The Failed Bailout and the New Domestics

Market forecasters from CSM Worldwide made a presentation to the Automotive Press Association on Wednesday, December 10, and it was all very interesting but most of the forecasts were predicated upon the federal bailout for the Detroit 3. Now this appears dead, and I wonder how much of the presentation applies.

The essence of it was that Chrysler is dead no matter what, although someone might want Jeep and perhaps the Ram pickup. Beyond that, excess production capacity has to be reduced throughout the domestic industry, and many of the suppliers—the 25 percent that are most in debt—will have to enter Chapter 11. Imports of cars will increase, the technological gap between Detroit and the others will widen, and the “new domestics” will control 82 percent of U.S. production by 2014. As for fuel efficiency, be reminded that exotic technologies such as hybrid powertrains or all-electric propulsion add tremendous cost to each vehicle. In other words, don’t perceive them as the panacea.

So last night the Senate killed the misguided bailout bill. It’s great to see Senators Bob Corker, Mitch McConnell, and Richard Shelby stand up and tell the truth as they did. Corker was particularly impressive during last week’s hearings. Imagine, last night, representatives of the Detroit 3 and the UAW in chamber helping to craft language for Corker’s compromise. Corker says three words kept the bill from being finalized, and those three words had to do with “no pay cut” (my quotes for emphasis) for the UAW.

During Wednesday’s Q&A, one member of the press asked a question that essentially blamed the Detroiters’ problems on imports. “Everybody knows the profits don’t stay here,” he said. It’s shocking to see this kind of thinking persists. The APA is full of guys in their 70s who’ve hung around for years without having their byline in any important magazine or newspaper. When I first came to Detroit in 1985, my editor at Automobile Magazine took me to a press luncheon and warned that the town is full of hacks. She was referring to guys like the questioner. (And to make things worse, they’re still fighting World War Two.) As for Detroit’s cars, all members of the press have spent decades sponging off the press fleets for transportation. They drove the junk the came out of Detroit in the 1970s and 1980s. And in the 1990s, too! Remember the Aztek?

So the same old crock who asked about imports named Senators Shelby and Corker as villains in the current situation. (“Nice guy, he said of the latter, adding, “And they’re Republicans.”) A certain element of the press has long been complicit with the Detroit 3 and the union, and when all these old white-haired blatherskites sit at the same table and razz the presenters with pointlessly antagonistic questions, one really sees it.

“Why do you use the term ‘new domestics,'” asked another, who isn’t white-haired—he’s a bit younger—but holds with his elders on many points.

CSM Worldwide’s Jim Gillette, unruffled, gave a fine answer. The value-added percentage is higher in a Camry (built in Kentucky) than in a Mustang (built in Michigan). Anyway, Gillette reminded, they’re publicly owned corporations—just buy the stock.

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