For those of you not fluent in l33t 5p34k… the translation to the title is “American Cars Suck”.
A few weeks ago, the heads of the Big Three automakers went before Congress, hat in hand, and asked to be included in a bailout strategy for economic recovery. The scene was bad comedy as Congressional thugs chided CEO’s for their excesses. Those excesses included large salaries, golden parachutes and even the very ‘luxury’ corporate jets they arrived in. (Just to be fair, (a) Congressman are paid $169,300, putting them in the top 5% of income earners, (b) get paid as much as two-million dollars in retirement benefits just for serving one term and (c) have access to and frequently use US Air Force passenger jets. Nancy Pelosi recently attempted to pimp this ride from a small executive type jet to a passenger airliner type jet.)
At one point, it was suggested that they could all take advantage of Chapter 13 Bankruptcy protections to restructure, to which GM CEO Rick Wagoner said he didn’t believe people would buy a car from an automaker that had gone bankrupt. Not surprisingly, a survey by Directions Research Inc was released within a week of that statement saying that very same thing. But did anyone ask the question whether those same buyers are GM/Ford/Chrysler buyers?
The trend in auto sales has been that foreign imports are the gainers and the domestic manufacturers are in decline. And in fact, when you break sales demographics down you find that The dominant market share of GM, Ford and Chrysler are due to a combination of government sales (the US government cannot legally buy foreign cars as long as there is a domestic automaker in business - the “Buy American” act) and what Obama might call “bitter clingers” who buy from the big three because they always have (and so did their daddy). Younger buyers eager for more gadgets, value and style have almost uniformally rejected domestic automakers. So this begs the question, do the Big Three automakers really have a clue what American’s want to buy?
I’m here to say that the Big Three is clueless on what drives American consumerism, and that driver is called “Identify Marketing”. If GM advertised the suburban as a gas guzzling, poor handling and expensive to maintain vehicle, you wouldn’t see many on the road. Instead, they showed pictures of affluent soccer moms hauling their kids, their kids friends, their kids sports gear, their groceries and oh yeah - surviving head on collisions with trains. It was safety, convenience and “bling” that made SUV buyers out of skinny suburbanite moms’ and rednecks alike. If the Big Three had been able to make as much on a Festiva as on an Expedition, you had better believe you’d see flashy commercial showing hot babes driving them.
Then there are technical buyers. That’s folks (like me) who could care less what a car looks like; they’re looking at the stats to determine things like “warranty coverage”, “total cost of ownership” and “resale value”. When I went car shopping a few years back, I compared several cars in the $20k - $35k price range. Every American manufacturer fell out of contention after the first few phases of comparison because of reliability problems, short warranty periods and lack of features. I wound up with a Hyundai, and nearly two years on I’m not at all regretful of my decision. A friend purchased the Chevy Malibu and has already had to have major engine service, door hinges replaced and keeps complaining about a ticking noise from the front wheels.
American car manufacturers could continue to sell crappy cars with impugnity if not for one other problem - their managment has negotiated some of the dumbest deals with the Unions. I’m not saying the Unions have screwed up the American auto industry. They’re a big part of the problem, but Toyota operates plants in California which are unionized and their vehicles are top rated. The problem is that GM, Ford and Chrysler basically sold their souls to unions and got nothing in return. GM is the biggest loser in that regard.
This week you can expect the same three CEO’s to go before Congress again. This time, with the Congressman having already scored points with last weeks tongue lashings, you can expect them to walk away with a generous package that’ll buoy the US auto industry for another two years. That may be enough - both GM and Ford have exciting new technologies both here and in the near term which will pull buyers back from foreign sellers. Chrysler is at rock bottom, so they have nowhere to go from here but up. Whether they get bailed out by the US Tax Payer, or by chapter 13, they’ll both be in the same spot in 3 years.
All the same, I’d rather than not do it on my dime.

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