Robert L. Sharp: Bailing and wailing

December 27, 2008 

It's very difficult to feel sympathy for the American Big Three automobile companies, having sold us junk for the past 60 or more years, and having a tin ear for what the public needed.

When the Volkswagen Beetle came to America, it was an instant hit, and Detroit responded with the Corvette and Thunderbird. OK, the Corvette was and is a winner, but not exactly the "People's Car."

I recall reading memoirs by the Mustang's father Lee Iacocca and former GM executive John Delorean, which reported Detroit's top executives lived in bubbles that never saw or drove the cars of competitors nor cared about what consumers wanted.

Detroit's offerings ran the gamut from A to B, so they didn't have anything to respond to the '70s Oil Crisis, but the Japanese did. Detroit cried foul to Washington and a 1981 "voluntary restraint agreement" limited the Japanese to exporting 1.68 million cars to the U.S. per year.

The Japanese automobile industry reacted by exporting bigger and more expensive cars and building assembly plants in the U.S.

Foreign competition did force the American companies to improve the quality of their vehicles, which had been famous for people not wanting to buy cars made on Mondays and Fridays, when those skilled union workers were either hung over, or getting that way.

When living in Hong Kong in the '70s, my right-hand drive Chrysler was imported from Australia. While my peers were driving Mercedes, my company's CEO was on Chrysler's board; enough said. Every turn made the extra nuts and bolts left under the seats and wheel wells let their presence be known.

Yes, it is true the current credit crunch is unique, and people who want to buy a Ford or Chevy (or for some odd reason, maybe even a Chrysler) can't buy them now. But the fact is, these companies have steadily been losing market share over the years. The handwriting has been on the wall for a long time.

I subscribe to Consumer Reports magazine, which has backed up the public's perception of American cars being of lower quality than imports, especially Japanese, for years. My January 2009 issue with the Owner Satisfaction survey says "In all, 20 of the models with the lowest rating were American; 11 from GM, seven from Chrysler and two from Ford."

You just know Detroit will be back for more bail-out funds as there is no way any large company can turn around in a few months. It should be explained that Chapter 11 bankruptcy doesn't stop business from continuing. It just takes off the heat from creditors while the company is reorganized; unprofitable lines of business killed and productive parts sold off or kept in place.

However, the threat of the loss of three million jobs, manufacturers and suppliers has to tug at one's political heartstrings, and the industrial skills that can turn out military tanks in time of war (and even in time of peace) shouldn't be lost. And wouldn't be in bankruptcy.

With a little more analysis, there is more to the story. If the point is supporting national champions and American jobs, the automobile's badge doesn't tell you much about that. At one chauvinistic point, the state of California required all of their government fleet to be "American" cars, until someone pointed out the Fords they were buying were made in Mexico and the Toyotas they avoided were made in Kentucky.

As to union salaries, According to an item floating around the Internet (I couldn't find the original), Forbes magazine reports the labor cost per hour, wages and benefits for hourly workers ran from $70 to $75 per hour ($141,000 to $151,000 per year) for Ford, GM and Chrysler, with Toyota, Honda, Honda and Nissan at $48 ($96,000 per year).

The American Association of University Professors reports the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 plus 27 percent benefits).

If the plan was to reduce the average UAW worker with a high school diploma to the Japanese nonunion level, they would have to descend to the miserly Ph.D. pay scale. I'm for upping the educators over downing the autoworkers, if that were the choice, but there is something wrong here.

As to high executive salaries and corporate jets, that's a populist red herring, jerking up the masses and diverting their attention from the real problem of competitiveness. When you are responsible for many billions of dollars of assets and hundreds of thousands of employees, it doesn't make sense to focus on a tiny part of the budget or spend nine hours of your valuable time commuting to D.C. in a car pool.

Actually it doesn't make sense for most people to waste their valuable time commuting in an automobile. Put the bail-out billions into mass transportation.

Full disclosure: I drive a 2002 Buick, upgraded from a 1995 Buick; couches on wheels. I am amused by all the ads for new cars boasting about getting 30 miles to the gallon on the highway. Big deal! Is that all after all these years? I drove from Los Angeles to Portland with both cars getting 30 mpg. 31 coming back -- it's mostly downhill.

Psychiatric Evaluation: Would buying blue Buicks have anything to do with my father trading in a 1938 Buick for a blue 1949 Buick with those nifty portholes? Maybe, but it also has to do with my being cheap. Consumer Reports advised the best buy for a used car under $16,000 to be those 1995 and 2002 Buicks. No new car for me that loses 30 percent of its value as you drive off the lot.

As for foreign cars, I'm hot for a Maserati. Dr. Freud could see me coming. More portholes!

Robert L. Sharp grew up in Linden (population 1,000) and spent most of the following 30 years as an international banker in Asia including four years as a Naval officer in that part of the world.

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