http://www.autoextremist.com/current/



November 12, 2008



Tick, tick, tick...


By Peter M. De Lorenzo


Detroit. So it has come down to this for General Motors: 100 years of living, breathing American industrial and social history is on the precipice of total disaster, with the once-glittering corporate icon facing certain collapse if some sort of government financial aid package is not put together in the next 60 days.

Think about that for a moment.

The company that basically powered this nation through a century of progress and helped this country muster the strength to fight world wars - while contributing immeasurably to the fabric of America and the development of our vast middle class - is on the verge of filing bankruptcy.

Unbeknownst to the legions of people out there in “fractured” America, the ones who fill the Internet with bile and who project such a level of viciousness and unbridled glee at the thought of the collapse of our domestic automobile industry as if it were – amazingly enough - some warped opportunity for celebration, there are countless towns, big and small, scattered all across this nation that have grown up with GM as their main employer and the main source of income for thousands of American families.

I am absolutely convinced that the people who hate “Detroit” and want it to implode have not even the faintest of clues as to what it really means if it were allowed to happen. To those instant experts out there who are reveling at the thought of a major part of our country’s industrial fabric collapsing, I say be careful what you wish for - because if GM is allowed to fail, it will take the entire domestic auto industry down with it - meaning thousands of suppliers and dealers in towns making up a cross-section of America will go under too.

For the record, there are around14,000 domestic-oriented dealers in the U.S. employing approximately 740,000 people with a payroll of around $35 billion – that’s billion with a “B.” But that’s just the dealer side of the equation. When you add in the suppliers and all of the associated businesses that either directly or indirectly depend on Detroit for their livelihoods, we’re talking almost three million people who would be out of work in a matter of just a few months, adding up to a $150 billion loss in personal income.

Let’s take California, for instance. Judging by our reader mail, there seems to be a large contingent of people out there who adamantly believe that “Detroit deserves to die” etc., etc., and that whatever happens “won’t affect me.” But GM and the domestic auto industry’s collapse will most definitely affect Californians as well. NUMMI, a joint operation between GM and Toyota (the Toyota Corolla, Toyota Tacoma and Pontiac Vibe are built there) and the only San Francisco Bay Area car factory, is already reducing shifts and may even shut down its Tacoma pickup truck line due to the burgeoning economic slowdown. One of our readers who understands the ramifications of a domestic industry collapse passed this interesting local news report along about NUMMI, which said, "There are tens of thousands of additional jobs on the line besides the 5,000 at NUMMI. There are over 1,000 suppliers in California that provide parts. They in turn employ 50,000 people."

That’s just one factory. Now multiply that by the staggering totals involved if GM - which has 22 stamping plants and 26 powertrain plants in North America on top of its assembly facilities - and the rest of the domestic automobile industry is allowed to fail. The tentacles of this kind of cataclysmic disaster would spread throughout the nation like a virus that could not be contained.

I really don’t know why it’s so easy for people out there to dismiss the collapse of the domestic automobile industry as being some minor event that won’t affect them in the least, because each person who is part of that figure of three million represents a real family and real human story, all across this nation. It’s the mom and pop diners, stores and peripheral neighborhood businesses that depend on the workers who toil at these factories and plants for their livelihoods too. There are towns all across America that would simply dry up and blow away if the local GM or supplier plant shut down. That’s not an exaggeration, that’s a simple fact.

I have been vilified of late by numerous critics for shifting my commentary to a more political tone over this election year, but I don’t offer any apologies. This country is not only in the throes of a financial crisis, it’s in the throes of a fundamental identity crisis as well. We as a nation have been lulled into thinking that things will work out and that any unpleasantness headed our way will be mere speed bumps on our journey to becoming a state of perpetual consumer bliss.

Well, it just doesn’t work that way, folks.

We live in a global economy that isn’t big on history or what we as a nation once did or stood for. We have to compete, or else we will arrive at a point when our national future will transition from being one of destiny to one being dictated to us by a unsavory set of circumstances and interests not in line in the least with our hopes, our dreams or our thinking.

In order to compete in this global economy we have to get smarter in our schools and with our educational policies. A high school graduation rate of 50-60 percent should be anathema in our inner cities instead of too often the rule. Remedial classes for kids entering college (who are not able to handle freshman classes) should become a thing of the past. And our teachers need to be compensated realistically and properly so more of our brightest people can sign up to help shape our kids’ futures.

Even though we as a nation don’t seem to have the stomach for hard work and sacrifice any longer - hell, I’m not sure those words and their meanings are even in the lexicon of vast swaths of our population - we must get tougher in the midst of this global economy, and we have to steel ourselves for the kind of battles we’ll face. And that means shoring up our manufacturing and supporting our homegrown industries that are so intertwined with communities all across this still great nation. It also means that President elect Obama will not only be President of the United States, he will have to be CEO of America, Inc. too.

And America Inc. not only needs to be rebuilt, it needs to be fortified with new determination because there are far too many talented and creative people in this nation who can do extraordinary things and we need to make the idea – the idea that we can innovate, create, build and manufacture things that are the envy of the world - cool again, and take pride in doing so as well.

In short, this nation needs a wake-up call.

Anyone who thinks this country will not be thrown into a full-blown depression if the domestic automobile industry is allowed to fail is simply kidding themselves. We are facing a perfect storm of events that could spell disaster if we as a nation don’t act and act fast. And it would take years for this country to recover too.

As I’ve said repeatedly the time for all of the idyllic, “let the free market run its course” hand-wringing is over. It’s far too late for that. This country’s leadership needs to get these loans to GM and the rest of the domestic automobile industry in the next 60 days, or life as we’ve come to know it in this country – and I mean every part of this country – not just here in the Motor City, will be severely and unequivocally altered.

That tick, tick, tick you hear?

It's the time running out on the future of America.

Let’s hope that what needs to get done will in fact get done, before it's too late.

Thanks for listening.

 

And while we're on a Peter Delorenzo kick, this too:

Cerberus. Lost in the din of bailout loans and imminent bankruptcies, Cerberus is escaping the level of ire from the mainstream media that it so richly deserves. These glorified carpetbaggers have made things worse with their obstinate stewardship of GMAC and the devastating effect it has had on GM's ability to do business. At this point it would be in everyone's best interest if these guys were summarily drummed out of the auto biz and Chrysler's assets were distributed to people who actually know what the f--- they're doing.

 

Excellent article, and so very true. I've talked to too many dumb****s that have no ****ing clue the repercussions of the Auto Industry failing. Most think it'll just pass over and things will be back to normal the next year. Most definitely NOT.

Without MFG jobs, you are a country of nothing.

 

On of my favorite quotes comes to mind. "A country that does not produce its own goods is destined to be ruled by those that do."

 

There seems to be alack of real knowledge in the actions that the domestic auto industry has already tried to right this ship...i.e. the shifting of much of the legacy costs to the union (who'll pay these costs if the people who hate Detroit and want the Unions destroyed???)....Also, the buy-outs and early retirement packages to further reduce their workforces and the hourly rates of any new hires...etc.................

Everyone also conveniently forgets the efforts of Detroit during the World Wars......and the actions BEGGED of GM after 9/11 to get the econmy back moving again....now that GM needs help, it's " s c r e w you guys ".....

Honestly, I don't even want to imagine the disaster we'll NOW face if Detroit is thrown to the curb.......

 

These are really scary times and it boggles my mind the apathy and ignorance many people from my generation (I'm 25) show toward the current crisis. Everyone thinks everything will just magically get better.

I'm looking for a new job right now in the same city as my girlfriend so we can get engaged. I’ve been having a hard time finding a job in the past few months and my roommates comment last night was “ Oh don’t worry man, I’m sure the economy will clear up in a few weeks.”

Sad times my friends….

 

GM is just a company like any other. When companies can not compete or make money then they go out of business. The failure can be government induced, externally induced or internal failures of management. Regardless, there are actual reasons why some companies profit and others do not.

If you really want to help GM (and everyone connected in the chain) then discover the route of why GM is not making money.

Throwing money at a fundementally flawed business is simply waisting money regardless of the good intentions. The precedent of upholding bad decisions is no way to remain a leader in the world.

lastly, an important part of capitalism is failure. Sadly everyone today wants to enjoy the rewards of risk without the the fear of losses.

 

i'll be honest GM does deserve to die. It's a company and thats it. It's not someones dad, or some local hero.

Years of bad choices, management, unions, etc have doomed this company to this set of circumstance. It needs to be fixed. The fix is bankruptcy. No, the fix is not giving billions in tax payers money so we can avoid the ill consequences.

Bring the consequences. Lets get this over with. Dancing around the situation won't fix anything. The business model is all wrong. The Big three can't compete, they can't make profit.

It's a very bad and sad situation to be in. I feel bad for the employees, the families, etc. This is a job though. This company has no responsibility to the country or world but rather to itself. If it doesn't take care of itself nothing and i mean nothing else matters.

 

hmm ....Sorry. But that connection is as real the fingers you typed the original with. Lorenzo's absolutely right.

 

We really are still just at the tip of the iceberg, 2009 is going to be a hard year.

 

Adam, I have not met many people who are so oblivious to the situation as your post seems to indicate.

I already answered your almost verbatium post on another thread, so I won't spend too much time here other than to say that the important thing right now is to keep the auto industry going UNTIL we fix what's wrong.

You can find volumes of my little rants about GM over the past month. However, I do realize that regardless as to what GM has done in the past, it simply can not be allowed to fail. It would wipe out the rest of the industry.

GM needs to be funded by... yes... the US government... and there needs to be the stipulation that heads roll and investigations done. I am begining to believe (and I'll be the 1st to say this on this site) there has been some type of fraud involved with GM management, especially the finance side. GM can also finally lose some of it's divisions.

However, simply letting GM crash isn't an option.

 

Your solution does not address why GM is unable to make money; it simply subsidizes failure. Digging a deeper hole brings you no closer to the surface.

 

I fundamentally agree with what you say. GM CANNOT simply be given a bailout in order to continue another 12 months of "cash burn". GM has lots of smart people, but it's organization and leadership culture seem to prevent it from doing the things that need doing in a timely matter.

Frankly, I just don't know how you change that. GM needs to find some stud somewhere and say - "you're in charge". Actually the GM BoD would need to do that, but that would usurp their power, so you can forget that.

 

What makes you say that? (I'm genuinely curious)

 

fraud would explain some of why the ship hasnt been righted. Fraud may also explain why it's hemoraging money as fast as it is.

I'd hope your wrong, but at this point, with AIG getting bailed out, caught 400,000 blowing at a spa, bailed out again, caught 80,000 at a golf resort, and then bailed out again, im sure fraud is in there, as it is in AIG.

Please, do however, explain your thoughts on this.. as it has picked my curiosity as well.