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JACKSON: Hardly 'charity' to save Big 3 automakers

By Tim Jackson, Special to the Rocky

Published November 13, 2008 at 12:05 a.m.

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Automobile dealers in Colorado and around the nation compete with each other energetically for the business of consumers, but on some points they are generally on the same side.

Regardless of what brands automobile dealers sell, they for the most part agree that this nation cannot afford to lose the so-called Big Three U.S. automakers: Ford, GM and Chrysler.

Former National Automobile Dealers Association President Ron Tonkin - who owns 18 dealerships, only two of which sell domestic vehicles - this month wrote in an open letter that "the importance of the domestic side of our industry is paramount to the employment base and health of all America."

Echoed U.S. Chamber of Commerce President and CEO Thomas J. Donohue: "The financial crisis and the resulting steep drop in car sales are not only putting American automobile makers at risk, but also their network of suppliers, vendors, workers and other businesses that provide goods and services to them."

As the U.S. chamber noted, the automotive industry represents 4 percent of the U.S. gross domestic product and accounts for one in 10 American jobs. The chamber cited a recent report from the Center for Automotive Research that found that if the Big Three American automakers were to cut U.S. operations by half, 2.5 million jobs could be lost in 2009, including nearly 250,000 jobs lost at the automakers and nearly 800,000 at suppliers.

Contrary to the view espoused by the Rocky Mountain News in its editorial of Nov. 2 ("No to Detroit"), the failure of the Big Three would trigger an economic earthquake that would be felt far from Detroit. Coloradans would certainly feel the shock waves, no matter what brand of vehicle we favor or where we work.

Fortunately, President-elect Barack Obama declared at his first news conference since his victory that he takes this problem seriously, urging the current administration to accelerate federal loans to the industry. Obama added: "I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis and succeed in producing fuel-efficient cars here in the United States."

Support for U.S. automakers is not just pro-America, it is pro-consumer and pro-economic growth. This should be an issue that can bring us together during this difficult period.

Let's be clear: The auto industry isn't looking for a handout from the government. The proposed federal loans would give automakers a needed lifeline but the manufacturers would be responsible for repaying this debt. However, they can work their way out of this crisis if they're given the tools they need.

Unfortunately, there's no simple panacea for the problems that ail the Big Three. For example, the Rocky's reference to the sales model of Dell ignores fundamental differences between the auto and computer industries, such as the fact that many consumers want to trade their old vehicle in as they buy a new car.

GM celebrated its 100th birthday in September. Similarly, Ford's Model T's made its debut in 1908. The nation can't afford to let its storied domestic automobile industry wither away in this challenging period.

Continued federal support for the U.S. automakers would not be "corporate charity," as the Rocky editorialized. Rather, revitalizing the U.S. auto industry is a way to help revive the U.S. economy.

We'll all reap rewards from that.

Tim Jackson is president of the Colorado Automobile Dealers Association.

Comments

  • November 13, 2008

    7:02 a.m.

    Suggest removal

    VVVV writes:

    Well then I want to collect the bailouts for Studebaker, Hudson, and all of the other domestic auto companies that were allowed to fail. These companies are so big, that they don't fail. They will drop into bankruptcy only to be taken over by some foreign company like Toyota or Fuji, and revamped to create a new breed of domestic cars. Domestic is a misnomer anyway, since the majority of the cars aren't built in the US. The big three aren't going to disappear. But maybe when someone successful takes them over, they can do the much needed housecleaning that will finally make these companies produce products that can actually compete in today's marketplace. A government bailout only guarantees that in 3-5 years, we'll have to bail out their incompetence again, and again, and again forever. Try giving money to a homeless person every day at the same time for a week, then stop doing it. You will see the effect of rewarding incompetence in the pressing demand for you to give him more money.

    Besides, Obama is going to completely reboot our entire energy system in 10 years. We'll need plenty of people and money to pour into that bottomless pit.

  • November 13, 2008

    8:01 a.m.

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    raysmom writes:

    So, Mr. Jackson, now that you have outlined what the taxpayer needs to contribute to your cause, please tell us what the auto makers and dealers are going to change to not make it good money thrown after bad! Will you stop giving outrageous sums to the Unions? Will you stop paying factory workers better wages than the average graduate degreed business person? Will you discontinue the practice of giving benefits that no other industry can afford to give, with 80% of factory workers retiring with full benefits by 55 yrs. of age? Will CEO's stop taking billions in bonuses off the top? Will you price vehicles affordably, and provide maintenence that is well done and fairly priced? All you have done is told us what WE have to do- any business that goes under has repercussions, but I don't see anyone bailing out OUR sole proprietorship small business if we run it poorly- and it alone contributes more than 150K into the local economy in overhead and taxation every year. What will you do for us?

  • November 13, 2008

    9:26 a.m.

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    mmannino writes:

    The labor thugs aided by their Democrat allies and corporate welfare seekers want to mug the taxpayers. This situation is pure graft and greed. Labor unions gave the Democrats $400M for the election. The Democrats will give the UAW $25B to subsidize their outrageous pensions and compensation. Is this the kind of change that many voters demanded? Hope and change for corruption and treasury looting?

  • November 13, 2008

    9:34 a.m.

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    Cicero writes:

    The American automobile industry does not deserve such support.

    1. It's the quality. This is the biggest difference consumers perceive, between Detroit and Japanese brands like Toyota and Honda.

    2. It's the product line. The big shots in Detroit kept emphasizing a product line of pickupts and SUVs long after the market was shifting to more economical models.

    3. It's the atmosphere. There is a culture of deceptive practices that pervades the car business. Anyone who owns a car can tell about it. Not only at the time of sale, but also when you need warranties honored, or other work done on your car. There are too many people in that business who act like they're out to screw the customer.

    4. It's the unions. They created obligations on the manufacturers that make it uneconomical to put out a car people can afford.

    5. It's the government. There is a laundry list of obligations that have been imposed on the car industry. I realize some are necessary or advisable. But remember that there is a price to be paid for each one. Maybe we can't afford some of them.

    6. It's management. The same people who got Detroit into this mess are now asking for assistance so they can stay in charge, doing business the same old way.

  • November 13, 2008

    10:37 a.m.

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    David_R writes:

    Throwing money at the auto manufacturers to maintain their ridiculously high cost labor contracts and retirement legacies will do nothing to help sales of their vehicles – sales desperately needed to both provide repayment of existing public debt and ongoing operating capital. After funding their legacy contracts they will once again fall short of operating capital needed to build cars that are not selling. They will once again need to be bailed out to “protect” the original public investments, ad infinitum.

    More and more of the products offered to the American public by the Big Three are actually being made offshore as they cannot afford to maintain their largess granted in the past as they mortgaged their future in unwise labor contracts and manufacturing plans. A prime example of this is the relatively fuel efficient GM Saturn which is now primarily a product of GM de Mexico and imported back into the U.S.

    Add to those facts of Business 101, the reality of instituting additional requirements to meet new fuel efficiencies in the future will only drain more funds from manufacturing operations needed to generate survival operational funds. They've been building and pushing the full size pick ups and SUVs in order to have a large enough profit margin to cover their obscene labor and legacy costs. Selling the small, fuel efficient cars that America needs -- and the foreign companies are providing in their US manufacturing facilities -- won't cover the financial nut for the Big Three.

    I'm not calling for "busting" the unions. Let the Big Three file reorganization bankruptcy, sit down with labor and hammer out a sensible and mutually beneficial business plan to move forward. Then, and only then, possibly look at investing taxpayer funds in ensuring their survival. Neither management nor labor can afford to keep going with the status quo.

  • November 13, 2008

    12:03 p.m.

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    ILoveChipotle writes:

    Maybe the big three need to fix their problems instead of just having the government apply a bandaid.

    Unions are milking these companies dry. Why does unskilled labor need to make over $50/hour?!?

    American cars are inferior when compared to foreign. No one wants to buy them. What's next, the government is going to force everyone to buy a ford to make sure they don't go under?

    I agree with the RMN - No to Detroit!

  • November 13, 2008

    12:13 p.m.

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    Fisherman writes:

    Can anyone explain that if the reason the Big Three are in trouble is due to slumping car sales, how will a $50B bailout increase car sales?

  • November 13, 2008

    8:43 p.m.

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    mmannino writes:

    I would like a member of the left to defend this bailout of the UAW thugs. Every comment here agrees that the taxpayer should not be forced to subsidize the outrageous compensation of the UAW auto workers. Please indicate why an auto worker with a high school education should be compensated more than a highly trained and educated scientist. Why should auto workers be entitled to retire at age 55 with close to full salaries and early retiree medical care? If auto workers are entitled to subsidies for their outrageous compensation, who is not entitled to a subsidy?