What's with the North American car industry?

I have been hesitant to comment much on the on-going shenanigans concerning the North American car industry, because the second I file something, everything changes.

As I type, the US Congress has passed a $14 billion (US) aid package, but the US Senate is still thinking about it. Hilarious to listen to certain senators say they'd never give private enterprise welfare payments. Check their voting records though and you'll often see they're the same guys who voted to give hundreds of millions of dollars in subsidies to foreign-owned companies to set up shop - coincidentally in THEIR states.

I was the States for the past few days, and it is interesting to see the local commentary. One editorial cartoon - might have been in the Las Vegas paper; can't remember, and I forgot to clip'n'save - basically said that it's too bad the domestic car industry didn't create lousy financial products, instead of building lousy cars. Because companies like AIG, CitiBank and other financial institutions lost billions of dollars - not by creating any products, not by actually making anything, and hardly employing anyone - but just by shoving bits of paper and computer data around, dishing out mortgages to home owners at 125 percent of the value of the house so they could buy (among other things) a new car. And those companies were given billions by that same US Congress.

David Cole, chair of the Center for Automotive Research in Ann Arbor Michigan, an industry consulting firm, said the other day that the domestic car industry was "being penalized for being old", echoing what I had written in the print edition of Wheels a couple of weeks ago. You can't expect workers to screw fenders onto Chevvies for 30 years and never get a raise. But if you're just off the farm in Georgia or Tennessee and somebody offers you $15 an hour to screw fenders onto Hyundais or Volkswagens, you're going to jump at the chance - and not worry about whether you will get titanium hips when you turn 65.

(Incidentally, you may not know that David Cole's father, Ed Cole, was the engineer who developed the famed small-block Chevrolet V8 in the '50s, and rose to become president of General Motors in 1967.)

Until the US stops being the only industrialized country in the world to tie pensions and medical benefits to the company you work for, instead of making such things a responsibility of the society as a whole, there is always going to be a built-in disadvantage to any company that has been in business for more than 35 - 40 years.

It's new companies, not necessarily foreign companies, that benefit, as Southwest Airlines proves.

Anything President-elect Obama might accomplish with respect to health care (pensions aren't even on the radar screen) will come far too late to help the car industry.

If the Senate doesn't get off its high horse and dish out some support, Chrysler (for sure), GM (probably), and Ford (possibly) will go bankrupt. While this may in fact be the only way out, and lots of companies have taken advantage of that route to restructure and come back and prosper, it will deal a devastating blow not just to the companies themselves, but also to the supplier industry - which of course also supports the foreign-owned companies.

Canada will have to play its part too, although it is very hard to negotiate when the opening gambit (as is Chrysler's ) is: pay or we move all our production back to the US.

I hope cool heads will prevail, and that at least two of the three companies survive.

How?

I wish I knew.

Comments

[Nick B.]

Interesting point there; "...Ed Cole, was the engineer who developed the famed small-block Chevrolet V8 in the '50s, and rose to become president of General Motors in 1967...".

Ed Cole was the president of GM when it having one of its most fruitful times. He retired in 1974 just as the oil crisis began to take hold, when life became too complex, and when the lawmakers started foisting upon us impact absorbing bumpers and other stupid things.

I have an idea (hee hee...) how to ensure GM's Ford's and Chrysler's survival; put the engineers back at the helm!

I cannot think of one car company (maybe others can?) that was started by an accountant or a lawyer or a marketing executive AND is still thriving today. These individuals usually ruin a good idea when it comes to making a proper and satisfying automobile.
Colin Champan, Enzo Ferrari, Ferdinand Porsche, for example, had either engineering degrees or where mechanically gifted. None could probably balance the books nor could they make fancy sales brochures full of BS; they didn't have to, their cars sold on their own merit. Only when they either died or hired too many accountants did they get into trouble.

So, bring back the people who know how to make cars, I say.

Furthermore, when it comes to GM, kill Saturn, reduce Pontiac's production to a couple of Holdens only, get Chevy to make only passenger cars and have them reduce the number of models to only three, get GMC to make two-three trucks and SUV's for trade and farmers only, sell Buick to the Chinese, and bring over Opels as-they-are (no stupid re-badging or re-chroming) to North America.

Sell Cadillac as well or let them go on their own - they'll probably do well with models they have for years to come.

Be a good start, I say.

[Charles]

Is it not about time somebody puts together a list of the vehicles that are made in Canada and encourages Canadians to seriously consider this list when shopping for vehicles?

[Jim Kenzie]

RE: Canadian-built cars - the issue really is what percentage of the car is "built" in Canada. There are a number of ways this could be measured - by value, by hours of labour involved, etc.

I don't know this for a fact, but there's a chance that a car with final assembly in Mexico could have more "Canadian content" in it - measured however - than one assembled in Oshawa, because perhaps its engine and transmission were assembled here.

The rules of NAFTA do specify what percentage by value a car must have to qualify for duty-free status.

Let's just say it is a very complex - and global - issue.

Jim Kenzie