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Bailing Out Detroit
BAILING OUT DETROIT....David Leonhardt uses this graphic in the New York Times today to illustrate the labor costs of the Big Three auto makers vs. the Japanese companies who manufacture cars in nonunion plants. As he says, the $70+ per hour figure that gets tossed around so often is badly misleading: a big chunk of that figure comes from legacy retiree costs, and retiree costs are high not because retiree benefits are wildly stupendous, but simply because the Big Three are old companies and therefore have a lot of retirees. But even so:
[Defenders of the Big Three] are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year's concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon.
He's right. Even under the new contracts signed last year with the UAW, it will take years for Detroit's costs to come down to Japanese levels. But worker paychecks aren't Detroit's primary problem anyway:
Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That's roughly the gap between the Big Three's retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.
Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.
That's because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.
....It's a sad story, in many ways. But it can't really be undone at this point. If we had wanted to preserve the Big Three, we would have bought more of their cars.
Obviously I have mixed feelings about all this. No one wants to see hundreds of thousands of auto workers collecting unemployment, especially now, but at the same time it just doesn't make sense to keep GM and Chrysler alive as zombie companies for the next couple of years. And the idea of a "car czar" doesn't appeal much either. It's only systemic restructuring that's going to make a difference here, and the deal we've struck so far doesn't seem to really accomplish that. Like so many other things these days, there aren't any good solutions here. Just bad and slightly less bad.
t's only systemic restructuring that's going to make a difference here, and the deal we've struck so far doesn't seem to really accomplish that.
Time to think outside the box Kevin. Is there another way to look at these companies other than as the "Big Three" that allows for a systematic restructuring....? Hmm.
Of course Detroit need
Of course Detroit need financial assistance. Our economy are secured if the auto industry itself are secured also.
Training? As a benefit?! The auto workers aren't getting trained to play the violin, they are getting trained for their jobs.
Training is a cost of doing business, not a benefit.
Kevin Drum: it just doesn't make sense to keep GM and Chrysler alive as zombie companies for the next couple of years.
But it's ok to do that with zombie banks? Please explain why.
Bank bailout? Think receivership instead.
there aren't any good solutions here
Tariffs? Oh no -- it would be unthinkable to question free trade. All the US auto workers -- and the other ones facing unemployment -- will soon find their way to an industry in which the US has a "comparative advantage" so they can produce lots of things we can sell to the Japanese and the Chinese.
What about weaving baskets? The Chinese are no longer interested in doing that. Maybe they'll be willing to pay for them.
How much would it help the Big 3 if we had national health insurance, like the Japanese? Would that make a significant difference in the cost of benefits for workers? Aren't a lot of the retiree benefits related to health care?
Also, are the figures cited in article for Toyota and Honda labor costs in the U.S.? Japan? Japan and the U.S.?
Just askin' . . .
Leonhardt is one of the best journalists the NYTimes has got. He tackles complex issues (and Lou Dobbs) and explains them in an easily understood way.
Actually, putting some money into the Big Three now is probably still a good idea even if it doesn't allow them to succeed in the long term.
A gigantic industry concentrated in a few states collapsing rapidly in the middle of a deep recession is a horrifying prospect. Allowing it to fade more gradually and giving the states and workers time to adjust really looks like a better option to me.
There really isn't anything wrong with the auto industry that selling cars wouldn't cure. Right now sales are down for all auto companies, foreign and domestic. There are two reasons the foreign companies seem to be in better shape, 1) the are being protected by their home countries and 2) they have lower legacy benefit costs that keep on keeping on in good times and bad.
In a sense the talk about labor costs per vehicle are misleading because the concept implies that the legacy employee costs can be slashed during bad times. Short of bankruptcy or universal health care they can't.
The cost of automobiles outstripped the wages of most Americans anyway. The people with the most disposable income liked the cache of foreign cars. I've never had a problem with American cars. Only the cost of all new automobiles. Somewhere we have to make a stand--working people deserve fair pay. Profits should drive employment--not dividends. I have said this before: the only real value of corporations is building the standard of living for their company and this country. The investor class has killed us again.
It is easy for the pundit class to wax wise with conventional wisdom, but in my experience there is little difference between the offerings of foreign and domestic car companies. The truth is many foreign cars, especially the luxury models, are overrated.
I told my son this evening that my current Pontiac is the best car I have ever owned. I wasn't kidding. Over the four last decades I have owned scores of cars both foreign and domestic. My last two, the Pontiac and a Honda have been the best built of the bunch, but on balance the Pontiac has been the better vehicle. Over all the Pontiac is a little more user friendly. The Honda is just a little too quirky for my tastes.
I will have to admit the Honda has maintained its value better than the GM offering but the costs of operation are comparable. The Honda is a better around town, but the Pontiac is better on the road. The quality of either is far beyond any previous car I have owned.
I bet a lot you haven't heard anything good about American cars in years.
Sparko is on to something. As long as the cost of a new car is beyond the easy reach of most Americans the auto industry will be in trouble. Henry Ford recognized many years ago that if a worker couldn't afford his product he would not be successful. Working people deserve fair pay.
Our family has been buying Japanese cars for 30 years, and this last Toyota Camry is a huge disappointment. Rattles, uncomfortable, ugly. We bought it for quality, not looks, but got neither.
The foreign auto makers have cynically played anti-labor, anti-union, north/south politics games in America.
They should not be rewarded for messing with our society this way.
They have these high retiree costs because they have become much less labour-intensive, and thus the retired workforce thus weighs heavily.
Just let Chrysler go bankrupt, and GM can then be turned around by strongly reducing the number of its brands.
And do remember to classify SUVs as cars again.
P.S. The big three are still losing market share. Market's down 16% this year. Ford's down 19, GM 21.8, Chrysler 27.7. None of the major Japanese or German brands are down more than the market.
Clearly, Chrysler is on the way out.
It's not surprising that Ron Byers' Pontaic is the best he's ever owned. The fact is all car makers are making much better cars than they did 5, 10, and 20 years ago.
However, passenger cars made by the big Three for the US domestic market are, for some weird reason, generally piles of turd compared with those made by Japanese and European makers.
It's not just the quality, it's the godawful interior design and the substandard handling.
I find this mystifying, given that GM and Ford Europe (and for that matter, Holden in Australia) churn out much better vehicles.
If GM America wants to fix its passenger car range, all it needs to do is start switching over its plants to produce Corsas (though that might just be too tiny for American tastes) and Vectras..
What is being overlooked here is one basic fact-We aren't in Japan, Korea, or any other Country in the World!American Companies have gone into bankruptcy for one reason-Incompetence at the highest level in our Government for allowing our companies to br sacrificed in the name of Free market Economy-IT HASN'tT BEEN FREE in any sense of the word and our balance of trade is ridiculous.The U.S. Economy is being sold out by the very people intrusted to its oversight. Washington can question the Auto Industry all it wants but they are the ones that should be questioned about the out of control gasoline prices that started this Recession in the First Place! It is interesting that our non competetive Auto Industry is doing just fine in every Country but the USA-Why don't I see those Charts on this article? As far as the Unions and pension funds-Lwet's do away with everyone elses, including our beloved Congress and see how they react to it!
It isn't the workers and at this point, I am sick and tired of people implying that we need to compete with Toyota by cutting the American common peoples wages, even as we see CEOs asking for million dollar bonus and taking vacation on bailout money.
The words American needs to invest in the most right now isn't "drill, baby, drill". Its "innovated, Baby, innovated." There is a reason why Bush wants to appoint the new Car Czar himself, and why he is extremely resistant to any restructuring of gas thirsty engines manufactured by the Big 3.
American needs to develop and push for more pride in American made vehicles, and increase the warranty since vehicles cost a lot more and people are keeping the autos longer.
We need a way to go around fossil fuel and the hybrid engine that Toyota and Honda lead innovation on, can adapt to run on water because we already found away to separate the compounds of H2O to produce combustion. Check out this FOX News video from YouTube, the man's helping the military develop a Hummer that utilize both water and gasoline.
ExxonMobil and BP are the companies that need to go bye-bye. They should have gone bye-bye in 1985. We don't need or want to go to war with the Mideast or force unfair contracts on them, we don't what to destroy our own pristine land with oil companies who consistently lie about how environmental friendly they are, remembering BP's pipeline without a pig in Alaska. I'm tired of big oil CEO's showing up on Capital Hill and not having to take an oath before testifying to congress, simply because they control American congress. We have to move away from fossil fuel, or sit by and watch other countries innovated why we are held hostage to big oil controlling us utterly.
We aren't going to sell oil to other countries because we used all of ours up. We aren't going to manufacture things because the Smartest Guys in the Room(tm) on Wall Street decided that it was more "efficient" for such grubby work to be done elsewhere (and besides, the dirty smelly workers were skimming off too much of the plutocrats' money). We aren't going to design things, because once the manufacturing moved to Korea, India, China, Malaysia the day-to-day knowledge necessary to be a good designer went with it, and anyway why pay a designer in NYC $75/hr when you can pay a Malaysian designer $5/hr?
Financial services.. yeah, that's the ticket. The United States will be the world center of financial services because of our great stability and perspicuity. That's how we will survive in this competitive world. Oh wait...
Seriously - and I have been asking this question at DeLong's for 4 years - what DOES the United States do that justifies its self-described position at the top of the world's economy? What DO our citizens do for productive work? Sweep up around the Toyotas?
Cranky
BTW, Japanese workers make more than American union labor. But Japanese-made Japanese cars are competitive. Labor just isn't as significant an input as it used to be; labor quality is very very important in a capital-intensive industry such as autos.
Robert Merkel,
You might have noticed I compared my Pontiac with my Honda (my wife and I own two cars--the Honda is newer) and the Pontiac wins not because the Honda is bad. It is great, but because it is quirky.
World Class crap is made by BMW.
Your comment about American cars being crap compared to their Japanese and European counter parts represents the kind of CW that passes for thought in today's world.
The problem is not enough people want to buy US cars to support the installed base of capacity and distribition. The US cars are fine - I don't buy them but it's not because I think they are bad cars. The quality gap has been closed for the most part and in many cases US cars are in fact more reliable. Most people make a more image or styling conscious choice than they are willing to admit, myself included. I own a VW because I think their cars are well styled inside and out and the brand speaks to me. Pontiac, Buick, Chevy, etc. just don't both from a style perspective and brand image.
But plenty of people like and buy US cars. There is certainly a business there but it just needs to be sized appropriately. There is no magic number for market share, and in a competitive, fragmented industry there is no reason to expect US car companies to have anywhere near the market share they had in the 1950s and 60s.
If GM can size it's business to have 15% of the US market then they'll do fine. It will just be a smaller company... but the presence of the retirees provides a perverse incentive to produce and sell MORE cars, regardless of profitability, so the benefits can be paid off a larger base of cars and people. If you cut the people and the cars, you have a more profitable company but one that is too small to support the retirees. Better to simply offload the pension costs to the govt and let the car companies start from scratch.
Why do the auto companies have to pay now for promises made way back when? Why did the accounting system not require companies to set money aside, in escrow, for pensions and retiree health benefits?
The domestic auto companies are in trouble now because they falsely inflated profits back then.
GM and Ford are very successfull in Europe. MB buys Chrysler and cannot make it in here.
Seems we are not seeing the forrest for the trees. There is something wrong with our auto market, not the companies. Why is no one in the MSM will mention our lack of trade policies?
People in the 70's who bought Toyota's and Honda's for the higher mileage during the oil crisis at the time noticed something else about their cars - they didn't need to see their mechanic every other week. They remembered that.
My first new car was a Ford Probe (1988, Ford body on a Mazda drive train) and all the Ford stuff kept breaking. But, the Mazda stuff kept working day after day. That made an impression.
Domestic auto makers spent the 70's and 80's losing their market to quality conscious buyers and continue to pay the price.
Not sure how to reverse that, but if the quality gap has been closed, you somehow need to get Japanese auto buyers to buy American. But how?
$800 per vehicle would have a significant effect on the bottom line. Over the last three years, American car companies lose money per vehicle or at best make up to $200 per vehicle. An extra $800 would have made Ford profitable and Chrysler about 5 times more profitable. $800 a car doesn't sound much, but when the gap between the Ameican companies and the Japanese has been about $2-3,000 it's a hefty percentage.
We need to do the multiplication here. GM sold ~4m vehicles in North America last year _before_ things really slid this year.
4m*$800=$3.2b
$3.2b would have made GM break even last year in North America. So if they had non-union wage rates and no pension obligations they'd be breaking even. On the other hand, with those same wage rates Toyota, Honda, and everyone else that produces cars in the US do much _better_ than break even. So its fair to say that union wage rates are part of the problem but by no means all of it.
When GM & Ford started to change their advertising to appeal to a different demographic, using Led Zepplin music and obscure indie rockers from a decade ago, I prayed that they would go bankrupt, to spare us from their miserable ads. So close now!
From Lawyers, Guns and Money (http://lefarkins.blogspot.com/2008/12/more-double-standard-puzzles.html):
"More Double Standard Puzzles"
"...is there any other context in which progressives would uncritically use the conserveratrian formulation "wage problem"? Am I supposed to be cheering for Wal-Mart to crush Costco because of the latter's "wage problem" while shopping at the former besides?"
GM effectively pays the health care costs of 400,000 retirees. Can anyone really effectively argue that single payer national health care wouldn't go a long ways towards helping GM out of this mess?
Simple charts are inherently misleading. The Big Three have been in business far longer than the Japanese (and Korean) companies. Part of this is reflected in the "legacy" costs of retiree benefits, but another part isn't: Workers who have been on the job longer have higher salaries, bigger families, and longer vacations. That affects three of the chunks in the cost bar: Wages, wage-related, and benefits.
If we want a truly fair comparison, we need to compare costs for first-year workers, fifth-year workers, etc.
Am curious. How do compensation packages for white collar employees and direct to indirect labor ratios compare between the Big 3 and Japanese corporations. These comparisons never seem to make the 6 O'Clock News nor the blogs. Does anyone out there have these stats/facts?
It's always seemed that Japanese corporations cut the fat from the bone where management spending is concerned and American Corporations... well they probably taught D.C. everything they know about waste.
Detroit's pension costs are so expensive, per car made now, because Detroit did not put the profits it made, when the present retirees were working, into a pension fund. Detriot lobbied Congress to allow them to fund their pensions later, with future profits.
"When ERISA was enacted in 1974, Congress allowed employers with existing pension plans 40 years to pay unfunded past service liabilities, and new plans were allowed 30 years to pay these liabilities."
The manufacturers and Congress are to blame for today's high pension costs of Detroit. Pensions should be funded with current revenues, not future profits.
I meant to add... As the workers at the Japanese-owned plants accumulate more years on the job, the cost-per-worker will also rise.
And, just out of curiosity, can we factor in the subsidies that these non-union plants are getting from the states in which they were built? (I like to think of that as a governmental pre-bailout...)
"Legacy costs" are still costs! The Detroit 3 have promised more than the market will let them deliver. Forget the blame game, (nobody's listening,) but they MUST get costs down to a fairly competitive level.
Hey Anonymous,
What do you mean your Honda is quirky? Give some examples.
Japan's auto workers are unionized and they also receive pensions. Japan's auto workers have also been around for at least fifty years. Japan's auto manufacturer's, just like they are better car designers and manufacturing managers, are also better employers. They treat their employees as very important inputs, soliciting them for advice on how to build cars, and treat them with respect. They may pay lower wages, but Japanese car mfg's offer much greater job security.
There was some disturbing programs on C-SPAN earlier this week. On Monday morning there was a program with a Carlyle Group manager complaining about auto workers wages and in the afternoon there was a program with a Blackstone manager complaining about them, too. The establishment is beginning its pressure on lowering wages. The burden of the current economic failure will be borne by those least able to afford it.
The problems associated with the Big 3 have nothing to do with automobiles. In my opinion the government is bailing out Unions and the rust belt. This area is one demensional as for jobs. The costs (taxes), restrictions and greed of the States, Cities and Unions have created this problem. Until you have a deversified job market you are subject to the severe swings in the market. The automobile industry has a history of failure and this bailout is not helping the majority of America. Failure might force these areas to get more progressive and come to grips with the real world!
Well, I for one would like to know how many young people will be able to go to college to get the job to buy the car to fit in the garage of the home they hope to purchase?
What's the New American Dream these days? The old one is finished.
"I told my son this evening that my current Pontiac is the best car I have ever owned. I wasn't kidding. Over the four last decades I have owned scores of cars both foreign and domestic. My last two, the Pontiac and a Honda have been the best built of the bunch,"
If you've owned "scores of cars" over 40 years, then presumably you're changing your car(s) at least every 2-3 years. That makes you just about a perfect customer for Detroit: you buy a car, run it for 20-30k miles, then sell it. And GM/Ford/Chrysler vehicles do that just fine (except you're spending a fortune by trading so frequently).
What most US drivers have realized is that it's cheaper and more convenient in the long run to buy higher-quality more reliable cars and keep them longer. And that's why so many buy Japanese-designed cars, especially Hondas and Toyotas. They cost a couple of thousand more up front, but you can drive them for 10+ years and 120K+ miles without major repairs.
Detroit makes *some* good cars: but overall they have lagged behind Honda and Toyota in quality and reliability, and especially so in economical small cars. Honda Civic vs Chevy Cobalt is no contest at all.
The market position of Detroit's small cars is much worse than it appears from the raw sales figures, because a) they sell over 40% to fleets (e.g. as crappy rental cars), and b) probably something like 70% of small-car owners prefer the Japanese cars - but the people who prefer Japanese cars run them longer and make purchases less frequently, so the percentage of *sales* is different.
I myself drive a 2000 Mazda Protege LX, which is pleasant to drive, economical, and has done 75K miles with nothing but new tires and brake pads.
My previous Mazda 626 got to 125K miles, so I've probably got some way to go.
There is no rational reason for people to buy tens of millions of new cars every year. When times get hard and finances get tight, a lot of people stop making irrational idiotic purchases, such as buying new cars that they don't need because the car looked "sexy" on the TV commercial.
The reason that the automobile industry is in trouble is that it is fundamentally premised on selling tens of millions of extremely expensive items every year -- items that people don't really need, that they only buy because they've been brainwashed into buying them with millions of dollars of mass media propaganda.
I drive a 1991 Ford Festiva that I bought for $5000 when it was two years old. I've driven it for 16 years, and hope and expect to drive it for many more years. It is practical, durable, reliable and efficient. It gets 48 MPG on the highway and 35 MPG in city driving -- gas mileage that approaches that of today's $25,000 hybrids, achieved with 18-year-old technology.
No US automaker sells a car like this in the USA today.
There is a reason that the automobile companies don't like to make compact, durable, reliable, efficient cars that last for decades: there is a lot more money to be made selling giant, gas-guzzling bullshit-laden vehicles that people replace every few years.
One of the best things that could happen for the well-being of life on Earth is for the "auto industry" as it is presently constituted to vanish from the face of the Earth. It has been a century long environmental and social catastrophe.
Take the "Detroit bailout" money and spend it to retrain workers and refit factories to build solar panels, wind turbines and electric trains.
In 1941, the entire US auto industry converted from building cars to building tanks in one year.
Let's get real.
"There is a reason that the automobile companies don't like to make compact, durable, reliable, efficient cars that last for decades: there is a lot more money to be made selling giant, gas-guzzling bullshit-laden vehicles that people replace every few years."
The relative financial performance of GM and Toyota should prove that making reliable economical cars is actually a much better long-term business strategy. Shame that GM hasn't made a serious effort to pursue that strategy recently - Saturn was a move in the right direction, but has not been favored by current management.
"Take the "Detroit bailout" money and spend it to retrain workers and refit factories to build solar panels, wind turbines and electric trains.
In 1941, the entire US auto industry converted from building cars to building tanks in one year."
I'm sympathetic to the goal of building efficient and renewable-energy infrastructure. And certainly some of Detroit's engineering assets might work for building wind turbines (pressed steel blades, an alternator, and some control electronics are all pretty similar to car parts). But solar panels are a whole different technology. And I think you underestimate the degree of specialization in current manufacturing. Back in 1941, cars were produced in very much smaller numbers with much less automation. The current auto industry represents 80 years of evolution towards producing very large volumes at astonishingly low cost: GM makes about 9M vehicles per year. Converting from "build 1M Chevy Malibus" to "build 5000 electric trains" is really a huge huge difference.
It's not the same kind of problem.
Kevin, where was your commentary about the U.S. auto industry being a "zombie industry" three months ago?
What's happened in those three months is the biggest credit freeze and financial crash since the 1930s.
How have we gone through both the initial post and 40 comments of reply without anyone even mentioning the proximate cause of the problem?
All over the left blogosphere, writers are posing that everyone has known for years that Detroit wasn't going to survive but a couple more years anyway, so why bail them out?
How did I miss all the blog posts about how the two million lost jobs would affect the 2010 midterms?
Oh, no, I didn't, because pretty much everyone thought that at worst, the industry would muddle through in its current form as far forward as people were willing to predict.
I will gladly stand corrected if anyone can link to a prediction, made before Sep 1, 2008, that a specified U.S. auto manufacturer would go bankrupt before Jan 1, 2011.
Surely, if it's now so obviously a zombie industry, such predictions should be common.
If the industry was expected to survive more or less in its current form for the forseeable future before the credit freeze, it might be prudent to wait until after the credit freeze before passing judgment on its longer-term survival prospects.
In fact, regardless of anyone's prior predictions, this particular moment, during the biggest credit freeze and financial crash since the 1930s, in a moment of enormous economic uncertainty - maybe the point of maximum economic uncertainty - is probably not the moment to make final pronouncements about the viability of Detroit's business model going forward.
Kevin, it's worth noting the biasing effects of crisis here: blogging about Detroit's long-term prospects is most interesting when Detroit is in crisis, but it's also the worst time to blog about Detroit's long-term prospects, because the effects of the crisis distort our evaluations of the longer-term issues at stake.
"If the industry was expected to survive more or less in its current form for the forseeable future before the credit freeze, it might be prudent to wait until after the credit freeze before passing judgment on its longer-term survival prospects."
Actually, it was the $4/gallon gas that really started the upheaval. GM and Ford had known for a long time that they had wean themselves off the crack cocaine of selling overpriced gas-guzzling trucks and SUVs, and they were working towards that goal (Ford slowly, GM glacially). But gas prices went way up suddenly, and truck/SUV/minivan sales fell through the floor, killing GM and Ford's cashflow.
Maybe the credit squeeze will come to an end. But all those people who owned trucks and SUVs and found themselves paying $80 for a tank of gas have been burned, and many of them are going to buy smaller vehicles next time. And Detroit doesn't have anything attractive to offer them in that segment, against Corolla, Civic, Prius, Mazda3, and the cheaper Kia/Hyundai.
I'm probably in favor of keeping GM/Ford/Chrysler afloat for the next couple of years, because putting 3M people out of work in the middle of a deep recession is just awful for the people and for the rest of the economy.
But don't let's delude ourselves that the credit squeeze is the whole problem: Chrysler is toast, GM has been in deep trouble for a long time, Ford is furthest towards making itself viable.
Just for reference, the average hours of labor (performed directly by the Big 3) is in the 30-34 hours range per vehicle.
At the $73/hr rate, which is deceptive, the labor cost is $2190 to $2482.
Compare that to the sale price of the vehicle.
Does that surprise you? It should.
Reference:
http://www.reuters.com/article/pressRelease/idUS150987+05-Jun-2008+PRN20...
What Secular Animist said. Plus, there's a lot of other things that don't need to be consumed in the way we've become used to.
Congress bailed out America's auto industry in 1974 with the passage of the ERISA. The auto makers wasted the money that should have gone into their workers' pension funds. America's auto makers are only able to delete value with capital, which is why bailout is the wrong term to use. Subsidy is a better word. Congress should be honest with Americans and tell them future tax revenues are being spent to subsidize a failed industry to protect jobs that no longer produce profitable products.
Congress should make Detroit install big auto shredders at the end of their product lines so that the products they produce are immediately recycled into more cars that are immediately recyled, etc. Then they should change the name of Detroit to Sisyphupolis.
"The relative financial performance of GM and Toyota should prove that making reliable economical cars is actually a much better long-term business strategy."
Actually GM and Honda would be a better comparison. Toyota is loosing a bundle on it's full size SUV's and pickups.
"Toyota is loosing a bundle on it's full size SUV's and pickups."
There's so little demand for big vehicles now, that I'd bet everyone loses money on them. But even in this severe recession, Toyota is still making a profit overall.
As for the timing of GM's troubles, the crash in truck/SUV sales started way back in Q1 2008, as this quote shows, then got really disastrous in Q2. All before the worst of the financial meltdown.
"For the first quarter of 2008, the company's sales decreased 10% to 947,000 vehicles, in North America. Total GM US truck deliveries of 476,000 vehicles were down 15% compared with the same period of 2007, while car deliveries of about 330,000 were off 6% compared with first quarter 2007. However, GM's total US retail share of 21% was comparable with first quarter of 2007."
http://www.automotive-business-review.com/article_news.asp?guid=EF7A522B...