GM
Less than Zero
You cannot produce any product with ever-increasing quality and durability, and make sales gains year upon year forever. Not unless your customer pool is increasing almost exponentially. Therein lies the dilemma of each and every automobile manufacturer, domestic AND imported in the U.S. market today. They’ve all but manufactured themselves out of business. Their cars are already piling up on our shores, as well as in the middle of our country (buy a beach front parking space NOW if you can!). My humble prediction is that if the Detroit 3 go under, so do Toyandissan as well, within the next year after the first domestic company files (unless President-elect Obama rides in and fixes the Waggoner).
Why will they have to file? Whether it’s jingoistic backlash (laughable), an employee reVOLT (i.e. massive strikes and T-workers finally hopping into bed with that ‘dirty’ UAW), or other unforeseen complications, it is going to happen. Or did we forget the memo that was leaked from Toyota that basically stated “We need to drop our American workers’ wages down to a more palatable rate, say $8.25 per hour.” You don’t talk about cutting wages by $300M unless that is exactly what you want to do. Toyota has wisely looked at executive compensation cuts to make up some of this budget target, but it still will not save them unless they can start selling cars, immediate like.
When everyone and their brother-in-law started buying these brand new cars, it had the effect of creating a staggering glut of perfectly serviceable used cars that even now hang out in dealer lots, visit the auctions without selling, and even languish in private sellers’ hands, sitting for weeks or months (hey, AutoTrader ads will run until it sells!) until they eventually lower the price or accept a lowball offer that meets the eviscerated resale values.
There are so many new and used cars and trucks out there that if every auto manufacturer were to shut down tomorrow, they could easily be maintained for decades, if not centuries. Especially with all the newly freed up parts manufacturing capacity we are going to have. For proof of this, you need only look to Havana, Cuba, where old Detroit iron has soldiered on for decades without the support of the manufacturer (which may be similar to what we’re going to see in this country if any or all of Our Boys go Chapter 7).
The most glaring place where all the automobile companies went wrong is in the selling of far too many trucks to way too many people who were willing to beg too darned much from the banks to get them. All financing follies aside, Trucks, and by extension SUVs survive much longer than cars in most uses. Even when they are driven harder, longer, and rougher than mere passenger cars, they are much more durable, and will soldier on that much longer (if they are just properly maintained). So what happens when you give them to soccer moms who don’t abuse them or even use them for actual heavy duty work ? They will last practically forever, except those that rust out, or get the old insurance roast, and meanwhile no one except the hard-core workmen will need more trucks. But why buy new when there are so many lightly-used, pristine, potential work-horses available out there? You can buy a new truck for $30,000+ or you can buy 3 2008 F-250 repos for about $33,000 (one example multiplied by three, @ $10,500 ea. plus a reasonable $500 ea. purchasing fee for New Car Consultant Stephen Lang ).
It’s like the story (my goo-search turned up nothing) of the company that made a better light bulb (CFLs?) and priced them the same as a regular incandescent, then promptly went out of business(or so the story goes) because people weren’t buying any replacement light bulbs. Well, people are no longer buying replacement cars, either because they don’t need them, or because they can’t get them financed, or both.
You hear anecdotes about people running a Camry for 80,000 miles without an oil change, and Top Gear can’t kill the Toyota Hi-Lux, you’re creating an entire race of ‘zombie cars’ that refuse to die.
While I appreciate the increasing quality, and durability in products, and I’m also a big fan of reasonable prices, I recognize the sheer orgy of volume sales is done. This recession/depression is assuredly not what any of us wants, and while it damages everyone, be it Honda, Toyota, or Ford, (and the rest), this entire market was due for a correction, just as the oil futures bubble burst, so has the new car sales bubble. No matter how many sales get traded amongst the car companies, the market is now shrinking and this is a Less Than Zero Sum Game.
A Modest Automotive Proposal (pt 1)
It is a melancholy object to those who drive through this great nation, when they see the towns, the roads, and even congressional hearings, crowded with beggars of the manufacturer persuasion, followed by three, four, or six suppliers, all in rags and importuning every taxpayer for an alms. These companies, instead of being able to work for their honest livelihood, are forced to employ all their time in jetting to beg sustenance for their helpless products: who as they grow obsolescent either turn beater, or leave their dear native country to fight in the Chinese Scrap Yard Wars.
I think it is agreed by all parties that this prodigious number of suppliers/products/brands/dealers in the arms, or on the backs, or at the heels of their Unions, and frequently of their Boards, is in the present deplorable state of the kingdom a very great additional grievance; and, therefore, whoever could find out a fair, cheap, and easy method of making these children sound, useful members of the commonwealth, would deserve so well of the public as to have his statue set up for a preserver of the nation.
But my intention is very far from being confined to provide only for the children of professed beggars; it is of a much greater extent, and shall take in the whole number of manufacturers at a certain domesticity who are born of parents in effect as to divert pension obligations and then demand our charity in the streets.
As to my own part, having turned my thoughts for many years upon this important subject, and maturely weighed the several schemes of other projectors, I have always found them grossly mistaken in the computation. It is true, a company just glommed to the government teat may be supported by her milk for a solar year, with little other nourishment; at most not above the value of 9B., which the Government may certainly get, or the value in scraps, by her lawful occupation of taxation; and it is exactly at one hundred years old that I propose to provide for them in such a manner as instead of being a charge upon their parents or the parish, or wanting bailouts and raiment for the rest of their lives, they shall on the contrary contribute to the feeding, and partly to the clothing, of many hundreds of thousands.
There is likewise another great advantage in my scheme, that it will prevent those badge engineered Crossovers, and that horrid practice of owners murdering their bastard SUVs for the Insurance payouts, alas! too frequent among us! sacrificing the poor innocent babes I doubt more to avoid the expense than the shame, which would move tears and pity in the most savage and inhuman breast.
The number of dollars in this first bailout being usually reckoned twenty-five billion, of these I calculate there may be about two hundred thousand executive jobs that may be saved; from which number I subtract thirty thousand who are classified to be mainly redundant, although I apprehend there cannot be so many, under the present distresses of the kingdom; but this being granted, there will remain an hundred and seventy thousand executives. I again subtract fifty thousand for those enterprises who miscarry, or whose stocks die by accident or disease within the year. There only remains one hundred and twenty thousand executives of poor management annually supported. The question therefore is, how this number shall be reared and provided for, which, as I have already said, under the present situation of affairs, is utterly impossible by all the methods hitherto proposed. For we can neither employ them in handicraft or agriculture; we neither build houses (I mean anymore in this country) nor cultivate land: they can very seldom pick up a livelihood by stealing, till they arrive at a position in an energy corporation or Investement Banking firm, except where they are of towardly parts, although I confess they learn the rudiments much earlier, during which time, they can however be properly looked upon only as probationers, as I have been informed by a principal gentleman in the county of Oakland, who protested to me that they never knew above one or two instances under the age of one hundred, even in a part of the kingdom so renowned for the quickest proficiency in that art.
I am assured by our merchants, that a car or a SUV before one years old is no salable commodity until incentives are added; and even when they come to this age they will not yield under a two thousand dollar loss, or more; which cannot turn to account either to the company or kingdom, the charge of wages and health insurances having been at least that much of a detraction of value.
I shall now therefore humbly propose my own thoughts, which I hope will not be liable to the least objection.
I have been assured by a very knowing former Englander of my acquaintance in Rhode Island, that a young healthy automaker well nursed is at a hundred years old a most delicious, tantalizing, and saleable commodity, whether stewed, roasted, bankrupted, or bailed; and I make no doubt that it will equally serve in attracting Chinese investment dollars.
A Modest Automotive Proposal (pt 2)
I do therefore humbly offer it to public consideration that of the hundred and twenty thousand executives already computed, twenty thousand may be reserved for actual management of the company, and my reason is, that these many executives seldom sow the fruits of good management, a circumstance much to blame on their savage accountant overseers, therefore one executive will be sufficient to each serve four UAW stewards, and one thousand workers. That the remaining hundred thousand may, at a year later, be offered in the sale to the companies of quality and fortune through the Stock Market; always advising the Government to let them suckle plentifully in the last month, so as to render them plump and fat for a good pink slip.
I have reckoned upon average that a vehicle just born should weigh around 3200 pounds, and in each model year, if tolerably nursed toward fuel efficiency, decreaseth by a minimum 28 pounds per annum.
I grant this adding of lightness will be somewhat dear, and therefore very proper in meeting the CAFE restrictions, who, congressional leaders have mandated, seeming in thought that they have all the best ideas for imposing on the companies.
UAW protests will be in season throughout the year, but more plentiful in March, and a little before and after; for we are told by a grave author, an eminent economic physician, that wages and benefits being their prolific diet, there is more overproduction about nine months after Lent than at any other season; therefore, reckoning a year after Lent, the markets will be more glutted than usual, because the number of domestics dealerships is at least three to one in this kingdom versus the transplants: and therefore it will have one other collateral advantage, of lessening the number of dealerships among us.
I have already computed the charge of nursing a beggar’s supplier (in which list I reckon all dealers, laborers, and four-fifths of the suppliers) to be about 9 billions per annum, per company, rags included; and I believe no gentleman would repine to give ten billions each for the funding of the carcass of a good fat company, which, as I have said, will make a minimum four sales of brands and toolings, when he hath only to invite the Chinese to dine with him. Thus the manufacturers will learn to be good landlords, and grow popular among their dealers; the manufacturer will no longer have eight shilling brands competing for a net profit, and all will be fit for work till they produce another desperately needed profitable, and desirable vehicle.
Those who are more thrifty (as I must confess the times require) may flay the carcass; the skin and bones of those which will be imported from Europe will hopefully make admirable sales to ladies, and be affordably financeable for all fine gentlemen.
As to our city of Detroit, shambles may be appointed for annual fire sales, with the fires being set to said cars if they do not sell in a timely manner.
A very worthy person, a true lover of his country, and whose virtues I highly esteem, was lately pleased in taking a sum of two hundred and twenty million offered to leave the once leading home improvement house he had been chief of. He said that many gentlemen of this kingdom, having of late destroyed their employability, he conceived that the want of Cerebus might be well supplied by the “Boot ‘Em” strategies. But with due deference to so excellent a friend and so deserving a patriot, I cannot be altogether in his sentiments; for as to the investment company, that American canine flush with profits from other ventures, cannot see fit to invest in their own risks, as they find their taste quite disagreeable; and to parcel them out and sell the pieces would not answer the charge when they can suck on taxpayer moneys in stead.
Then as to the other Robert; which, I confess, hath always been with me in the strongest objections against any project, except those with the rear wheel drive, no matter how greenly intentioned. But in order to justify my friend, he confessed that this expedient is none other than the famous Lutz, a native of the island General-Motas, who came thence by jet above twenty years ago, and in conversation told the media, that in his opinion ‘global warming is a crock-o-shite,’ and all the media sold the quotes to persons appreciative of humor; and that in his time the body of Chevy Trailblazer was appointed as a Saab, and other among other great modifications of the court, the ignition was placed between the seats. Neither indeed can I deny, that if the same use were made to badge engineer every model in town, who without one single vision to their future fortunes cannot stir abroad without an Opel chairman, to appear at government playhouses and assemblies in foreign fineries which they never will pay for, asking in letters for bailouts lest their fortunes be the worse.
A Modest Automotive Proposal (pt 3)
Some persons of a desponding spirit are in great concern about that vast number of poor UAW, who are hard workers, have families, and need their boner pills covered by their insurances, and I have been desired to employ my thoughts what course may be taken to ease the nation of so grievous an encumbrance. But I am not in the least pain upon that matter, because it is very well known that they are every day dying and rotting by cold and famine, and filth and vermin, resigning for buyouts as fast as can be reasonably expected. And as to the young laborers, they are now in less hopeful a condition; they can only get tiered wages, and consequently pine away for want of honest representation, to a degree that if at any time they are accidentally promoted to key positions, they have not strength or training to perform it; and thus the country and themselves are happily delivered from the evils of paying living wages.
I have too long digressed, and therefore shall return to my subject. I think the advantages by the proposal which I have made are obvious and many, as well as of the highest importance.
For first, as I have already observed, it would greatly lessen the number of inept managers, with whom we are verily overrun, being the principal impediment to the success of the manufacturers as well as our most dangerous enemies; and who stay in petty fiefdoms on purpose with a design to deliver the kingdom to its end, hoping to take away as much as they can from the UAW by pleading the absence of so many sales, who have chosen rather to place blame on supposed currency manipulations, and perception gaps rather than face the music.
Secondly, The poorer suppliers will have nothing valuable of their own, and can be liquidated, which by law may be made liable to distress and help to pay their landlord’s rent, their contracts thrown out and tooling already seized, and money a thing unknown.
Thirdly, Whereas the maintenance of an hundred thousand retirees, cannot be computed at less than fully funded VEBA, the UAW’s stock will be thereby be increased using the profit of any newly introduced designs to the driveways and garages of all gentlemen of fortune in the kingdom who have any refinement in taste. And the money will circulate among ourselves, the goods being entirely of our own manufacture.
Fourthly, The constant sales, beside the gain of many billions for bailout, the manufacturers, by the sale of their brands to the Chinese, will be rid of the charge of maintaining them after the first year.
Fifthly, This solution would likewise bring great investment in design of new products; where the Chinese will certainly be so prudent as to procure the best receipts for dressing it to perfection, and consequently have their dealerships frequented by all the fine gentlemen, who justly value themselves upon their knowledge in good driving: and a skillful salesman, who understands how to oblige his customers, will contrive to make it as expensive as they please.
Sixthly, This would now be a great inducement to install speed cameras everywhere, which all wise nations have either been encouraged by shortfalls in revenues or enforced by laws and penalties in the guise of safety. It is all for the children, after all, provided in some sort by the Australian company RedFlex, to their annual taking of drivers’ moneys out of the country. We should see an honest emulation along every freeway, which of them could bring the most revenue from the market? Men would become as proud of their violations, and having the means to pay them as they are now of their tackle, past conquests, and witticisms; nor would they offer to pickax or incinerate them (as is too frequent a practice in Europe) for fear of a miscarriage of justice.
Many other advantages might be enumerated with these plans. For instance, the addition of some thousands of cheaply made Chinese-American automobiles, the propagation of cut rate quality, and improvement in the art of upside-down financing, so much tragedy has been witnessed among us by the great destruction of our economy. Not a tear will be shed when these new, cheap automobiles meet their end; they which are no way comparable in taste or magnificence to a well-grown, fat, classic American sedan, which driven whole hog will make a considerable single digit mileage whilst gulping the petrol as in the lord mayor’s feast or any other public parade. But this and many others I omit, being studious of brevity.
Supposing that one thousand families in each major city, would be constant customers for these new automobiles, besides others who might have them at merry meetings, say autocrossing and rentals and the like, I compute that Detroit would take off annually to about twenty thousand new sales; and the rest of the kingdom (where probably they will be sold somewhat cheaper) the remaining units sell in the eighty millions.
A Modest Automotive Proposal (pt 4)
I can think of no single objection, that will possibly be raised against this proposal, unless it should be urged, that the number of jobs will be thereby much lessened in the kingdom. This I freely own, and ’twas indeed one principal design in offering it to the world. I desire the reader will observe, that I calculate my remedy for this one individual Kingdom of Automobilia, and for no other that ever was, is, or, I think, ever can be upon Earth. Therefore let no man talk to me of other expedients: Of taxing our oil companies: Of using neither tariffs, nor universal healthcare, even an Apollo style energy program: Nor of utterly rejecting the materials and instruments that are products of foreign luxury: Of curing the expensiveness of pride, vanity, idleness, and bumbling management: Of introducing a vein of parsimony, prudence and temperance in executive compensation: Of learning to love our country, and its products, wherein we differ even from Europeans, and the inhabitants of Asia: Of quitting our animosities and factions, nor acting any longer like the Germans, who were trying to veto Porsche control at the very moment their Volkswagen was taken: Of being a little cautious not to sell our country and consciences for nothing: Of teaching manufacturers to have at least one degree of mercy towards their suppliers. Lastly, of putting a spirit of honesty, industry, and skill into our dealers, who, if a resolution could now be taken to buy only our native goods, would immediately unite to cheat and exact upon us in the price, the measure, and the goodness, nor could ever yet be brought to make one fair proposal of just dealing, though often and earnestly invited to it.
Therefore I repeat, let no man talk to me of these and the like expedients, ’till he hath at least some glympse of hope, that there will ever be some hearty and sincere attempt to put them into practice.
But, as to my self, having been wearied out for many years with offering vain, idle, visionary thoughts, and at length utterly despairing of success, I fortunately fell upon this proposal, which, as it is wholly new, so it hath something solid and real, of great expence and much trouble, full in our own power, and hubris whereby we can incur no danger in disobliging America. For this kind of commodity will excellently bear exportation, and manufacture of automobiles no longer being vital to our survival as a nation, to admit a long continuance in sale of these companies, although perhaps I could name a country, which would be glad to eat up our whole nation without pause.
After all, I am not so violently bent upon my own opinion as to reject any offer proposed by wise men, which shall be found equally innocent, cheap, easy, and effectual. But before something of that kind shall be advanced in contradiction to my scheme, and offering a better, I desire the author or authors will be pleased maturely to consider two points. First, as things now stand, how will they be able to find salary for an hundred thousand useless mouths and backs. And secondly, there being a round million of excess cars new in stock throughout this kingdom, whose whole subsistence put into a common stock would leave them in debt two trillion of pounds sterling, adding those who are beggars by profession to the bulk of suppliers, manufacturers, and laborers, with their wives and children depending on them: I desire those politicians who dislike my overture, and may perhaps be so bold as to attempt an answer, that they will first ask the taxpayers, whether they would not at this day think it a great happiness to have been sold for the benefit of a wicked few, in the manner I prescribe, and thereby have avoided such a perpetual scene of misfortunes as they have since gone through by the oppression of the big three, the impossibility of paying rent without money or trade, the want of common sense, with neither house nor clothes to cover them from the inclemencies of the weather, and the most inevitable prospect of financing the like or greater miseries foisted upon by these automobile manufacturers for ever.
I profess, in the sincerity of my heart, that I have not the least personal interest in endeavoring to promote this necessary work, having no other motive than the public good of my country, by advancing our trade, providing for workers, relieving the poor, and giving many billions to the rich. I have no affiliation by which I can propose to get a single penny out of this; as I do not work for, own or mismanage an auto manufacturer. To you all I bid a good day, and God bless.
The End
Many Apologies, and all credit to Jonathan Swift, who wrote the original A Modest Proposal which I adapted.