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Advertise on the Tentacle

July 31, 2009

So you want to buy a car?

Joe Charlebois

The American automobile industry, General Motors, Chrysler and Ford Motor Co. are publically traded corporations, private industry that – for the most part – has struggled to survive the marketplace in the past two decades. There are a multitude of reasons that the Big Three are failing while their foreign-owned counterparts have tapped into greater percentages of the American market share.


First and foremost they were passed on the highway by a few companies that put their faith in hybrid technology and more fuel efficient vehicles. When oil prices soared, the bold move made by Japan put them in the driver’s seat. They set the marketplace; they created the demand. It’s not that the Big Three have entirely ignored the growing demand; two of the American car makers has responded with hybrids of their own and have attempted to take “green” technology a step further – into electric vehicles.


Domestic vehicle sales aren’t slowing down because the industry is not adapting. GM has more hybrid options than Japan, and it has the electric vehicle Volt coming out within the next year. It has changed. Ford has offered hybrids and Chrysler has done more to capture the attention of car enthusiasts over the last 15 years than any other car maker – foreign or domestic.


The American auto industry has provided consumers with quality vehicles at prices typically at levels well below the competition. Why then – even if sales are slowing for all companies involved – do foreign competitors make higher profits or have smaller losses?


When comparing the percentage of profit between the two, it is easy to see why Detroit is struggling. Detroit is working on a much tighter margin. This overwhelming difference is in direct correlation with the costs associated with current employee benefit plans, as well as the legacy costs associated with retirees.


It comes down to perception and built in costs.


GM and Chrysler asked the federal government for funding to help bridge the current financial crisis so that they could keep on the road. The administration – well supported by this industry – provided billions in temporary relief because it feared failure would cause a ripple effect, not only through auto related industries, but throughout other sectors of the economy as well.


Now that two of the Big Three have taken the federal bailout package, we see firsthand just how well nationalization works.


Although there have been occasions in our history when the federal government has intervened into private industry, never in a time of peace has such a broad takeover of private industry been in effect.


In the past, the federal government would not have stepped in. Corporations would have gone through bankruptcy, gone through reorganization, rebirth or dissolution.


For those who believe that these giants are too big to fail, I ask: How many of the United States top 100 companies in 1909 are still with us today?


This is a natural cycle. GM and Chrysler have gone through bankruptcy and reemerged. At GM a few car lines are gone or sold to other interests. Chrysler has merged with Fiat to stave off dissolution, but this is after billions of our children’s future earnings will go to pay for the automotive industry bailout.


Of an even bigger concern is the eventual “end-around” of the federal government designing vehicles to their specifications, producing too many or too few of a certain class of vehicle and dictating what cars will be built without taking into consideration to market forces. With the federal government having a stake in how these corporations operate, it is now free to force vehicles that conform to certain ideological concepts into the market place.


Many eyes have been opened over the last few months as the one automaker who has rebounded is not a foreign brand, but Dearborn, Michigan’s own Ford Motor Company. What are its hottest sellers? The Fusion and Fusion Hybrid as well as the Escape Hybrid have led the way in Ford’s resurgence.


The interesting note is that Ford did not take a dollar out of our pockets, yet it is the one domestically owned automaker that has not groveled at the feet of the almighty federal government.


I own a Chrysler-made van and a Ford SUV. I respect American made products and have owned a Mitsubishi, and two Hondas and think highly of those vehicles as well. But the fact that only Ford has held its own over the last quarter goes to prove the point that people believe in the product and respect the fact that they didn’t go “hat in hand” to the president and Congress.


Henry would be proud!


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