround sale.) And there should be little surprise GM plans to dump 31,500 jobs (nearly a third of its workforce) and Ford has already eliminated 57,000 North American jobs over the last three years. (GM laid off over 3000 workers on December 23 alone. Merry Christmas.) And little surprise that already UAW contracts cut new worker wages to $14 an hour, or half of what they currently make. (As Business Week remarked, "for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build.") And none should be surprised that opposition to bailing out Detroit in Congress came not from Democrats protesting the attack on American workers, but Republicans (such as the rabidly anti-union Bob Corker) who felt that workers weren't getting the shaft enough.
How will this all end up? Well, Detroit got its money, but with the expectation they screw the autoworkers yet again. Perversely, the huge number of job cuts, combined with the same fixed cost of retirement benefits to former workers, will only increase the "wage and benefits" costs per labor hour, thus giving right-wing propagandist even more bogus ammo to justify future cuts in jobs in wages. It seems the downward spiral will only continue, unless the working class finally responds in a mass rebellion. Of course, considering the economic crisis Team USA is currently in, anything is possible...
In any case, we salute Rick Wagoner as Beast of the Month. Congratulations, and keep up the great work, Ricky!!!
Sources:
Special thanks to the World Socialist Web Site ( WSWS.org ) for help in this article as a research resource.
Boehlert, Eric. "The Media Myth: Detroit's $70-an-hour Autoworker." Media Matters 25 November 2008 <http://mediamatters.org/columns/200811250012>.
City Crime Rankings 2008-2009. CQ Press 2008 <http://os.cqpress.com/citycrime2008/citycrime2008.htm>.
"Depression Hits Detroit." Prison Planet 23 December 2008 <http://www.prisonplanet.com/depression-hits-detroit-average-home-price-18513-unemployment-rate-21.html>.
"GM Shares Fall to Lowest Level Since 1950." Yahoo Finance 9 October 2008 <http://biz.yahoo.com/rb/081009/business_us_gm_shares.html>.
"GM Warns It Could Run Out Of Cash By 1st Half '09." CNNMoney.com 7 November 2008 <http://money.cnn.com/news/newsfeeds/articles/djf500/200811071240DOWJONESDJONLINE000633_FORTUNE5.htm>.
Goodman, David N. "Motor City Named Nation's Most Dangerous." Yahoo News 19 November 2007 <http://news.yahoo.com/s/ap/20071119/ap_on_re_us/dangerous_cities>.
Hamsher, Jane. "Chinese Want To Buy the Big 3 Automakers." Huffington Post 20 November 2008 <http://www.huffingtonpost.com/jane-hamsher/chinese-want-to-buy-the-b_b_144920.html>.
Krebs, Michelle and Visnic, Bill. "2008 U.S. Auto Sales Are Worst Since 1992." Auto Observer 5 January 2009 <http://www.autoobserver.com/2009/01/2008-us-auto-sales-are-worst-since-1992.html>.
Krolicki, Kevin. "GM Exec Stands by Calling Global Warming a 'Total Crock of Shit.'" Common Dreams 23 February 2008 <http://www.commondreams.org/archive/2008/02/23/7251/>.
Moore, Michael. "Senate to Middle Class: Drop Dead." MichaelMoore.com 12 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=243>.
Moore, Michael. "Saving the Big 3 for You and Me..." MichaelMoore.com 3 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=242>.
Neiwert, David. "Republicans to Detroit: Drop Dead." Crooks and Liars 20 November 2008 <http://crooksandliars.com/david-neiwert/republicans-detroit-drop-dead>.
Ohnsman, Alan and Ramsey, Mike. "Honda Passes Chrysler as Asia Brands Widen U.S. Share." Bloomberg 4 September 2008 <http://www.bloomberg.com/apps/news?pid=20601087&sid=agUdhAPT2KEY>.
Parks, James. "If Auto Industry Goes Bankrupt, Millions of U.S. Jobs Will Be Lost." AFL-CIO 4 December 2008 <http://blog.aflcio.org/2008/12/04/if-auto-industry-goes-bankrupt-millions-of-us-jobs-will-be-lost/>.
"Rainbow PUSH Mobilizes to Save 4 Million Jobs." Rainbow PUSH Coalition 16 December 2008 <http://www.rainbowpush.org/FMPro?-db=rpodata.fp5&-format=rainbowpush%2Fdata06%2Fdetailpress.htm&-lay=main&-sortfield=date&-sortorder=descend&category=press&year=2008&-max=20&-recid=34007&-find>.
"Reports: Chrysler, GM Discuss Merger, Acquisition." Associated Press 11 October 2008 <http://ap.google.com/article/ALeqM5ha9rjtSaQvjt-5p8ej6DXKECN4AQD93O40F00>.
Riechmann, Deb. "Bush Orders Emergency Bailout of the Auto Industry." Yahoo News 20 December 2008 <http://news.yahoo.com/s/ap/20081220/ap_on_go_pr_wh/meltdown_autos>.
Roberts, Paul Craig. "The Crisis Has Hardly Begun." Online Journal 18 November 2008 <http://onlinejournal.com/artman/publish/article_4021.shtml>.
Salmon, Felix. "Chrysler Follows the Strip-and-Flip Playbook." Portfolio.com 1 November 2007 <http://www.portfolio.com/views/blogs/market-movers/2007/11/01/chrysler-follows-the-strip-and-flip-playbook?addComment=true>.
Sorkin, Andrew Ross. "Chrysler and the Fallibility of Private Equity." New York Times 1 November 2007 <http://dealbook.blogs.nytimes.com/2007/11/01/chrysler-and-the-fallibility-of-private-equity/>.
Vlasic, Bill and Fackler, Martin. "Car Slump Jolts Toyota, Halting 70 Years of Gain." New York Times 23 December 2008.
Rick Wagoner
CEO, General Motors
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
For Americans living outside of Detroit worried about the USA falling into a major depression, be thankful at least you aren't a resident of the Motor City: it's already one there. It's bad enough for the city's rep that LA and New York hip-hop passed Motown as ground zero for African-American music. Michigan's great metropolis is now the poorest city in the nation. Unemployment has hit 21 percent and is still rising, while the average price of a home is down to $18,513. Indeed, the economic downturn is so bad, the notoriously violent city is no longer the nation's most dangerous, having been passed by New Orleans and Camden, New Jersey in 2008 thanks to the lack of worthwhile targets for crime. And to top it all off, the Lions went 0-16.
We bring this all up because naming the city's most powerful korporate executive, General Motors CEO and Chairman Rick Wagoner, The Konformist Beast of the Month seems almost like an excessive piling on overkill. After all, yes, Wagoner and his cohorts at Ford and Chrysler, Alan Mulally and Bob Nardelli, may have come off as clueless and arrogant after coming to Congress asking first for $25 billion and then $34 billion. (You gotta admire their balls, though: usually when you flub your first request for a loan, you ask for less the second time, not $9 billion more.) And yes, maybe it does seem appalling after the Wall Street bailout swindle to have another well-connected industry coming to DC begging for a handout while the working class hasn't received a dime in help from the financial crisis. And yes, for all their whining and moaning about needing help, none of the auto execs could give a convincing mea culpa and admit they have no one to blame for their crisis besides themselves.
(And yes, maybe it would have been at least symbolically wiser for the auto executives to have driven to Washington in good old fashion cars made by their companies rather than fly their in private company jets.)
But, on the other hand, the auto industry is a labor-intensive business that does actual manufacturing, unlike the parasitic, leeching deadweight at the core of Wall Street banks. That means if GM, Ford and Chrysler go down, estimates ranging from 3 to 5 million jobs will disappear with them, good quality jobs at that. And that's before any likely domino effect causes even more jobs to vanish. And while the vast majority of Americans are rightfully disgusted at the idea of another bailout after the Wall Street con, even $34 billion for up to 5 million jobs centered in the manufacturing sector is pretty damn cost-effective, and certainly not comparable to the $700 billion bankster black hole. Maybe Wagoner, Mulally and Nardelli are a bunch of incompetents creeps, but American auto workers shouldn't be left holding the bag for their screw-ups.
This is why The Konformist is awarding the prestigious BOTM prize to Wagoner after all. If workers shouldn't receive the punishment for the failures of Wagoner and his pals, neither should he receive a free pass for the plight of the people of Detroit.
And unfortunately, the auto worker ARE receiving the punishment for the auto executive failures, just as they have over the last 30 years. The framing of the debate was staged when right-wing propagandists repeatedly claimed the average worker gets paid $70-80 in wages and benefits. In fact, the average wage is $28: the grossly inflated figure is based on adding payments to retirees to current benefits and dividing the total by the current work force. But the damage has been done: the blame for the automobile industry crisis was laid at least partially on the feet of overpaid union auto workers, and the remedy was massive cuts in pay and benefits along with layoffs. These talking point barely challenged by the so-called Democratic Party. As Michael Moore rightfully put it with his usual share of deserved outrage: "After giving BILLIONS to Wall Street hucksters and criminal investment bankers -- billions with no strings attached and, as we have since learned, no oversight whatsoever -- the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America."
Okay, so the auto workers are the predictable scapegoat here, but what is the real cause of the auto market crisis? In some ways, it's just a symptom of the bad economy. After all, Toyota announced in December that it would have an operating loss in 2008, the first time it has failed to make a profit since 1938. Meanwhile, Toyota, Honda and Nissan all had drops in sales last year, all averaging over an astounding 30 percent drop in US sales during December alone.
The problem with this explanation is that while the Japanese car companies are indeed slumping, they still are doing way better relative to Detroit. While the Japanese fell from 8 to 15 percent in US sales in 2008, Ford went down 20%, GM 23%, and Chrysler 30%. All told, the Big Three's US market share fell below 50 percent last year. As far as Toyota goes, it finally overtook GM as the world's largest automaker, and solidified its lead over Ford as number two in the US market. Honda nearly overtook Chrysler as number four in the US market as well, a ranking it should decidedly own in 2009. Meanwhile, GM saw its shares fall to their lowest level since 1950, and warned it could run out of cash the first half of 2009 without help. The Detroit auto companies have become so desperate, there have been talks of merging all three into one company, or possibly all three being taken over by Chinese auto firms (something which would have major national security implications.)
So if isn't evil unions or the economy, stupid, what is the real problem with the US auto companies? The Konformist diagnosis isn't an original one, and one we (and others) have been repeating for quite awhile: the Big Three are victims of their own lack of creative thinking. Since the nineties, the US auto companies have had their focus almost solely on the SUV fad as their meal ticket. It wasn't a bad idea: over half their profits have come from light trucks and SUVs, thanks to the vehicle's wider profit margins. "But now," as The Konformist warned five years ago when we gave the BOTM prize to the Hummer, "the US auto industry seems to be falling back in a lazy, self-satisfied pattern. By hiding behind the short-term lack in economy of scales in hybrid technology to justify the non-creation of economy of scales, the Big Three may have made one of the worst decisions in business history. Meantime, GM keeps pumping out those Hummers, which in the short term is indeed profitable. But somehow we suspect that the Hummer will soon resemble another Titanic, as a symbol of the great economic disaster that may soon fall the entire American auto industry if they don't rise to the challenge of the Prius and Insight."
You would think, at this point, we would get some sort of smug satisfaction out of being once again vindicated by history. But frankly, The Konformist doesn't really enjoy having to say "I told you so" repeatedly like we're Jose Canseco discussing steroids, especially in this case where the victims are hard-working American union members. Unfortunately, the numbers pretty much confirm our prediction: SUV sales peaked in 1999, back when the price of oil was $16 a barrel. With the cost of oil passing $140 last summer (and over $4 a gallon at the gas pump) after the 2000-2008 oil price spike, even the most vain of yuppies and soccer moms had enough of the gas-guzzling behemoths. Here are some of the most noted drops in 2008 US sales: at Ford, the SUVs Explorer and Expedition fell 43% and 39%; at Chrysler, the Jeep Grand Cherokee 39% and the Dodge Dakota pickup 48%; and, perhaps most telling, GM's Hummer brand sank at 51%. Even with the recent stunning drop in oil prices, US consumers are decidedly too gun-shy to drink the SUV Kool-Aid anymore.
"How will the economics of hybrids ever match that of the internal combustion engine? We can't afford to subsidize them." This was Wagoner in a 2002 quote from Business Week, a quote that symbolized the view of Detroit executives. The Japanese took another viewpoint, and the results are now in. Put it all together, and there's a reason why Japan is replacing Detroit as the center of the automobile universe. In retrospect, Motown's double down on SUVs is a "IBM letting Microsoft own MS-DOS" kind of business blunder, rivaling as this decade's worst biz decision the AOL-Time Warner merger, Vince McMahon's XFL and Wall Street's plunge into subprime mortgage loans.
Of course, even as Detroit abandon's the SUV craze faster than you could say "Disco sucks!" in 1979, they still have an extremely difficult road ahead. Simply put, US autos are deemed decidedly inferior in quality and reliability compared to those made in Japan by consumers. The difference is highlighted by the view of Japan making more hi-tech, fuel-efficient cars. This is what happens when Japan markets the Prius and other hybrids as the symbol of their creativity. Had GM not squashed the electric EV1 (covered meticulously in the 2006 documentary Who Killed the Electric Car?) they would have something besides the Hummer to showcase as their vision.
The punch line is Detroit is actually making some excellent cars. GM hit a home run with the 2008 Chevy Malibu (named the North American Car of the Year) and the Corvette is still dollar for dollar the best sports car on the planet. The ultra-economical Ford Focus gets 35 MPG. Even the most clueless of US auto companies, Chrysler, has in the PT Cruiser wheels with a cult following usually associated with Apple Computers and The Big Lebowski. (Not to let a good thing be used wisely, Chrysler has decided to kill the Cruiser off.) But these exceptions almost seem to prove the rule, and are deemed too little too late by most American car buyers.
What could change Detroit's image quickly? As usual, Konformist ally Michael Moore presented a pretty good plan last month: making any government bailout of Motown conditional on them producing hybrid and electric cars, as well as mass transit such as trains, buses, subways and light rail. The kind of moves that also would help cure America from its oil addiction while creating millions of blue-collar construction jobs. It's also the kind of move that would be a great change of pace for the Big Three, who long have battled increasing MPG standards and any new environmental laws. (Earlier this year, GM Vice Chairman Bob Lutz dismissed global warming as a “total crock of shit" while speaking to reporters.)
Naturally, the establishment ignored Moore's idea, and instead embraced a different modest proposal: massive layoffs and wage cuts for auto workers, of course. There should be no surprise in this prescription, as it has been the game plan since the 1970s. And no surprise Cerebus, the geniuses who took over Chrysler in 2007, would embrace such a plan, as they already slashed jobs by 24K their first year. (The private equity firm has long been a champion of the "strip and flip" profit strategy: handing out pink slips to "right-size" a korporation for a turnaround sale.) And there should be little surprise GM plans to dump 31,500 jobs (nearly a third of its workforce) and Ford has already eliminated 57,000 North American jobs over the last three years. (GM laid off over 3000 workers on December 23 alone. Merry Christmas.) And little surprise that already UAW contracts cut new worker wages to $14 an hour, or half of what they currently make. (As Business Week remarked, "for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build.") And none should be surprised that opposition to bailing out Detroit in Congress came not from Democrats protesting the attack on American workers, but Republicans (such as the rabidly anti-union Bob Corker) who felt that workers weren't getting the shaft enough.
How will this all end up? Well, Detroit got its money, but with the expectation they screw the autoworkers yet again. Perversely, the huge number of job cuts, combined with the same fixed cost of retirement benefits to former workers, will only increase the "wage and benefits" costs per labor hour, thus giving right-wing propagandist even more bogus ammo to justify future cuts in jobs in wages. It seems the downward spiral will only continue, unless the working class finally responds in a mass rebellion. Of course, considering the economic crisis Team USA is currently in, anything is possible...
In any case, we salute Rick Wagoner as Beast of the Month. Congratulations, and keep up the great work, Ricky!!!
Sources:
Special thanks to the World Socialist Web Site ( WSWS.org ) for help in this article as a research resource.
Boehlert, Eric. "The Media Myth: Detroit's $70-an-hour Autoworker." Media Matters 25 November 2008 <http://mediamatters.org/columns/200811250012>.
City Crime Rankings 2008-2009. CQ Press 2008 <http://os.cqpress.com/citycrime2008/citycrime2008.htm>.
"Depression Hits Detroit." Prison Planet 23 December 2008 <http://www.prisonplanet.com/depression-hits-detroit-average-home-price-18513-unemployment-rate-21.html>.
"GM Shares Fall to Lowest Level Since 1950." Yahoo Finance 9 October 2008 <http://biz.yahoo.com/rb/081009/business_us_gm_shares.html>.
"GM Warns It Could Run Out Of Cash By 1st Half '09." CNNMoney.com 7 November 2008 <http://money.cnn.com/news/newsfeeds/articles/djf500/200811071240DOWJONESDJONLINE000633_FORTUNE5.htm>.
Goodman, David N. "Motor City Named Nation's Most Dangerous." Yahoo News 19 November 2007 <http://news.yahoo.com/s/ap/20071119/ap_on_re_us/dangerous_cities>.
Hamsher, Jane. "Chinese Want To Buy the Big 3 Automakers." Huffington Post 20 November 2008 <http://www.huffingtonpost.com/jane-hamsher/chinese-want-to-buy-the-b_b_144920.html>.
Krebs, Michelle and Visnic, Bill. "2008 U.S. Auto Sales Are Worst Since 1992." Auto Observer 5 January 2009 <http://www.autoobserver.com/2009/01/2008-us-auto-sales-are-worst-since-1992.html>.
Krolicki, Kevin. "GM Exec Stands by Calling Global Warming a 'Total Crock of Shit.'" Common Dreams 23 February 2008 <http://www.commondreams.org/archive/2008/02/23/7251/>.
Moore, Michael. "Senate to Middle Class: Drop Dead." MichaelMoore.com 12 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=243>.
Moore, Michael. "Saving the Big 3 for You and Me..." MichaelMoore.com 3 December 2008 <http://www.michaelmoore.com/words/message/index.php?id=242>.
Neiwert, David. "Republicans to Detroit: Drop Dead." Crooks and Liars 20 November 2008 <http://crooksandliars.com/david-neiwert/republicans-detroit-drop-dead>.
Ohnsman, Alan and Ramsey, Mike. "Honda Passes Chrysler as Asia Brands Widen U.S. Share." Bloomberg 4 September 2008 <http://www.bloomberg.com/apps/news?pid=20601087&sid=agUdhAPT2KEY>.
Parks, James. "If Auto Industry Goes Bankrupt, Millions of U.S. Jobs Will Be Lost." AFL-CIO 4 December 2008 <http://blog.aflcio.org/2008/12/04/if-auto-industry-goes-bankrupt-millions-of-us-jobs-will-be-lost/>.
"Rainbow PUSH Mobilizes to Save 4 Million Jobs." Rainbow PUSH Coalition 16 December 2008 <http://www.rainbowpush.org/FMPro?-db=rpodata.fp5&-format=rainbowpush%2Fdata06%2Fdetailpress.htm&-lay=main&-sortfield=date&-sortorder=descend&category=press&year=2008&-max=20&-recid=34007&-find>.
"Reports: Chrysler, GM Discuss Merger, Acquisition." Associated Press 11 October 2008 <http://ap.google.com/article/ALeqM5ha9rjtSaQvjt-5p8ej6DXKECN4AQD93O40F00>.
Riechmann, Deb. "Bush Orders Emergency Bailout of the Auto Industry." Yahoo News 20 December 2008 <http://news.yahoo.com/s/ap/20081220/ap_on_go_pr_wh/meltdown_autos>.
Roberts, Paul Craig. "The Crisis Has Hardly Begun." Online Journal 18 November 2008 <http://onlinejournal.com/artman/publish/article_4021.shtml>.
Salmon, Felix. "Chrysler Follows the Strip-and-Flip Playbook." Portfolio.com 1 November 2007 <http://www.portfolio.com/views/blogs/market-movers/2007/11/01/chrysler-follows-the-strip-and-flip-playbook?addComment=true>.
Sorkin, Andrew Ross. "Chrysler and the Fallibility of Private Equity." New York Times 1 November 2007 <http://dealbook.blogs.nytimes.com/2007/11/01/chrysler-and-the-fallibility-of-private-equity/>.
Vlasic, Bill and Fackler, Martin. "Car Slump Jolts Toyota, Halting 70 Years of Gain." New York Times 23 December 2008.
Tuesday, February 24, 2009
Its Muscle Car Glory Faded, Pontiac Shrivels Up
http://www.nytimes.com/2009/02/20/business/20pontiac.html
Its Muscle Car Glory Faded, Pontiac Shrivels Up
By MICHELINE MAYNARD
February 19, 2009
DETROIT — With its history of building muscle cars like the GTO and the low-slung Firebird, Pontiac had good reason to take pride in its best-known marketing slogan from the 1980s, “We Build Excitement.”
Lately it has been using “Pontiac is CAR,” a phrase more likely to catch the attention of grammarians than car buffs.
And on Tuesday, when General Motors asked the federal government for more bailout money, it also announced a reorganization plan that included demoting Pontiac to a “focused niche brand,” signaling that its lineup of vehicles would shrink and that it would no longer be a separate division.
To industry analysts and Pontiac’s longtime fans, the downgrade provides a case study of the product missteps that helped put G.M. in its precarious state, and a reminder of the dangers in straying from a successful formula.
“When you deviate too far from it, that’s when you run into trouble as a brand and a company,” said Jack R. Nerad, executive editorial director at Kelley Blue Book, whose 1968 Firebird made him feel “as cool as I could be.”
More than any other G.M. brand, Pontiac stood for performance, speed and sex appeal. Its crosstown rivals followed with similar muscle cars, giving Detroit bragging rights over the cars that Japanese automakers were selling based on quality and reliability.
Though still G.M.’s third-best-selling division, behind Chevrolet and GMC, Pontiac’s sales peaked in 1984, when it sold almost 850,000 vehicles, roughly four times as many as it sold last year.
G.M.’s chief executive, Rick Wagoner, said the company’s decision to concentrate primarily on Cadillac, Chevrolet, Buick and GMC left the company with a “comprehensive portfolio.”
By many accounts, Pontiac started to falter when G.M. pursued a cost-saving strategy of providing the same cars to different divisions.
It gave Pontiac vehicles like the TransSport minivan, and the Sunbird, Sunfire and Phoenix cars that were barely distinguishable from models sold by Chevrolet and Oldsmobile.
Pontiac also garnered unwanted publicity in 2001 with the Aztek, whose tag line declared, “Quite possibly the most versatile vehicle on the planet.” Its bulky looks landed it on lists of the world’s ugliest cars. Indeed, Aztek won top honors in that category from The Daily Telegraph of London last year.
Pontiac’s current plight is reflected in its Vibe, a well-regarded crossover vehicle that shares underpinnings with the Toyota Matrix, as part of a joint venture between Toyota and G.M.
While the Matrix holds 67 percent of its resale value after three years, according to Kelley Blue Book, the Vibe retains just 54 percent.
The Vibe, whose future is not clear but which was redesigned for 2009, is meant to appeal to the same age group that Pontiac’s muscle cars once did.
But many younger Americans, who were not around for Pontiac’s prime period, will not miss the brand as it shrinks, said Ron Pinelli, who is president of Motorintelligence.com, a company that tracks industry statistics.
To them, he said, “it doesn’t have any cachet unless they’re watching a late-night movie with Burt Reynolds,” whose film “Smokey and the Bandit” featured the Pontiac Trans Am.
But in its best years, Pontiacs were “highly styled and valued and really something,” Mr. Pinelli said.
Known before World War II primarily for its sedate sedans, Pontiac got a lift in the 1950s when G.M. used its cars on the racing circuit. Because of its “wide track” stance, Pontiacs quickly caught on with street racers, as well.
Tim Sampson, whose family owned a yellow Pontiac Grand Prix in the 1960s, remembered the Pontiacs that were used for drag races on President’s Island, in an industrial part of Memphis. “People used to get arrested,” said Mr. Sampson, a founder of the Stax Museum of American Soul.
Italian sports cars inspired another classic Pontiac in the 1960s, when the division’s new general manager, John Z. DeLorean, decided it needed a small, fast car modeled after a Ferrari. He hit on the name GTO — after a Ferrari coupe called the Gran Turismo Omologato.
The GTO returned this decade, as part of an effort to revive Pontiac. But G.M.’s Holden division in Australia built that car.
Its appearance barely echoed the original GTO, disappointing its core audience. It lasted only from 2004 to 2006, before G.M. stopped selling them.
The most recent efforts to breathe new life into Pontiac were put into motion by G.M.’s vice chairman, Robert A. Lutz, who will retire at the end of 2009. Known in the industry for his love of high-performance vehicles, Mr. Lutz had pushed the division to return to its car heritage.
On its Web site, Pontiac explains its new slogan more fully: “Pontiac is style. Pontiac is performance. Pontiac is culture. Pontiac is music. Pontiac is CAR.”
Now, G.M. will have to determine which Pontiacs will remain Pontiacs. So far, Mr. Wagoner and other executives have not given any indication of the company’s specific plans for Pontiac.
But unlike Saturn, which will be discontinued by 2012, G.M. does not have to dismantle a dealership lineup for Pontiac. Its franchises, for the most part, already have been grouped with Buick and GMC. Any future models, G.M. said this week, will be sold through this Buick-Pontiac-GMC organization.
“We’re the third generation, and we’re the last,” said Rick Zimmerman, whose family has sold Pontiacs in Pittsfield, Ill., since the brand came to life as part of its Oakland division in the 1920s. (Pontiac became a stand-alone division in 1932.)
Mr. Zimmerman, whose first car was a GTO, said hundreds of customers used to flood his showroom each fall when new Pontiacs — like the popular Bonneville, now a retired nameplate — were unveiled.
Now, despite positive reviews about the performance of some new models like the G8, he has trouble getting his customers interested in them.
“It’s been a good name, and had a lot of good cars,” Mr. Zimmerman said. “It’s tough to see it go.”
Nick Bunkley contributed reporting.
A version of this article appeared in print on February 20, 2009, on page A1 of the New York edition.
Its Muscle Car Glory Faded, Pontiac Shrivels Up
By MICHELINE MAYNARD
February 19, 2009
DETROIT — With its history of building muscle cars like the GTO and the low-slung Firebird, Pontiac had good reason to take pride in its best-known marketing slogan from the 1980s, “We Build Excitement.”
Lately it has been using “Pontiac is CAR,” a phrase more likely to catch the attention of grammarians than car buffs.
And on Tuesday, when General Motors asked the federal government for more bailout money, it also announced a reorganization plan that included demoting Pontiac to a “focused niche brand,” signaling that its lineup of vehicles would shrink and that it would no longer be a separate division.
To industry analysts and Pontiac’s longtime fans, the downgrade provides a case study of the product missteps that helped put G.M. in its precarious state, and a reminder of the dangers in straying from a successful formula.
“When you deviate too far from it, that’s when you run into trouble as a brand and a company,” said Jack R. Nerad, executive editorial director at Kelley Blue Book, whose 1968 Firebird made him feel “as cool as I could be.”
More than any other G.M. brand, Pontiac stood for performance, speed and sex appeal. Its crosstown rivals followed with similar muscle cars, giving Detroit bragging rights over the cars that Japanese automakers were selling based on quality and reliability.
Though still G.M.’s third-best-selling division, behind Chevrolet and GMC, Pontiac’s sales peaked in 1984, when it sold almost 850,000 vehicles, roughly four times as many as it sold last year.
G.M.’s chief executive, Rick Wagoner, said the company’s decision to concentrate primarily on Cadillac, Chevrolet, Buick and GMC left the company with a “comprehensive portfolio.”
By many accounts, Pontiac started to falter when G.M. pursued a cost-saving strategy of providing the same cars to different divisions.
It gave Pontiac vehicles like the TransSport minivan, and the Sunbird, Sunfire and Phoenix cars that were barely distinguishable from models sold by Chevrolet and Oldsmobile.
Pontiac also garnered unwanted publicity in 2001 with the Aztek, whose tag line declared, “Quite possibly the most versatile vehicle on the planet.” Its bulky looks landed it on lists of the world’s ugliest cars. Indeed, Aztek won top honors in that category from The Daily Telegraph of London last year.
Pontiac’s current plight is reflected in its Vibe, a well-regarded crossover vehicle that shares underpinnings with the Toyota Matrix, as part of a joint venture between Toyota and G.M.
While the Matrix holds 67 percent of its resale value after three years, according to Kelley Blue Book, the Vibe retains just 54 percent.
The Vibe, whose future is not clear but which was redesigned for 2009, is meant to appeal to the same age group that Pontiac’s muscle cars once did.
But many younger Americans, who were not around for Pontiac’s prime period, will not miss the brand as it shrinks, said Ron Pinelli, who is president of Motorintelligence.com, a company that tracks industry statistics.
To them, he said, “it doesn’t have any cachet unless they’re watching a late-night movie with Burt Reynolds,” whose film “Smokey and the Bandit” featured the Pontiac Trans Am.
But in its best years, Pontiacs were “highly styled and valued and really something,” Mr. Pinelli said.
Known before World War II primarily for its sedate sedans, Pontiac got a lift in the 1950s when G.M. used its cars on the racing circuit. Because of its “wide track” stance, Pontiacs quickly caught on with street racers, as well.
Tim Sampson, whose family owned a yellow Pontiac Grand Prix in the 1960s, remembered the Pontiacs that were used for drag races on President’s Island, in an industrial part of Memphis. “People used to get arrested,” said Mr. Sampson, a founder of the Stax Museum of American Soul.
Italian sports cars inspired another classic Pontiac in the 1960s, when the division’s new general manager, John Z. DeLorean, decided it needed a small, fast car modeled after a Ferrari. He hit on the name GTO — after a Ferrari coupe called the Gran Turismo Omologato.
The GTO returned this decade, as part of an effort to revive Pontiac. But G.M.’s Holden division in Australia built that car.
Its appearance barely echoed the original GTO, disappointing its core audience. It lasted only from 2004 to 2006, before G.M. stopped selling them.
The most recent efforts to breathe new life into Pontiac were put into motion by G.M.’s vice chairman, Robert A. Lutz, who will retire at the end of 2009. Known in the industry for his love of high-performance vehicles, Mr. Lutz had pushed the division to return to its car heritage.
On its Web site, Pontiac explains its new slogan more fully: “Pontiac is style. Pontiac is performance. Pontiac is culture. Pontiac is music. Pontiac is CAR.”
Now, G.M. will have to determine which Pontiacs will remain Pontiacs. So far, Mr. Wagoner and other executives have not given any indication of the company’s specific plans for Pontiac.
But unlike Saturn, which will be discontinued by 2012, G.M. does not have to dismantle a dealership lineup for Pontiac. Its franchises, for the most part, already have been grouped with Buick and GMC. Any future models, G.M. said this week, will be sold through this Buick-Pontiac-GMC organization.
“We’re the third generation, and we’re the last,” said Rick Zimmerman, whose family has sold Pontiacs in Pittsfield, Ill., since the brand came to life as part of its Oakland division in the 1920s. (Pontiac became a stand-alone division in 1932.)
Mr. Zimmerman, whose first car was a GTO, said hundreds of customers used to flood his showroom each fall when new Pontiacs — like the popular Bonneville, now a retired nameplate — were unveiled.
Now, despite positive reviews about the performance of some new models like the G8, he has trouble getting his customers interested in them.
“It’s been a good name, and had a lot of good cars,” Mr. Zimmerman said. “It’s tough to see it go.”
Nick Bunkley contributed reporting.
A version of this article appeared in print on February 20, 2009, on page A1 of the New York edition.
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