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Drive 'em into the ground

The latest car sales numbers just came in, and they truly are bad enough to make a grown man cry. GM and Ford sales fell by half in February. At the current rate of sales, Detroit is doomed. That leaves two choices: bankruptcy or nationalization. Or both.

My first instinct is to say bankruptcy all the way, forget the stomach-churning idea of nationalization. But I read an interesting take yesterday from Larry Kaufman, a former railroad executive. He argues that the US Railway Association, which was set up to handle bankrupt railroads, is a good model for saving the car companies. Instead of letting them restructure on their own in bankruptcy, he says a government agency could take the steering wheel:

"Management of bankrupt rails were spectators. They could not fix their own companies. Similarly, expecting auto manufacturers' management to fix their own companies reminds one of the definitions of insanity: the same people repeatedly doing the same things but expecting different results."

It's hard to argue that point, but it's easy to argue that the government wouldn't run things any better. What do you think?

You know what GM thinks, but the company's argument against bankruptcy is laid out clearly today in this post on GM's Fastlane blog. Tom Wilkinson, the Director of GM News Relations (love the title), does make a rational case against Chapter 11. Unfortunately, it still hinges on people buying cars, and that is one loose hinge.

By the way, you know who's benefiting from the lack of car sales? The people who sell car parts. Today, AutoZone said profits were up more than 8% last quarter. When gas prices were super-high, people were putting off repairs. Apparently now, they're doing the repairs, so they can drive their cars until the wheels come off.

Makes me think of my dad. He kept a 1980ish Toyota Corolla until there were holes in the floorboards. This wasn't that long ago. You could've driven that thing Flintstones-style. Although we teased him mercilessly at the time, it's one reason I'm not too worried about my parents surviving the recession.

Of course, if I were a carmaker, I'd be terrified of a nation of people like him.

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Sounds like everyone is contemplating a "right to die", or even more accurately, a "license to kill" paradigm for a very sick industry, unprepared to cope with it's own, self-induced problems. Where are Kevorkian and 007 when we need em..?!

Does anyone think the American auto industry will survive once the chinese start building cars for export?

Here is a plan to get car sales going again. This is not a plan to promote extravagance, just to get cars selling again, and provide for the peoples basic need to get to their jobs.

Re-adjust to the market, which has changed to people needing the lowest priced models. Stop offering incentives to move higher priced cars. Offer the incentives on the lower priced ones.

Government - temporarily suspend the tax and title fees. TT&L adds over $1500 to the cost of car buying. How discouraging it is to pay a big down payment or use up the incentive on the down payment and still have to finance more than the price of the car. Allow buyers to go into their car purchase and loan upside up instead of the other way.

Dealers - Actually offer the financing deal that the "Credit Cowboy" shouts about on the ad. Ban fine print saying "Promotional financing only offered to those that don't need it." I know of people who were drawn into a dealer by the false promise of $199 down and $199 a month, only to find out that the deal is not available to them, or after 3 months it changes to $379 a month.

Financing

But this is nothing more than a proposal to sustain the unsustainable. There are a number of things that are inherently unhealthy in our landscape: strip malls, 80 mile commutes, sprawling cookie-cutter subdivisions swallowing prime agricultural real estate. Cars do nothing but promote these malignancies and support the notion that there's nothing wrong with that picture. And they do so even if they're from a re-tooled Detroit and fueled with ethanol, soybeans, or used french-fry oil.

Wasn't GM built out of a dozen or more failed car companies? Did anyone run around saying those companies had to be saved? Did the world collapse when Packard, Studebaker, etc, died?

What is the big deal? Is it the fact that we have no social safety net and all those workers would suddenly have no health care? Is it an emotional thing, with Ford and GM stretching back so far?

Don - I think you are right about China... it is hard to compete with workers who have no rights and factories that have no environmental laws. Something political will have to change before any industry is safe from the China Syndrome.

In the 40's we went from building cars to building planes in tanks. that was before flexible manufacturing. Isn't there something else we could build in those idled plants? There is an X-prize for you, think of 101 things to do with an abandoned auto factory.

Ooh, ooh! I know!
Let's build the rolling stock for an efficient passenger rail system, intra-city light rail, and other mass transit equipment.

We could use the ObamaBucks stimulus money to build civil infrastructure that promotes communities, instead of civil infrastructure that destroys communities (interstate system and low-density suburban development - I'm talkin' 'bout you!)

I have read a report that, for 700 billion dollars, we could restore passenger rail to most communities with 10,000 people or more.

Yes, let them fail. They will anyways, along with all of the other unhealthy and wasteful appendages of our unsustainable living arrangement. Same goes for the airlines, suburbia, and industrial agriculture. All of these arrangements were predicated on borrowed wealth and energy, and are currently unravelling with surprising speed. The reality of a physically limited world with tangible consequences seems to be overtaking the "growth forever" nonsense and other silly assumptions that our economic theories have labored under (and absolutely depend on) for the past two centuries. Of course, these assumptions feel just great and are empircally validated when you're on the uphill side of the peak (peak oil, peak credit, etc.) I think we have a long way to fall yet, but we can cut our losses if we start making the hard, grown-up decisions that will result in an orderly economic contraction. We need to be more modest in how we live, do business, and occupy our landscapes.

Well said. The last sentence ought to be a motto.

Aw, shucks. I really can't claim the idea as my own. I refer you to James H., Kunstler, the author of "The Geography of Nowhere" and "The Long Emergency."
He also has a wonderful polemic blog here: www.kunstler.com

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