People Just Don’t Understand the Problem with GM

I just read the headline on Yahoo finance that the United Auto Workers (UAW) will not offer any more concessions in their contracts with the “Big 3” automakers.


My favorite line in the article is this:

“workers will not make any more concessions and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy”

Folks, no one is going to “turn around” this economy. There has been irreparable damage that needs to be CLEANED OUT. Think about it – the auto companies are asking for $25 billion. Without even thinking of who’s next in line waiting for a bailout, do you know that GM ALONE is burning $6B a QUARTER?  What will giving the 3 companies $25B do? Just make them take about 6 months longer to declare bankruptcy that’s all.

Now, I will agree that there is definitely economic pressure on these guys. But remember, these companies have another problem – their cars STINK. Let me ask you something – do you know anyone that would willingly buy an American car? I’m 35 and I don’t know anyone that would choose American first – my friends all have chosen Japanese cars – Toyota, Subaru, Honda – and they represent all sides of the political spectrum.

Allow me to provide some more anecdotal evidence that I’m sure I could easily back up statistically if I felt like it. Seniors buy way more imported cars now as a percentage of senior auto purchases compared to 10 years ago. About 10 years ago, Detroit lost the loyal senior market – now the Camry litters retirement community parking lots (I know I visit them all the time as part of my work). Even many seniors think that American cars stink! Apparently, they don’t like poor quality and lousy gas mileage either.

Detroit should have been working on this years ago  -specifically, better engineering, better fuel economy, cutting expenses, etc. Moreover, in addition to making awful cars (my opinion), they have the same problem that our government has – too many retirees to support on a system that can’t handle it – with one caveat – the government has the printing press and Detroit doesn’t. The government will try to print its way out of financial difficulties (to another fiery end which is the topic of another discussion) but Detroit will just collapse. Last month, GM’s sales were down 45% to the industry average of down 32%. Both declines are terrible but what a disparity between GM and the industry!

We are heading into a deeper recession – basically artificially low interest rates that I ranted about 2 weeks ago caused us to steal demand from the future in housing, cars, etc and overheat the economy – now that bubble and disparity have to be deflated and it’s going to be painful – ok? No avoiding it so forget bailouts and economic manipulation – rates can’t go much lower and the consumer is finally tapped – the game’s up.

Note: Apparently, FINALLY some in Congress seem to get it (in my opinion, it’s a ploy to buy votes since even with the money these guys are gone):

Legislators Oppose Bailout of Auto Industry

Chris Grande
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