Comments on: The Big Three Need a Shakeout, Not a Bailout

By: admin

admin — Tue, 16 Dec 2008 15:05:17 +0000

Comment by Jerry Haywood on 9 December 2008:
Your article brings several questions to mind. Why do we allow unfettered access to our markets when U.S. companies in China have to have a Chinese partner? Are the U.S. auto companies allowed to manufacturer, cars or trucks in Japan? Are the tariffs, taxes, import quotas, and customs regulations the same going both ways? I think when you find the answer to these few questions you will find another part of the big three’s problem that no one wants to address.

~~~~~~~~~~
I couldn’t agree more, Jerry, but maybe not for the reasons you expect. The bottom line is that if Detroit truly made the best cars in the world as they insist they do, consumers would be beating a path to their door and voting with their wallets – high production costs and all. But, they’re not and that’s what I suspect is so hard to swallow here…pride.

History shows that protectionist policies ultimately undermine the very businesses they’re intended to help. So the last thing we want to do is to play tit for tat. China, Japan and Korea will ultimately pay their bill in this regard and, in fact, several of their industries already are. Which is why I have no doubt that Detroit, after getting totally boxed in by its own avarice, will rise to the occasion, though probably not in any form that the current crop of executives is capable of imagining.

Keith Fitz-Gerald
Investment Director
Money Morning

By: admin

admin — Tue, 16 Dec 2008 15:04:30 +0000

Comment by Rob Shippy on 9 December 2008:
Keith,
I agree with most of your sentiment, but the one place you are off base is the employees. Those companies will not absorb our workers, because the demand they fill will largely be produced overseas, where they are able to keep ee costs LOW. Therein lies the problem, because now those wages are being spent in a foreign country, and the profits are going to a foreign country. And while in principle, theory, and soap box I agree with you, my livelihood is in Detroit, and I need those workers to have jobs to have money to spend in my business…..solve that.
Thanks for the kind words, Rob. Unfortunately, I’m not in charge. And neither are the guys in Washington, despite what they’d like to believe. The markets are. As long as consumers prefer Hondas and Toyotas, no amount of bailout funding is going to do anything other than perpetuate the inevitable. Which is why a Big Three shakeout that may kill Detroit could ultimately be good for the Carolinas, Alabama, Georgia and Mississippi where VW, Toyota, and Kia are all in the process of completing new factories right now – despite the downturn – thanks to more than $1 billion in Southern legislative incentives. Incentives, I might add, that Michigan could pass if it wanted to more directly help businesses like yours, like Southern representatives are helping their constituents.

Keith Fitz-Gerald

By: John D. Smith

John D. Smith — Sun, 14 Dec 2008 19:39:23 +0000

Why is it not recognized the GM and Chrysler can’t be saved; failure or viability having occurred many months ago? Demand (revenue) for their products has been deficient for years and costs were not brought under control. The market place revealed the ignored and/or failed responsiveness.

Also, why can’t we distinguish the difference between a “bailout” and a subsidy? Subsidizing failed industries benefits no one and continues waste and responsiveness to market realities. Command economies have proven this !00% of the time.

Why do we feel compelled to solve complex and demanding business and financial issues in the political arena? Why don’t we commit to augmenting, if required, city and state funds to provide unemployment, food, retraining, medical and relocation assistance with federal funds? Government performs well in those areas and the need is, and certainly will be, there. Why let failed business entities drag Detroit and the nation down further just because they are large and make a limited number of profitable cars? The time for denial and perseveration has expired.

By: Felix

Felix — Sun, 14 Dec 2008 14:34:41 +0000

Why not bail out the ‘auto suppliers’ to save them and let the car mfgs do their own house cleaning. The last I read the Union seems to be one of the big problems that bankruptcy would take care of.

By: Auto Bailout Fails! « Hunterseekers The Next Great Economic Depression

Auto Bailout Fails! « Hunterseekers The Next Great Economic Depression — Fri, 12 Dec 2008 09:35:01 +0000

[...] In the words of Keith Fitz-Gerald, Investment Director Money Morning.: [...]

By: Gary Wardell

Gary Wardell — Thu, 11 Dec 2008 21:54:27 +0000

To keep every body employed in the old Soviet Union the “state” sponsored manufacturing things (supply) which did not have any demand.

When the auto manufacturers make automobiles that people want and will purchase plenty of privite investment will be available.

By: Jutia Group - Market Jitters & Political Critters

Jutia Group - Market Jitters & Political Critters — Thu, 11 Dec 2008 18:38:09 +0000

[...] The Big Three Need a Shakeout, Not a Bailout [...]

By: Dan H

Dan H — Thu, 11 Dec 2008 12:15:36 +0000

The impending collapse of the American auto industry literally gives me chills down my spine. As a bit of a student of history, I will remind those who feel we would be better off without Detroit, that it was the ability of the American auto and other industries that kept a continent free from the Nazi’s in WW 2. The problem with the “Big Three” can be summed up quite simply, UAW. This situation that the US auto industry faces has been festering for years. As market share fell the unions still demanded more, now it’s time to pay the piper. There is talk about simple economics, having run a small business I know that I cannot compete if my labor cost’s were twice that of my competition. Was Maryville, Ohio a thriving place before Honda opened a motorcycle plant there? Can you imagine if GM were to lay off all the Detroit employees follow the path of the imports. They open plants in areas where jobs are scarce and $15-20/hr is a gift from God. I’ll bet there would be Congressional hearing’s telling the CEO’s they would have to stay put. Probably the government would offer monies for that. Assembly line work is essentially unskilled labor, yet UAW members have demanded wages that many college graduates cannot earn. Does the industry need an overhaul? You better believe it. Will it happen, I doubt it. There is no short term fix here. Pumping taxpayer dollars is only buying time. The US auto industry as we know it, is finished. God help us all when the “trickle down effect” hit’s.

By: Auto Bailout Awaits Congressional Approval with Millions of Jobs at Stake

Auto Bailout Awaits Congressional Approval with Millions of Jobs at Stake — Thu, 11 Dec 2008 09:29:30 +0000

[...] Money Morning: The Big Three Need a Shakeout, Not a Bailout [...]

By: Kevin Ramsay

Kevin Ramsay — Wed, 10 Dec 2008 18:45:26 +0000

In regards to “The Big Three Need a Shakeout, Not a Bailout
By Keith Fitz-Gerald, Investment Director”, I was very surprised to find his comments expounding on his ignorance.

It is one thing to be ignorant; it is entirely another thing when you propel it to a podium. But for that effort Keith, well done! You have succeeded.

I quote your first spelling mistake that changes the whole meaning of this sentence. “…the same people who have been running the U.S. Postal Service would not be in charge of both Wall Street and one of our major manufacturing industries.” What you meant to say was “NOW” instead of “not” in that sentence. We understand your mistake; it seems everyone is not impervious to them, even yourself. Yet you seem to think everyone should pay themselves for their mistakes. And that GM, Ford, And Chrysler should go into the dust so that you can drive your import. (Please acknowledge your current car model to the group; I find your thinking is typical of the preppy import buyers that have not actually looked at an equivalent domestic made car in the last 5 yrs.)

Yes on the onset your idea of survival of the fittest is a good one. It would make your import companies more profitable from the increased markets. but you (an investment director??? hmm) fail to see that your country will not have any of the high level jobs for your kids, the engineering and other executive positions will all be in another country. If you are lucky your children might be able to put a grill into your soon-to-be-purchased, beloved import, before you get to drive it home.

Yes those first couple years will be wonderful for you and your other import driving friends. It will seem wonderful until the economic ramifications start to bite your lifestyle around you.

Then you will realize to late the impact of the Big Three in your country.

You fail to mention that the GM Malibu is the best quality car in its class, bar none!!! You also fail to mention that GM has 18 models that get over 30mpg, more than ANY other manufacturer.

You fail to mention that GM has more Hybrid models than any other.

You also fail to realize that the other countries like Japan that sell into US and Canada do NOT allow our Big Three to sell into their borders. Yes they get profits from Japan and your country but your car companies are barred from their markets.

You also failed to realize that GM is making a profit selling into China in the last few years. Too bad the Japan automakers get an unfair advantage. And you tote that as survival of the fittest??? Come on! Learn the facts before you step on your podium Keith!

If you get your wish to save American taxpayers all that money, I hope you live to see the day you remember you were supporting the decline of your civilization as we know it.

May you live forever Keith, and may you grow in wisdom that whole time. And I mean that sincerely.

Kev