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The talks of bailing out GM (and other auto-makers) are dominating the headlines, it’s an interesting debate and I think we (the USA) will end up “bailing them out” – not because it will save them, but because it will postpone an even harsher economic reality. I’m curious what the makers here think – it’s energy, it’s engineering, it’s what MAKE is all about.

I love GM, our Detroit automakers and the heritage of American made cars – but that doesn’t mean they get a free pass… Here are my quick thoughts – I suppose what makes this sting the most is what GM was saying a few years ago.

While Toyota was introducing the Prius, ‘s Vice Chairman Bob Lutz was quoted as saying it was a publicity stunt and “it was kowtowing to the shrill screams of a handful of a nutty environmentalists living in California communes, or something like that.”

Harsh!

During the same time – At GM he “introduced car buyers to the V-16 Cadillac Sixteen concept car, sporting a 14-litre engine (a typical four-cylinder engine is about two litres.) GM also introduced the new Camaro at around that time, and other muscle cars, all under the watchful eye of the Czar… (who also gave us the Dodge Viper in a previous life.)”

GM also owns Hummer, but they’re trying to sell it off now – so far no buyers.

There was more… “DETROIT (Reuters) – General Motors Corp Vice Chairman Bob Lutz has defended remarks he made dismissing global warming as a “total crock of s—,” saying his views had no bearing on GM’s commitment to build environmentally friendly vehicles.”

So here we are getting asked to bail them out, most of the people I know don’t have the same sentimental thoughts towards GM as our parents and grandparents do.

We’ve all heard the famous 1953 quotation from the former General Motors president Charles E. Wilson — that what was good for our country was good for G.M.

I think it’s extremely important to debate and research global warming but to not address the market with more fuel efficient cars that consumers want and to also taunt an entire state in the USA didn’t really help in the past and I think it’s still not helping in the current crisis. What good for GM *is* good for the USA – It’s an odd place we’re in right now, it took decades to get here and unfortunately it will take decades to get us out – can GM (and all of us) wait that long?

Mr. Lutz is now heading up the Chevy Volt launching in 2010 – I’m looking forward to it and I hope this is a new beginning for GM. I don’t mean to single Bob out but he’s the one that talks to all of us.

The Extended-Range Electric Vehicle that is redefining the automotive world is no longer just a rumor. In fact, its propulsion system is so revolutionary, it’s unlike any other vehicle or electric car that’s ever been introduced. And we’re making this remarkable vision a reality, so that one day you’ll have the freedom to drive gas-free.

Chevy Volt is designed to move more than 75 percent of America’s daily commuters without a single drop of gas.(2) That means for someone who drives less than 40 miles a day, Chevy Volt will use zero gasoline and produce zero emissions.

Unlike traditional electric cars, Chevy Volt has a revolutionary propulsion system that takes you beyond the power of the battery. It will use a lithium-ion battery with a gasoline-powered, range-extending engine that drives a generator to provide electric power when you drive beyond the 40-mile battery range.

I’m sure our elected officials have long memories too, we’ll see what happens – if and when a bailout happens there might need to be really specific goals for fuel efficiency, it’s lame that government and not the free market would need to do that but here we are. In 2005 the auto-makers defeated a bill that would have raised fuel efficiencies – it doesn’t look like they’ll have the same clout for awhile.

Thoughts? Post up in the comments!


  • Jon K

    I know that the economy will be impacted by the fall of GM, but personally I’d rather see the government give any money to the people who have already been on the forefront of pushing the US automotive industry into the next generation. I think companies like Tesla should be seeing some help, not GM.

  • M

    “specific goals for fuel efficiency, it’s lame that government and not the free market would need to do that but here we are. In 2005 the auto-makers defeated a bill that would have raised fuel efficiencie”

    It was right to defeat the bill mandating fuel efficiencies exactly BECAUSE the market will destroy those companies which ignore market demands. We are seeing that the free market IS accomplishing that which you lament it isn’t!

    And the democrats are basically saying “let’s stop the market from demanding fuel efficiency”.

    The entire concept of this bailout is inconceivable to me.
    I don’t know anyone who owns an american car.
    I don’t know anyone who would consider buying one.
    They make an inferior product and are suffering because of it.

  • Phil

    Please stop using the picture of the cool concept car when referencing the VOLT.. and replace it with the really boring cookie cutter one that they are actually unleashing on the public, which looks nothing like the concept.. thanks

  • Nick Owen

    The best solution would be to break GM into a number of companies. If the end goal is a healthier, stronger more creative auto industry, I would prefer the “Solid Seven” over the Big Three. GM has a number of problems, but the most important is bad management. Breaking up the company would increase competition making the US auto industry more like Japan’s or more like the hyper-competitive US high tech industry – both major exporters.

  • Anonymous

    To the commenter “M” who said “It was right to defeat the bill mandating fuel efficiencies exactly BECAUSE the market will destroy those companies which ignore market demands.
    We are seeing that the free market IS accomplishing that which you lament it isn’t!

    And the democrats are basically saying “let’s stop the market from demanding fuel efficiency”.

    The entire concept of this bailout is inconceivable to me.
    I don’t know anyone who owns an american car.
    I don’t know anyone who would consider buying one.
    They make an inferior product and are suffering because of it.”

    Until gas prices started soaring, SUVs were all the rage, if you’ll remember. When people realized “oh yeah, we don’t really control our energy supply” they started wising up and buying more fuel-efficient cars. If those standards had been in place before the price spikes, perhaps the car makers would’ve been more prepared for the sudden shift to fuel efficient cars.
    As far as American cars being inferior.. that’s not quite true anymore. http://www.jdpower.com/autos/ratings/quality-ratings-by-brand/sortcolumn-1/ascending/page-#page-anchor

  • Joe

    I think one of the biggest problems is that the same 5 guys keep trading places as the heads of the auto companies and consequently nothing changes. As the article notes Bob Lutz, who now works for GM, used to head Chrysler. Its no wonder these companies are in the toilet. The only way I would support a bailout is if they completely restructured the big three and fired everyone in upper management. GM needs to streamline its operation and stop making 4 versions of the same car. Just make a Chevy and a Cadillac, that’s it. Stop with all this Pontiac, Buick, GMC, Saturn BS; it’s all the same crap and no one wants any of it.

  • k4gdw.myopenid.com

    I’m totally opposed to the bailout. The main problem with the “big three” is that they’re saddled with exorbitant union contracts. Not to legacy costs of retired employee pensions that are artificially elevated due to those union contracts. I read somewhere that it costs GM an average of $1000 more to make a car than it earns from the sale of said car. None of the Japanese car companies have such anchors around their necks. Unions served their purpose at one time but now they’re hurting the entire country, not just the US auto industry.

  • Chris

    I have to agree with ‘M’ when (s)he says:
    “The entire concept of this bailout is inconceivable to me.
    I don’t know anyone who owns an American car.
    I don’t know anyone who would consider buying one.”

    If you ask anyone outside of the US if they’d buy a GM or Chevrolet car, they probably laugh at you. They are aesthetically and mechanically inferior. Americans need to get over the rose-tinted way they view these cars. Especially as they made by companies that look after themselves and their oil company friends, not the average American driver.

    Where I disagree with M’s list is: “They make an inferior product and are suffering because of it”. The US lobby system is such they stand a real chance of winning their bail-out. And then they’ll keep on doing what they’re doing now – it makes them very rich to sell poor goods for top dollar.

  • Paul C.

    To assert that American cars are an “inferior product,” is sheer nonsense. If you define Quality in terms of reliability and longevity, then the American products can stand with any in the World.

    To beat up the “Big Three” for building gas guzzlers, is disingenuous indeed. They have only been guilty of building what the public was buying. The Nissan Armada and Toyota Sequoia can guzzle gas on a par with anything GM or Ford has to offer.

    These same cries were heard in the late ’70’s and early 80’s, as gas prices climbed from 30 cents/gal to over a dollar, but as prices leveled off, it was all forgotten and everyone rushed back in to the dealers to get the newest and biggest SUV or Van.

    As long as there is no clear public policy and regulation, free market forces will continue to drive cycles of panic and plenty. Alternative energy sources won’t be developed until the conventional sources are nearly exhausted. Then your Prius will be of no more use than your neighbor’s Hummer.

  • Hal Tse

    “it’s lame that government and not the free market would need to do that but here we are. In 2005 the auto-makers defeated a bill that would have raised fuel efficiencies”

    Really the same government that was “defeated” by the lobbying or bribes are the people that are going to enforce a free market? Somehow I doubt that. The same people that try to pick technological winners based on the kind of crop their constituents happen to have in surplus? Yeah that works. 25 billion would be one hell of an automotive X prize and I’d much rather see what research into this area brings us over buying four more months of the status quo.

  • johnrdupree

    “If you ask anyone outside of the US if they’d buy a GM or Chevrolet car, they probably laugh at you.”

    What about a Saab? Or an Opel? Those are both GM brands, as are Holden and Vauxhall. The problem isn’t with names or quality, it’s with management. They put all they revenue eggs in the SUV basket and had no backup plan in place for another energy spike. Toyota, Nissan, and Volkswagen also make giant gas hogs, but they also make things like the Yaris, the Versa, and the Rabbit. Toyota has a whole brand dedicated to small cars in Scion. The American companies don’t have enough models to compete, and the ones they do have are built down to a price. Just because it’s small and efficient doesn’t mean it has to be cheap. And management had no plan to quickly ramp up small car production if it was needed, which now it is, and they’re paying the price.

    Bankruptcy would be the best thing for GM. Instead of giving the managers who screwed this up the money, extend the unemployment benefits of the workers who will be put out until the rest of the auto industry, domestic and transplant, can pick up the slack. And since the unions had a big part to play in the lack of competitiveness, it’s time for them to step up and take care of the workers who will never again find jobs at that wage.

  • Phillip Torrone

    “25 billion would be one hell of an automotive X prize and I’d much rather see what research into this area brings us over buying four more months of the status quo.”

    @Hal – that’s an excellent idea.

  • Paul C.

    Isn’t that an oxymoron?

  • Mark H

    I am pleased to hear most of the comments that have been given thus far. The government should absolutely not bail out the big three. It is against nature, including human nature for that matter. If the U.S. wants to still stay at the forefront of technology and science as it has for the past century, its free markets are vital. If we take that away, we are removing the idea that free markets are no longer survival of the fittest. Without this concept, we can not expect to progress at the pace the world demands, and really human kind. I really liked what Jon K said about the matter. If the government felt the need to do anything, it would help out these developing technolgoies, though I personally don’t advocate this. However, I can’t be ignorant of the consequences and their bankruptcy will leave a lot unemployed. Though this is bad on the surface, new jobs should be created in better technologies. Again survival of the fittest.

    As a side note, I like many things about the president-elect Obama, and I have optimism for his presidency, though I think he would bailout the Big-Three, which dissapoints me. What is your opinion? Do you think he would bail them out?

  • Mr.PG

    If there is some part of the US economy that actually deserves to be “bailed out” (as in _morally_ deserves – regardless of the actual consequences for the economy) – it’s the car-making industry. For being actually able to think and count. And for being not afraid to go public with unpopular facts.

    Let’s consider the typical bullshit mentioned above: “That means for someone who drives less than 40 miles a day, Chevy Volt will use zero gasoline and produce zero emissions.”

    Cars do _not_ run on magic. They consume essentialy the same amount of energy to get from point A to point B. This amount can and should be computed starting from the point where you get your energy – and to the point where you spend it. For gas-powered cars it would be something like:
    pump the oil – refine it – deliver it to the car – add thermodynamic and mechanical losses. You can even find the exact amount of various pollutants on all the stages of this process if you really want to.

    And then you should go and compare it to “zero emissions” in the following chain:
    make the solar panels (very dirty process) – install them on huge areas in the sunny states – make the huge banks of accumulators for them on site and install them (and replace them often) – deliver the electric energy across the continent (with losses again) – make the li-ion batteries and recycle them when they die in a few short years (again, very, very dirty processes) – finally, add mechanical losses in the car. Once again, you can calculate the overall efficiency and total amount of pollutants in this chain.

    You’ll be surprised to find out that “clean” car is way dirtier than a traditional one. Sure, it shifts the dirt to some other place – hoping that someone else will take the blame. There are lies, big lies, and politics, unfortunately – and it’s just not feasible for a successful politician to voice unpopular (even true) opinions and bore the voters with dry numbers instead of juicy slogans…

    Oh, and, by the way, are you aware what the _MOST_ environmentally friendly car is? No, it’s not Prius or even Volt. It’s that good old 20-year-old junker law-makers are trying to remove from the streets. Why? Simply because it’s already here – you don’t have to _make_ it again – producing incredible amount of pollution while preparing the metals, paints, chemicals, etc. Sure, this car produces a bit more dirt per mile – but that’s still much less than it takes to recycle it and build the new one. Just think, please, before you make your decisions – you are reading MAKE, after all, so you should have the equipment to do that :-)

  • Almost_There

    I am ABSOLUTELY opposed to bailing them out. The Government has encouraged them to make more fuel efficient cars for the past 30 years or so. We, the tax payers, have already given them billions in the form of tax breaks and other incentives. They took the money, didn’t deliver, and now they want a bail out? NO F$&@%ING WAY!

  • Adam Smith

    BUY A BIKE

    Honetly, it’s healthier, it’s more fun, and often it’s faster.

  • Kevin K

    “I don’t know anyone who owns an american car.
I don’t know anyone who would consider buying one.
They make an inferior product and are suffering because of it”

    You must not know a lot of people..

    And yes, do away with the Auto Unions. The thing is, it wont happen in THIS Administration.

    That is what is hurting the US auto companies. Too many shitty workers that get to keep their jobs because of Union shenanigans.

  • Jason J. Gullickson

    Amen to the first poster, Jon K;

    Give the money to companies that have a hope of providing a product that the world wants and the U.S.A has a chance at regaining its position of industrial leadership.

    (yes I know Tesla’s are not built in the states, but I’m sure they would consider a change if given a few billion dollars under those conditions)

  • IHRS

    As a GM employee, it saddens me that there is so much animosity directed towards Detroit due to misinformation or people flat-out refusing to see the truth for what it is. So many people want to see the American auto companies burn for their past sins and their current perceived transgressions, most of which are simply false. It is human nature to want to find someone to blame, and the “Big 3″ have been the whipping boy of the media for way to long.

    The common perception is that the auto companies are old, antiquated, produce gas-guzzling inferior vehicles, and that their current business model, which harkens back to the 60’s, isn’t relevant any more. That statement couldn’t be farther from the truth. I can’t speak for Ford or Chrysler, but I’ve seen the changes in GM first-hand. Contrary to popular belief, GM hasn’t been stumbling along this past decade with its head in the sand. Instead, it’s a much leaner and more focused company than it was even three years ago. Despite becoming a much smaller company, it still continues to develop and launch new vehicles at an un-precedented pace.

    While I’m on the topic of products, how many of those who berate General Motors have been in one of their new products recently? As cliché as it may sound, I ask you as a matter of courtesy, to stop by your local Chevy or Cadillac dealer and take an unbiased look at the Malibu or CTS and honestly say that it is a step below the Toyota or Lexus equivalent. If you can, then I take no issue with your complaints. At least you’ve made the effort to see for yourself, instead of regurgitating slander that you heard third-hand.

    At the same time, I’m not going to try and lie to you, by saying that everyone of our current products is top-notch, because clearly there are a few hold-overs that were developed several years ago while GM was transitioning to its more competitive self. But as time goes on, those products will be phased out with new vehicles, such as the Malibu and CTS, that can truly stand toe-to-toe with the best in the world.

    GM doesn’t take a back seat to anyone when it comes to fuel economy either. Just because they don’t have a media darling like the Prius (yet), doesn’t mean that everything that leaves the factory swills petrol. The Cobalt gets 37 mpg on the highway, while the midsize sedans all get 30 mpg or above. Even the trucks and SUV’s that everyone loves to hate are class-leading when it comes time to fill up. GM is serious about fuel economy, and it drives numerous decisions that are made every day.

    Although this post is becoming rather verbose (sorry, it’s a necessity), I’d like to address the “bailout” that everyone is so vehemently against. You can call it a bailout if you’d like, but I’d argue that a more accurate term would be “bridge loans”. The common perception is that the government would just hand over the money and that the domestic auto companies would keep on doing the same old think that it’s been doing for the past 30 years. Instead the money would be given in the form or low interest loans designed to alleviate some of the immediate liquidity issues until the market can rebound.

    Most people don’t realize how precipitous the drop has been in the last few months. For the past several years, there have been anywhere between 16 and 17 million cars and trucks sold annually in the United States, that number includes GM, Toyota, everyone. The annualized rate for these past couple of months has been around 11 to 12 million units. A 30% drop in any industry is going to shake things up. This is especially true in a market where margins are already razor thin. Drops that large in revenue will shake the foundation of all but the strongest companies. Note that I said “strongest companies”, not just ” healthy companies”, business that we deem as merely healthy have still be affected.

    The timing of the financial crisis couldn’t have been worse either, as the domestic automakers have just finished spending untold sums of money over the past several years restructuring their businesses so that they can compete in the $4-gas, post-SUV age. Change doesn’t come cheap when you’re talking about companies the size of General Motors and Ford, and having lead-times of three or four years before a product can be taken from the drawing board to physical metal doesn’t help the situation either. Although the media would have you believe that it’s as simple as throwing a few switches and making a dozen mouse clicks.

    The short reason why you should support the government loans to the automakers is that there is nothing that they could have done to have prevented this. I’m sure that last comment will generate flames aplenty, but here me out. Here’s a brief synopsis of the past five years:

    1) Consumers wanted large SUV’s because it was the stylish thing to drive, gas was cheap, and the environment wasn’t at the forefront of our minds as it is today. All the automakers, domestic or otherwise, raced to meet this demand, as any sane business would do.

    2) Soon thereafter, as gas prices started to climb, plans for new, smaller fuel-efficient vehicles were drawn up. Remember, it takes several years to bring new products to market.

    3) Gas prices spiked much quicker than any reasonable person would have expected. Future plans were skewed even more toward smaller vehicles.

    4) The rising cost of gas, and it’s compounding affect on the price of goods, forces hundreds of thousands of families that were already living to close to the edge of their means to default on their home loans.

    5) The tidal wave of bad loans wipes out several banks, leading to a complete lock-down of the credit industry.

    6) With no credit available to buyers, new car purchases drop significantly, cutting off a significant chunk of revenue to the automakers.

    A couple years ago, the domestic auto companies had to make a choice, keep the status quo, or spend the money needed to shrink the company to better reflect its market share. They chose to spend the money (wouldn’t you do the same?), which left them in a vulnerable position. The financial collapse came and delivered them a near-knock-out blow.

    Without the mind-blowingly sharp drop in the economy, we wouldn’t be talking about a bailout, or the imminent loss of our countries manufacturing base. The purpose of these government loans is to help the auto companies weather the current financial storm, not prop them up for years to come. These companies have taken some tough medicine to transform themselves in to competitive businesses.

    It’s a shame that we could lose such an iconic industry that is deeply intertwined in the fabric of this country, just because of the libel and ill will from an ignorant public at large.

    If you made it this far, I thank you for hearing the unpopular side of the story, however true it may be.

  • Phillip Torrone

    @IHRS – thank you so much for this comment, very insightful and i really appreciate it as will others!

  • Me

    It’s time for the auto industry to consolidate – as happened in the airline and financial industries. Not enough cars to sell at this point.