why do the automakers need a bailout?
By American Girl in Italy on November 17, 2008 at 1:45 PM in Auto Industry
Because people aren’t buying their cars? Now, I am no car expert. When I bought my last car and someone asked me what it was, I said it was a red convertible. And when they asked about horse power, and safety options I said it has an electric top, windows, and the seats heat up – and a cool stereo system. See my point? And as far as why the auto industry needs a bailout, I am simply thinking and questioning this, as an average American consumer.
So, again, why does the industry need a bailout? Because they don’t produce the cars that people want? Because people want cars made overseas because they are more stylish? efficient? cheaper? Is it because of poor management? Out of the world pension plans?
I always suspected that US automakers weren’t producing smaller hybrids and fuel efficient cars because they were succumbing to pressures from Oil lobbyists, (Kind of like the lore of the light bulb that could last for years and years, but would destroy the light bulb industry) and because of profit margins.
Like, why do they have so many of the auto parts made overseas? Because people want cheaper cars? Because this increases the profit margin? Basically, were thousands of jobs shipped overseas so the head honchos could make more moolah?
And why do consumers want to trade their cars in all the time? Didn’t people used to buy a car and keep it for years, and years? Now it seems people turn over cars every two years. It seems to me that if you can buy a good solid car that lasts a long time, it would be worth it to have a car that was manufactured entirely in the US, and pay a little bit more for it?
It seems to me that automakers, like every other company in America, have been driven by greed and profit, and not looking to the future. How long has Al Gore been studying and talking about global warming (like 30 years!)? How long has the Prius been on the road? (it launched in Japan in Dec. 97, and in the US in 1999)
And how long have US automakers been producing SUV’s? Are they really producing cars that the people want, or are they producing cars that they are telling the consumer they need to have?
“In the case of SUV consumers, the auto company marketers start by implanting the subliminal message you can be tough, independent and sexy, if ya buy and drive our brand of SUV. Notice many ads show an SUV in a wilderness, the H2 ads show it off roading in Iceland (the viewer is shown beautiful people conquering nature and having fun). In some National Geographic print ads for Toyota, they show back packers with their SUVs in the wilderness, with the slogan “oh what a feeling.” The basic idea of an auto company ad campaign is to associate driving their SUV with the idea of being sexy, tough and independent. The tough and independent image of driving an SUV is further reinforced by the name of the vehicle (Path Finder, Trail Blazer, Mountaineer, Escape, Explorer, Expedition, etc.). Constant exposure to slick ads fools people into thinking they can “walk the walk” of being independent and tough just by buying the SUV shown in the idealized dreamland of advertisers. If you do not think SUV propaganda effects the consumer, then ask your self is it just a coincidence that SUVs became trendy after SUV advertising rose nearly nine-fold from $172.5 million in 1990 to $1.5 billion in 2000.” Read more here, it is quite entertaining, and informative.
The advertising budget in 2008 for GM was $3.01B, Ford’s was $2.53B and Chrysler spent $1.74B. That is over $7 billion dollars to convince consumers to buy their gas guzzling vehicles. I would think they could have taken a portion of those dollars to revamp the production lines to produce more hybrids….
When the SUV first came out, some people bought them up but they were a luxury item. But over time, they became the staple on the road. The reason, in my opinion? Because we were told they were much safer to have, in case of a collision – with another SUV.
Is there more profit in producing and selling an SUV vs. a small energy efficient car?
“US automakers could enjoy profit margins of $10,000 per SUV, while losing a few hundred dollars on a compact car. For instance, the Ford Excursion could net the company $18,000, while they could not break even with the Ford Focus unless the buyer chose options. This led to Detroit’s big three automakers focusing resources and design on SUVs over small cars (small cars were sold mainly to attract young buyers with inexpensive options and to increase their fleet average fuel economies to meet federal standards). The high wages of unionized workers in the United States and Canada (members of the UAW and CAW, respectively), compared to non-union workers such as that of Toyota, meant that it was unprofitable to have them build small cars. The General Motors Arlington, Texas factory where rear-wheel drive cars were built, such as the Chevrolet Caprice, Buick Roadmaster, and Cadillac Fleetwood Brougham was converted to truck and SUV production, putting an end to full-size family station wagon and overall terminating production of rear-wheel drive full-size cars. As a result of the shift in the Big Three’s strategy, many long-running cars like the Ford Taurus, Buick Century, and Pontiac Grand Prix eventually fell behind their Japanese competition in features and image (relying more upon fleet sales instead of retail and/or heavy incentive discounts), some being discontinued.”
I think instead of putting the billions towards building a new production line that would produce hybrids and fuel efficient autos, the US auto industry spent billions in advertising to convince the consumer to buy SUV’s.
Like I said, I always assumed the lack of vision wrt the type of cars being produced by US automakers was driven by pressure from the oil industry and auto dealers. Big expensive gas guzzling vehicles. And I always believed jobs were shipped overseas to increase the profit margins. Some have started to produce energy efficient/hybrids, but is it too little, too late?
Because, in a country that supposedly has the most brilliant minds, designers, thinkers, scientists, and work force, I don’t understand why the automakers are failing and need a bailout. We should be better than this.
Now, don’t get me wrong, I love capitalism. I love new shiny cars. And having driven many different luxury SUVs (borrowed from family members while visiting, I don’t own one), I can see why people buy them. They are nice and tall, and you feel safe, and powerful, and they are super fancy. And they smell good, all leathery. And my sister in law owns one of those with 7 seats, but she uses it constantly, to haul kids, and carpools, and her parents around. So, from that point of view, they are handy, when you are constantly shuttling massive amounts of kids around.
(This pic just cracks me up)
But, far too many people use them as a single car for commuting. And that is crazy! Our friend here in Italy is a lawyer, and uber rich. He bought a Porsche Cayenne but after a few months of paying for the gas (which is WAY more expensive here) and trying to find parking, he bought a Smart Car. They are simply a waste of money. And a pollutant. It is like taking hundreds of dollars every month, and just burning it.
So, it seems to me, that the auto industry does not really deserve a bailout. They got themselves into this position, in my opinion, because of greed, profit, and lack of vision. I understand that thousands of jobs are at risk, but did the automakers just now realize this? They have been sending jobs overseas for a long time, now, to increase their profits. They didn’t care too much about those workers who lost their jobs then.
So, how do we help our economy, save those jobs, and maintain our auto industry in the US? Massive overhaul? Bring the jobs back? Update the production lines, immediately? Take the retirement packages, and massive salaries away from the CEO’s and higher ups? How about employee buy in packages? Then the employees own the companies, instead of the government or tax payers?
I don’t know. It just doesn’t seem right to give them a bailout. You reap what you sow? And maybe we can all take a hard look at consumption and make some much needed changes?
by Ronald Scott
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