American Carmakers in Crisis

I became really frustrated with the American car companies when shopping for my last car in 1995. I would have preferred an American car, but I wanted a fuel efficient hatchback and none of the big three made one. When I talked to sales people about what I wanted, I was told "no one wants a car like that". I bought a Honda and my husband bought a VW. My Civic SI still runs great at age 13, and when I replace it, I want something more efficient (my car gets 29/30 city 36 highway on average) and something equally well built and long lasting. That, sadly, seems to be a bar that Detroit won't or can't get over. It makes me sad.

Ford has been making a number of good small cars available in Europe for a long time, but the 'smart guys' in charge have chosen not to make these vehicles available in North America. Perhaps those days are over.

GM also sells Opel's in Europe that can compete, but they too have been asleep at the wheel. Saturn has recently begun the changeover to Opel USA, perhaps they can be saved.

Chrysler, on the other hand, sells no small fuel-efficient car and has no prospects that I am aware of. Their idea of a small car is the Caliper, which is about the size of a Toyota Matrix. Not small by any stretch of the imagination.

Can Detroit be saved? Only if they allow their European and Japanese divisions to save them.

It is definately a mess. I don't know about everyone else, but no one that I know has bought a brand new vehicle in years.

French automaker Peugeot, is doing great. If GM and Ford followed the example of Peugeot and made autos that were a bit smaller, lighter and had better gas milage like Peugeot they would probably do a bit better than they are currently doing.

I purchased my last American-made car (a 1974 Ford Mustang II) in 1974. The car was so unreliable (it broke down at least 4 times on interstate highways far from home before the car had 50,000 miles on it) and the service was so horrible that I decided never to own a Ford again. A second-hand Dodge was no better. And I never have found a GM car with comfortable seats.

I knew in 1974 that the American manufacturers made cars that I did not want to own. These idiots could not figure it out for 35 years! They all should be liquidated. Generations of management have been clueless.

A company that never has cared about its customers should not exist.

Folks:

Here is what I think to be the source of the economic crisis in America....all I ask is that you read this comment in it's entirety. I wrote it about 3 1/2 years ago and sent it to the media but it fell on deaf ears. The topic was raised durin the OnPoint discussions today (07/23) and so I thought to resubmit this text to see if people would be more receptive.

The most central and important issue of all, and to my mind the real essence of this problem…i.e. the role and impact of Wall Street on US corporations. Given the current situation, one may just be asking corporations to do the impossible… i.e. to buck the very ethic that is pervasive throughout the Wall Street community…the ethic that forces corporations to operate short-term to develop their product. Even mutual funds, which tend to prefer the longer-term, certainly have seen their bottom line adversely affected by this ethic. It's a question of balance, and Wall St. has upset that balance in their favor and to the detriment of US corporations and US jobs.

I think the reasons corporate CEOs in general receive such high salaries and perks is due in part to their responsibility which involves doing business the "Wall Street Way"...i.e. their job being to insure they direct their companies in specific ways sanctioned by the Wall Street ethic. It’s no easy task for companies to run uphill against this ethic either. When things get rough (as they usually do), global competition forces companies to cut corners even further in order to keep their business running profitable. As such, many take the path of least resistance and outsource jobs to reduce overhead costs. Actually, the outsourcing of jobs is just a symptom to a much deeper problem, but it's a superficial way US corporations try to deal with crises. Others behave more honorably, re-engineer and keep their quality, but usually drop short-term in stock value. A few others still, fall prey altogether and cross the legal line in their business activities and we all know who they are....corporations like Worldcom, Enron, and Tyco.

I think that the ethics of the Wall Street community is undermining the American economy and American corporations. This ethic dictates corporate policy by enforcing issuance of quarterly guidance that rewards or punishes stockholders on a short-term basis. In fact, the shorter-the-term the better because it means more stock market action and more churn in which more trades amount to more profits for more people in the Wall Street investment community...i.e. bankers and brokers. In essence, it’s the Wall Street middlemen who collect money going in both directions but who do not have any personal stake in the corporations they evaluate. Here's how this ethic plays out...it’s the corporate CEO/BOD (Chief Executive Officer/Board of Directors) that are the logical link between the corporate world and Wall Street. Thus, it’s the function of these corporate leadership teams to internalize the issuance of short-term quarterly guidance into corporate policy guidelines for wage and bonus rewards that reflect and work in tandem with the Wall St. ethic…policy guidelines that filter all the way down from the CEO to the worker on the assembly line or in the shipping department. Thus, it’s the CEO or CFO or CTO who becomes the “bagman” for Wall St often without even being aware of the consequences. It’s then the job of the BOD to insure this Wall St. ethic is properly implemented by the corporate leadership team and the process is often labeled as “protecting the shareholder”. Once this ethic is in place Wall St. can then control the strings of corporate performance, and guess which type of performance garners the most reward or receives the highest praise or bonus within the company? Of course it’s the performance that meets or exceeds corporate short-term objectives…these short-term objectives that usually involve a quick–fix or a recall of the problem product rather than the longer-term re-engineering of the product solution….that receive the highest rewards among the corporate rank and file. This ethic ultimately results in a product of poorer quality, a product that needs to be sold along with other incentives like discounts or rebates or low-interest financing to motivate the public into purchase…there are dozens of such examples....the auto industry with it's ongoing recalls and rebates is a perfect example.

Unfortunately, there is no way a worker on the assembly line, even as he sees the adverse effect of this ethic on the product he’s making, is able to refuse working under this ethic if his family and livelihood are so dependent upon this job.

Thus, this Wall Street ethic removes the worker’s pride and as such, the product value that would have made his company far more competitive. Thus, the situation continues to deteriorate because this faulty reward mechanism emanates from the top on down. Even though a lower quality/cheaper product may lead to increased sales revenue for the near-term quarters, it eventually leads to less market share over time. Then once a critical mass is achieved, it becomes like a snowball going downhill and the corporate deterioration escalates by orders of magnitude. Lower quality products leading to lower market share leading to lower revenue and profits, and in a last-ditch effort to hold the line on spending, leading to US jobs being outsourced in yet another short-term effort to cut operating expenses even further. In many cases, the CEO gets a bonus reward or salary increase for cost reduction as the workers on the assembly line or shipping department loose their jobs. In some cases when corporate deterioration becomes more pervasive even outsourcing doesn’t help...then layoffs, plant-closings, and bankruptcy are the inevitable result. Even in this situation, CEOs still emerge with their perks and benefits in tact.

By arbitrarily demanding that guidance figures and earnings escalate on a quarterly basis, the sole objective of Wall Street has been to improve their own bottom line, and in the process ignore the negative impact of this ethic on the competitive quality of American-made products. I’m saying that the entire conglomerate of Wall Street middlemen to include brokers, investment bankers, analysts, and financial news organizations are each responsible for implementing a portion of this reward mechanism that eventually provides the context in which American business develops a less competitive, lower quality, short-term for profit, quick-fix product approach. If American products can no longer compete on price alone in these competitive global markets, why doesn’t Wall Street help America compete on value…why doesn’t Wall Street help America make the very best product at the very best price….why is Wall Street being allowed to serve only itself ? Could it it be "greed" at any cost ?

Overall, it’s the ethics of the Wall Street community that is the real culprit behind the destruction of American jobs. This problem and its subsequent damage are woven deep into the fabric of American working life. It has turned the once inherent quality of American-made products upside down and into just the opposite of what they could and should be. It now plays out that American business is more likely to be rewarded by Wall Street for a short-term approach to implement the quick fix for profit but penalized for choosing the longer-term approach to implement a quality product.

The reward mechanism set in place and endorsed by Wall Street essentially penalizes American business for the time and research necessary (which lower profits for the short-term) to make a better product that could sustain or even grow the employment base. In the end, if quarterly guidance figures demanded by Wall Street analysts were to be extended to annual guidance figures, then companies would have some breathing room and be better able to build quality into their products instead of being forced to recall their products due to the lack of it. In fact, Wall Street by the very nature of its ethic, has insured that American business is becoming less and less able to choose the path leading every worker to the American dream, but rather a path that has undermined the essential values where the pride of “Made in America” once meant quality. There’s a big money game going on right on Wall Street with the sacrificial lambs being American companies, American workers and American jobs. In the end, it’s really this Wall Street ethic and those responsible for it that needs to be outsourced !

Thomas Saverio
Hamden, CT
07/23/08

I say we have a national strike. Everyone stay home for a day or two.
We demand
1: CEO's and wall street stop selling us down the pike.
2: That we have fair work week not 60 to 70 hours and everyone makes a living wage, has the right to sick leave and that families come first not your f'n bottom line .
3: BRING BACK USURY LAWS! Any bank or credit card company that does not like, to bad move to China or some other country and take you family with you. We will take 50% of your assets.
4: We demand a good national health service.
5: We demand that CEOs' not make more than 50 to 75 times the salary of the lowest paid worker.
6: We demand that more money be spent on educating our children.
7: We demand that our infrastructure is fixed an well maintained.

I could go on,
Oh one more thing WE DEMAND THAT CONGRESS STEP UP TO THE PLATE AND ACT LIKE THE HAVE SOME BACKBONE!

Too little too late....

I forgot we talking about the American car industry.
Sad to say the executives are at fault here for not having a diverse product.
It's boggles the mind how Ford in Europe can be so successful but back here they fail.
GM is doing great in China, what gives?

I think in part we the American public are a fault. Almost all my neighbors drive suv's or large pick up trucks. Do they need them, no.
I have always hated these machines and to me it seems that most Americans have become kind of selfish in this regard with the type of cars and recreational toys they have.
I read somewhere that the average middle class family has 3 to 4 cars and in some cases RV's and those horrid off road ATV's not to mention the skidoos.

Do we really need all these gas powered gadgets to define what fun is?