# The car industry is vital, but . . .



## jackmccullough (May 10, 2006)

I've been watching the debate over what to do with the car industry, and I'm not entirely sure that we should just tell them to take a hike. After all, we really need the industry. In addition, it's not all their fault. True, the have fought more responsible environmental and safety regulations for over forty years, but they were profitable a year or so ago. I don't think it's entirely fair to have expected them to turn over their entire operations, especially when they were making a profit of $5-10,000 per unit on the SUV's they were selling.

Still, Jesus H. Christ!

(CNN) -- Some lawmakers lashed out at the CEOs of the Big Three auto companies Wednesday for flying private jets to Washington to request taxpayer bailout money.
Chrysler CEO Robert Nardelli, left, and Ford CEO Alan Mulally testify on Capitol Hill on Wednesday.

"There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses," Rep. Gary Ackerman, D-New York, told the chief executive officers of Ford, Chrysler and General Motors at a hearing of the House Financial Services Committee.

https://www.cnn.com/2008/US/11/19/autos.ceo.jets/index.html

How stupid do they have to be to do this? Does it make you hand over any of your money?


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## PedanticTurkey (Jan 26, 2008)

They make cars, but they're losing $1500 per car they sell!

They are bankrupt. They need to be reorganized, not bailed out.


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## TMMKC (Aug 2, 2007)

I don't think a government bailout of the auto companies is really going to do much good except create some VERY temporary optimism on Wall Street. These companies lack vision and common sense, and are saddled with massive obligations to legacy and pension plans. Twenty-five billion isn't going to cure deep-seeded problems. I hate to say it but I don't think they have a snowball's chance in hell of digging themselves out of the hole they're in. 

If GM, Ford and Chrysler were serious about turning themselves around, they would have emulated the management and manufacturing practices of Toyota and Honda many years ago. I have abosolutely no confidence in American autos...which is why I've owned Hondas and Acuras for many years. It's all very sad.


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## pt4u67 (Apr 27, 2006)

What states need to do is to get rid of these pro-union laws and become right to work states. That way labor can compete fairly for these available jobs. 

That being said, there are many retirees of the Big 3 who depend on their pension and healthcare benefits. These companies need major restructuring to become competitive.


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## TheWardrobeGirl (Mar 24, 2008)

They need to reorganize under Chapter 11 - not get bailed out! I have been watching the news on this and it is absolutely infuriating!


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## jbmcb (Sep 7, 2005)

A few notes - 

1. They aren't asking for a bailout, they're asking for loans that they can't get because the commercial paper and bond markets are frozen.

2. The government bailed out Chrysler during the recession of the late 70's and early 80's. Chrysler paid them back within a few years, with interest. The government ended up making money on the deal.

3. In the last five years, the companies have addressed most of their problems. Quality is *way* up (initial quality is superior to the German companies, and almost on par with the Japanese), costs are down, they successfully negotiated new contracts with the UAW that shifts most of the health care costs to them, they are introducing a lot of new fuel efficient vehicles at good price points. They still have a ways to go, but they're getting there.

4. Chapter 11 would probably kill them. Who would buy a car from a bankrupt company?

5. Regarding the private planes. How do you think the execs from AIG got to Washington? Southwest? I'm not saying it's right, but every bankrupt bank and investment firm (who were directly involved in creating the current mess) flies their execs to Washington in a private plane. It's not really news when an exec takes a private plane to Washington. It's incredibly stupid, but not really news.

6. The domestic manufacturers still account for 45% of car sales in the US. They are all making money in most of their foreign markets. They are still viable companies, they just need a bit more time to fix themselves.


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## Liberty Ship (Jan 26, 2006)

I do think that Chrysler was able to pay the money back because they got a collateral contract to develop and produce the M1 Tank.

The steel industry was critical to the country, too. But it was murdered, too. The automotive industry has always had to fight on two fronts -- labor and Washington. The tipping point that led to today's death rattle was the Carter administration and GM's Roger Smith's collaboration with it. Jimmy Carter was anti-industry and Smith sucked up to him, using the Carter administration and the fact that he had that stupid Chevette ready to import from Brazil to drive American Motors into dissolution and Chrysler and Ford to the brink. For 20 years after Carter, Detroit turned out government mandated junk by overpaid workers. No way to compete with the Japanese.

We're not really talking about an automotive bailout so much as a union bailout. I say let them crash and bust the union. The union never hesitated to bust the industry. Endgame.


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## Phinn (Apr 18, 2006)

> In the last five years, the companies have addressed most of their problems. Quality is *way* up (initial quality is superior to the German companies, and almost on par with the Japanese), costs are down


Interpretations and sales pitches mean nothing in the face of the stone cold fact that these companies are losing money.

That means they are not making products that are sufficiently appealing to consumers, and/or they are spending too much on overhead.

This is not a matter of interpretation, or public relations. These are facts. This is economic reality.

If you are so sure that they will turn things around, with enough time, then give them _your_ money.

I seem to remember a conversation with you in July when I mentioned that GM's failure was imminent, and you suggested I was wrong. Now here they are, begging at the door, doing a better job at selling this bailout plan than they are selling cars.


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## laufer (Feb 20, 2008)

jbmcb said:


> A few notes -
> 
> 1. They aren't asking for a bailout, they're asking for loans that they can't get because the commercial paper and bond markets are frozen.
> 
> ...


I see your point. Can I get government to provide a couple of billions to Sirius. I have grown fond of that thing (XM actually but it is the same thing now). I would be deeply depressed if satellite radio fails and I had to revert to FM where I would have to suffer daily torture of endless commercials and DJs who's vocabulary consist of the same 20 words repeated mindlessly all day long.

While we at it I suggest we preemptively lend some money to AE and ALDEN. Seriously imagine if they are to fail many forum members would rather go barefoot than buy anything from ALDO. 

Yeah let's provide Big 3 with the loan but fire all management and dissolve the UAW and then we can move forward. To quote Albert Einstein doing the same thing but expecting a different result is definition of insanity. The management of big 3 and UAW brought us here where we are today. It is naive to think the same people will get us out.

By the way I have yet to find an American who would choose some of Big 3 midsize sedans over Accord or Camry. Those who buy Tauruses, Impalas etc have to be bribed with a couple of thousands $$$$ in rebates.


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## TMMKC (Aug 2, 2007)

laufer said:


> The management of big 3 and UAW brought us here where we are today. It is naive to think the same people will get us out.


The overall stupidity of the management of the Big 3 is well documented and known...but it seems to me the UAW doesn't get trated as harshly (from the media anyway) for their part in this mess. I for one am sick and tired of the UAW whining about all the concessions they've given the Big 3 over the years. It's a whole new ballgame and they better get used to it.


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## agnash (Jul 24, 2006)

Phinn said:


> doing a better job at selling this bailout plan than they are selling cars.


That was funny. 
GM lost money in 2005, 2006, and 2007. I don't believe it was the financial crisis that was doing them in back then. They've been dying for years, and now it is time to do the humane thing and put the company out of its misery.


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## bus station number 6 (Jul 25, 2008)

I lurk on here regularly but have yet to post, so I thought I'd start here. I think one of the many problems that the big 3 have is simply a massive top heavy bureaucracy and an institutional inflexibility that combines to handcuff them to prevent a rapid response to changes in consumer demand. This is the same problem that they faced in the 70's with the oil embargo. They simply were unwilling and or unable to respond to a fundamental shift in consumer demands. Entire factories dedicated to producing one car model doesn't exactly lend itself to being flexible. The Japanese manufacturers figured this out decades ago and it is one important reason why they consistently outperform the big 3. That being said, bankruptcy can be a good thing. It would give them protections while they reorganize and restructure, but only if the changes are fundamental in nature and what emerges is a streamlined and efficient American auto industry. -mike


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## PedanticTurkey (Jan 26, 2008)

It doesn't need to be put out of its misery; it needs to be reorganized. A judge needs to sit down and figure out what the auto companies _can_ pay on their debts, obligations, and continuing expenses. Those costs need to be reduced accordingly, and the people who are owed money are just going to have to deal with it.

The big three can't pay the ridiculous union contracts they agreed to, so the unions and the democrats want the taxpayers to step up and make sure the unions get paid. That's what this is all about. Apparently our paying dramatically more for cars than they should cost for so many years wasn't enough.


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## MarkfromMD (Nov 5, 2008)

Great post jbmcb, 

The automakers need a bridge loan. They have been trying to change the way they do business recently but they are behind the other manufacturers in terms of adapting and moving to more efficient vehicles. 

Everyone who is crying to let the automakers fail now will be crying even more when the government listens to you. 3 Million jobs lost? All the tax revenue that the automakers produce? 

We have already outsourced most of our other jobs and now we are going to let our auto industry die? 

A depression will be a sure thing if the loan is not given and the automakers go into bankruptcy. If even just one of them goes down it will pull the whole industry down. The parts suppliers are having liquidity problems also and will start dropping like flies if they don't get their receivables. 

Chrysler should be taken over by GM and GM and Ford should be given loans to allow them more time to restructure. Something also needs to be done about the union wages.


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## TheWardrobeGirl (Mar 24, 2008)

I thought it was interesting when asked if the 3 executives would be willing to do what Iacocca did and take a $1 salary until the companies are profitable...the only one that said "Yes" WITHOUT hesitation was Chrysler...the other 2 sat there like humps, avoided the question, then turned the question to general executive compensation and said they needed to be competitive to retain or incent good people...GIVE ME A BREAK! First, these guys should be ousted - they have MORE than enough money to live off of for the rest of their lives...second, these fancy executive packages should be eliminated and they should get salaries (granted bigger salaries) than the rest of the employees - there are PLENTY of intelligent people that could fill those roles (the people in them now certainly haven't proven exceptional capabilities, intelligence, etc)...third - I thought there was 25 Billion dollars already allocated for the automotive industry - just lift the CAFE regulations and release that money to tide them over...there is NO need to be giving any more at this time...


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## Phinn (Apr 18, 2006)

> I thought it was interesting when asked if the 3 executives would be willing to do what Iacocca did and take a $1 salary until the companies are profitable...the only one that said "Yes" WITHOUT hesitation was Chrysler...the other 2 sat there like humps, avoided the question, then turned the question to general executive compensation and said they needed to be competitive to retain or incent good people...GIVE ME A BREAK!


Every member of the government should forego his or her salary until such time as it becomes profitable.

Since the government produces nothing of value that could compete in a free market, this reduction in salary will be more or less permanent.


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## agnash (Jul 24, 2006)

MarkfromMD said:


> We have already outsourced most of our other jobs and now we are going to let our auto industry die?


I don't believe we are letting the entire industry die, just the parts of the industry that are no longer capable of competing on their own. According to Money magazine, 80% of the cars sold by Honda are manufactured in the U.S. using 90% U.S. made parts. I would certainly consider that part of the U.S. auto industry, and Honda isn't going to Washington begging for a welfare. Since 1993, employment in automotive assembly has been fairly stable in the U.S. as a whole, but it has moved away from the areas where the labor market has become uncompetitive. For the last three years, it has cost GM more money to build and sell vehicles than they earn from sales prices. A government loan isn't going to change their cost structure, but reorganization in bankruptcy might get them out of some of their ridiculous labor contracts.


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## Xhine23 (Jan 17, 2008)

TWG, I think the 25bil. was allocated for the company to retool their plants in order to make fuel efficient cars.
I never like american cars for one reason, they aren't durable/dependable. 
I think these big 3 need to reduce the number of new models that they put out every year. Its nonsense to have same vehicle with different badges because you cant target your market, they are jumping all over the places trying to attract customers.
Also, I wouldnt like to see them gone completely because because of security reasons. I dont think we want the Japanese to make our tanks and other military vehicles.


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## jbmcb (Sep 7, 2005)

Xhine23 said:


> I never like american cars for one reason, they aren't durable/dependable.


That may have been true 20 years ago, not true anymore.

https://articles.moneycentral.msn.com/SavingandDebt/SaveonaCar/MostDependableCar.aspx


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## laufer (Feb 20, 2008)

jbmcb said:


> That may have been true 20 years ago, not true anymore.
> 
> https://articles.moneycentral.msn.com/SavingandDebt/SaveonaCar/MostDependableCar.aspx


You are probably right but in auto industry it takes decades to change consumer perception.


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## Kav (Jun 19, 2005)

I don't know if Tucker's soul is laughing or crying.


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## agnash (Jul 24, 2006)

laufer said:


> You are probably right but in auto industry it takes decades to change consumer perception.


Agreed, it only takes buying one lemon from a manufacturer to taint that brand in a consumers mind. I know Volkswagens are generally highly regarded, but I owned one that spent most of its life with me in the shop. I swore never again, and have kept that promise. How many people are alive today who bought substandard vehicles from the Big Three, and are still holding those vehicles against them? How much advertising do you have to do to overcome personal experience?

For the record, my last three vehicles have all been Ford's, and all of them have been great vehicles, but I wasn't buying cars in the 70s or 80s.


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## TheWardrobeGirl (Mar 24, 2008)

jbmcb said:


> A few notes -
> 
> 4. Chapter 11 would probably kill them. Who would buy a car from a bankrupt company?


Chapter 11 will kill the unions - the unions disolving is pretty much the only thing that can keep these companies afloat...the unions are dragging them down...while they are scheduled to assume the healthcare costs in 2010 (I think), I would bet money when that date approaches there will be a strike and that will be back on the table for negotiation (ESPECIALLY if secret ballot is eliminated...another DISASTER in the making)...unless drastic measures are taken, the inevitable will still happen it is just a matter of time...also, if more money is given from Congress, they are going to want their 2 cents about what kinds of cars are made, etc...we will go from these companies being run by idiots, to morons telling the idiots how to run the companies...

If they come up with a prepackaged deal, the government can back it and protect the warranties, etc so no, I don't think it will affect the consumer's willingness to buy (keep in mind, the average American doesn't read the paper, and doesn't have a clue what is going on in the world, I doubt they will even understand what Chapter 11 is)...if they go to Chapter 7 (which if they continue along the same path and change nothing, inevitably WILL happen), THEN there will be problems...



Xhine23 said:


> TWG, I think the 25bil. was allocated for the company to retool their plants in order to make fuel efficient cars.
> .


That is what it is for, but they are already doing that and in order to stay competitive will need to continue to do that...whether that money is used now or in a few months is irrelevant...use it now


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## a4audi08 (Apr 27, 2007)

even though i have read through the pro-bailout arguments and have found them persuasive, i have a nagging feeling that the $25B will be burned VERY quickly, and we may find ourselves in the same situation 6-8 months from now. every economic indicator and analysts are forecasting a serious recession for most of 2009. even if gm/ford/chrysler are producing decent cars, people are not going to be able to afford them, either b/c they no longer have a job or b/c they can't get the financing. looks like we're just kicking the can further down the road.


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## TBOWES (Nov 29, 2007)

Barney Franks called imposing Chapter 11 "union busting". The unions are at the heart of the problem. When everything changes over and the Democrats have even greater numbers, I am afraid individuals like Franks will write them a blank check for anything they want. The only way to have true restructuring is through Chapter 11 but I doubt it will happen.


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## TheWardrobeGirl (Mar 24, 2008)

TBOWES said:


> Barney Franks called imposing Chapter 11 "union busting". The unions are at the heart of the problem. When everything changes over and the Democrats have even greater numbers, I am afraid individuals like Franks will write them a blank check for anything they want. The only way to have true restructuring is through Chapter 11 but I doubt it will happen.


+1...that was what I was trying to say, but I took the scenic route saying it


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## Stringfellow (Jun 19, 2008)

All these fighting words about unions and no recognition that the manufacturers agreed to the union demands. A contract is a two way street. Rather than unions being at the heart of the problem, maybe the manufacturers who agree to union demands are at the heart of the problem.


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## TheWardrobeGirl (Mar 24, 2008)

Stringfellow said:


> All these fighting words about unions and no recognition that the manufacturers agreed to the union demands. A contract is a two way street. Rather than unions being at the heart of the problem, maybe the manufacturers who agree to union demands are at the heart of the problem.


The manufacturers don't really have a choice...the unions get them by the short hairs most of the time with their threats to strike - plus, do away with secret ballot which will probably happen and manufacturers have no chance.


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## scwtlover (Nov 12, 2008)

TBOWES said:


> Barney Franks called imposing Chapter 11 "union busting". The unions are at the heart of the problem. When everything changes over and the Democrats have even greater numbers, I am afraid individuals like Franks will write them a blank check for anything they want. The only way to have true restructuring is through Chapter 11 but I doubt it will happen.


His last name is Frank, Barney Frank.


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## brokencycle (Jan 11, 2008)

TMMKC said:


> The overall stupidity of the management of the Big 3 is well documented and known...but it seems to me the UAW doesn't get trated as harshly (from the media anyway) for their part in this mess. I for one am sick and tired of the UAW whining about all the concessions they've given the Big 3 over the years. It's a whole new ballgame and they better get used to it.


My stepdad was a union (not UAW but IAW, I believe) welder at Chrysler (the Kenosha plant where they make the Jeep engines) until he retired this year.

Anyway, I do believe the UAW is partially to blame.

Employees at the Japanese manufacturer plants here in the US get comparable pay and benefits and the Japanese companies pay significantly less for it because they're not paying to fight with the unions.


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## Stringfellow (Jun 19, 2008)

TheWardrobeGirl said:


> The manufacturers don't really have a choice...the unions get them by the short hairs most of the time with their threats to strike - plus, do away with secret ballot which will probably happen and manufacturers have no chance.


The manufacturers did have a choice. When the unions demanded more than the manufacturers could pay the manufacturers could have let the unions strike. The manufacturers took the quick and easy way out and caved to union demands and now the manufacturers are paying the price. It is a two way street.

If the big three can't make a competitive product at a competitive price, including union wages, the big three are inefficient and need to go. The managers do a poor job running the company - the employees do a fine job working.


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## Phinn (Apr 18, 2006)

Stringfellow said:


> The manufacturers did have a choice. When the unions demanded more than the manufacturers could pay the manufacturers could have let the unions strike. The manufacturers took the quick and easy way out and caved to union demands and now the manufacturers are paying the price. It is a two way street.


This kind of negotiation is rigged from the get-go because of government-sponsored, protectionist, anti-freedom, union legislation that forcibly prevents manufacturers from being able to make voluntary employment agreements with willing potential employees.

Whenever there is a strike, you find there are willing employers and willing job applicants, but unions stick themselves in the middle of this relationship and forcibly prevent these two parties from being able to work together.

Unions call these people "scabs."

Like all cartels, unions deal with scabs by force. Once upon a time, enforcement of the cartel was implemented by various forms of thug violence, intimidation, harassment and terroristic threats. Now the government takes care of the thuggery for them and calls it "law."


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## Kingsfield (Nov 15, 2006)

*A Bridge Loan? U.S. Should Guide G.M. in a Chapter 11, By Andew Ross Sorking* https://www.nytimes.com/2008/11/18/business/economy/18sorkin.html?_r=1&oref=slogin&pagewanted=print

*Let Detroit Go Bankrupt, By Mitt Romney*
https://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&hp=&pagewanted=print&oref=slogin

*Consumer Reports on Car Reliability* (More In the December 2008 issue*)*
https://www.consumerreports.org/cro...reliability-findings/reliability-findings.htm


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## jackmccullough (May 10, 2006)

It's true that there are two heavy weights dragging down this industry, but neither one is the workers who actually make the cars. What's hurting the industry is bad management and the lack of national health care.

For those of you who are complaining about the burden of employee health care costs, and retiree health care costs, just keep in mind that Subaru, Honda, and Toyota don't have to pay them, or even consider them in negotiating with their workers, because they have national health.


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## pt4u67 (Apr 27, 2006)

jackmccullough said:


> It's true that there are two heavy weights dragging down this industry, but neither one is the workers who actually make the cars. What's hurting the industry is bad management and the lack of national health care.
> 
> For those of you who are complaining about the burden of employee health care costs, and retiree health care costs, just keep in mind that Subaru, Honda, and Toyota don't have to pay them, or even consider them in negotiating with their workers, because they have national health.


What about Subaru, Toyota and Honda plants here? You don't think it has anything to do with onerous Government regulation and statutory mandates with respect to labor relations?

I'll give you bad management but national health care? I have the feeling this will be the rallying cry for the next four years.


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## Kav (Jun 19, 2005)

Those execs FLYING to Washington would do well to DRIVE.
A few hours in their product, on our crumbling roads in traffic slowed by SUVs, pumping self serve gasoline and hoping the Firestone tires don't blow out would give them religion.


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## Xhine23 (Jan 17, 2008)

Everybody is talking about the UAW, what about the top execs? I'm sure they pull whole lot of money in salary and compansation. Both UAW and the Execs are to blame for this mess. They should take those execs to the Toyota plants that scartered all over the country to learn how to run profitable roduction.


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## MarkfromMD (Nov 5, 2008)

Opportunity cost, they don't have time to drive and it was probably cheaper to fly them on private jets than for them to stand around taking 4x longer to fly commercial. 

They will come back with plans and they will get money. The government already let Lehman fall and had to witness the consequences, they won't risk a similar collapse again.


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## pt4u67 (Apr 27, 2006)

Xhine23 said:


> Everybody is talking about the UAW, what about the top execs? I'm sure they pull whole lot of money in salary and compansation. Both UAW and the Execs are to blame for this mess. They should take those execs to the Toyota plants that scartered all over the country to learn how to run profitable roduction.


Exec. salaries are a drop in the bucket compared to the operating costs of this industry. Exec. salaries are an easy target, but you're absolutely right about Toyota!

The big 3 can take a cue from the Japanese/Asian car makers. They make a more reliable, more stylish and less expensive product that seems to sell.


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## agnash (Jul 24, 2006)

jackmccullough said:


> It's true that there are two heavy weights dragging down this industry, but neither one is the workers who actually make the cars. What's hurting the industry is bad management and the lack of national health care.
> 
> For those of you who are complaining about the burden of employee health care costs, and retiree health care costs, just keep in mind that Subaru, Honda, and Toyota don't have to pay them, or even consider them in negotiating with their workers, because they have national health.


Jack,

Workers building cars in Mississippi, Alabama, Georgia, Tennessee, etc do not have national health care. Their employers (Honda, Toyota, BMW, GM, etc) provide healthcare. The difference is that manufacturers in those areas are not saddled with unsustainable and unprofitable labor contracts. The overwhelming majority of Hondas sold in the U.S. are made in the U.S. from parts made in the U.S., but they are not made anywhere near Michigan. Look at the numbers in GMs annual report. For the last three years it has cost GM more to build and sell a car than they get in price for the car.

I read your post on conservatism at your blog. I suppose that if that is the true definition of conservatism, then I must be something else. Libertarian I guess.

AG


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## Pentheos (Jun 30, 2008)

I recall hearing - though untrue, probably - that per car, the big three paid out more in health care benefits for the retired than for the steel used. That's not a workable business model.

Have any of you ever worked in an auto plant before?

I have.


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## jackmccullough (May 10, 2006)

Obviously a manufacturer that is able to pay lower labor costs will be able to incorporate those lower costs into a lower price structure.

On the other hand, the price differential is not just for the halth care benefits of current employees, but also for the health benefits for retired workers, which the foreign manufacturers aren't faced with because their home countries have national health (or, in the case of foreign plants in the U.S., the predecessors of the current, U.S.-based workers, who made the cars that established those companies' reputations, are living in countries with national health care).


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## Wayfarer (Mar 19, 2006)

jackmccullough said:


> It's true that there are two heavy weights dragging down this industry, but neither one is the workers who actually make the cars. What's hurting the industry is bad management and the lack of national health care.





jackmccullough said:


> Obviously a manufacturer that is able to pay lower labor costs will be able to incorporate those lower costs into a lower price structure.
> 
> On the other hand, the price differential is not just for the halth care benefits of current employees, but also for the health benefits for retired workers, which the foreign manufacturers aren't faced with because their home countries have national health (or, in the case of foreign plants in the U.S., the predecessors of the current, U.S.-based workers, who made the cars that established those companies' reputations, are living in countries with national health care).


So the assumption here is that national health care costs will be nonexistant on the auto companies. This is an incorrect assumption, as nationalized systems do not run for free. Indeed, they are funded through taxes, both on individuals and corporations. So what we have now are badly managed domestic makers, who cannot sell their product at a profit. We also have foreign owned auto makers, functioning (we assume) at a profit. So if we drastically change the cost structure on the foreign owned, in hopes of saving our crappy domestics, what happens?

The foreigns leave to places like Mexico and Canada, and import to the US under the Auto Pact agreements. Mexico is just plan lower cost and Canada comes in with lower costs due to several reasons. Read up on Nissan's decision to locate its new plant in Ontario vs. the US south, as they did the Titan plant. All that will be left in the US are the crappy domestic makers, which will still be badly managed and have an entitled work force, that fill Obama's coffers with campaign donations, union coffers with dues. They wil still be in the red too.

Great plan.


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## agnash (Jul 24, 2006)

jackmccullough said:


> On the other hand, the price differential is not just for the halth care benefits of current employees, but also for the health benefits for retired workers, which the foreign manufacturers aren't faced with because their home countries have national health (or, in the case of foreign plants in the U.S., the predecessors of the current, U.S.-based workers, who made the cars that established those companies' reputations, are living in countries with national health care).


But Jack, we do have National Health Insurance for retirees, it is called Medicare. Of course, that does nothing for auto workers who can retire after 30 years. So the auto makers end up paying for up to 17 years of health insurance for former employess who are retired, but are far too young for Medicare. And the Japanese health insurance is paid for by a 9.5% payroll tax, and they still have a 30% co-pay, up to $700 per month.


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## jbmcb (Sep 7, 2005)

Wayfarer said:


> The foreigns leave to places like Mexico and Canada, and import to the US under the Auto Pact agreements.


That's a bit short-sighted. The existing foreign companies are lining up to be slaughtered by even lower cost Chinese and Korean imports. It's going to be pretty hard to compete against nearly-free labor, even with very cheap labor.

Mexico is *very* cheap, but there are a lot of hidden costs in doing business with Mexico, and they don't have the infrastructure for heavy industrialization in the northern areas - yet.



> All that will be left in the US are the crappy domestic makers, which will still be badly managed and have an entitled work force,


The domestics aren't crappy anymore, as evidenced by quality and customer satisfaction data. Still not quite as good as the Japanese manufacturers, but definitely not crappy.

The domestic car companies have been working on making union based compensation more reasonable for a long time. Lately, they've been succeeding, especially in regards to health care costs.

Canceling the existing union contracts and bringing in new labor at a more realistic price sounds like a good idea, but it would take months to get a new workforce in place and retrain everybody. You could do it piecemeal, but the existing union members would almost assuredly strike, stopping production instantly. The only viable option is to buy out the contracts, which won't be cheap.

There really isn't a way to cleanly break the union stronghold on the auto labor market without a big stockpile of cash and months of planning, neither of which the domestic car companies have right now.


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## Wayfarer (Mar 19, 2006)

jbmcb said:


> That's a bit short-sighted. The existing foreign companies are lining up to be slaughtered by even lower cost Chinese and Korean imports. It's going to be pretty hard to compete against nearly-free labor, even with very cheap labor.
> 
> Mexico is *very* cheap, but there are a lot of hidden costs in doing business with Mexico, and they don't have the infrastructure for heavy industrialization in the northern areas - yet.


I agree, cars from Asia will be even cheaper. I should have explained myself more. We all know Obama has signaled protectionism. The first to get slapped with huge tariffs will be the Asian makers. The last thing to fall, before the US goes into full blown Smoot-Hawley, will be the N.A. auto pacts. Hence why I proposed plants would move there.



jbmcb said:


> The domestics aren't crappy anymore, as evidenced by quality and customer satisfaction data. Still not quite as good as the Japanese manufacturers, but definitely not crappy.


Agreed things are improving. However, design quality is still lacking. Initial build is getting much better. Also, cost to implement a new design is overly high with the US makers.


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## agnash (Jul 24, 2006)

Wayfarer said:


> I agree, cars from Asia will be even cheaper. I should have explained myself more. We all know Obama has signaled protectionism. The first to get slapped with huge tariffs will be the Asian makers.


Asian maker as in car made in Asia, or Asian maker as in car made in the U.S. for an Asian (okay, Japanese) company? If 90% of the Hondas sold in the U.S. are assembled in the U.S. out of parts that are primarily manufactured in the U.S., I consider that an U.S. built product, regardless of the name on the label. They can manufacture those cars in the U.S. and can be profitable, because they are not trying to provide welfare to every person who every won the life lottery and joined the UAW.


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## Xhine23 (Jan 17, 2008)

Its obvious that UAW & the execs are in the same blame boat. But I'll direct my blame to the execs more because they're highly paid in order to make good/sound decisions which they didn't. The whole problem with the big 3 is they heavily invested on gas-guzzlers and when the gas price went up people stopped buying those gg and switched to japanese car. I'm sure if their vehicles were getting good MPG and reliable they wouldnt be in such a mess they are in today.


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## Wayfarer (Mar 19, 2006)

agnash said:


> Asian maker as in car made in Asia, or Asian maker as in car made in the U.S. for an Asian (okay, Japanese) company? If 90% of the Hondas sold in the U.S. are assembled in the U.S. out of parts that are primarily manufactured in the U.S., I consider that an U.S. built product, regardless of the name on the label. They can manufacture those cars in the U.S. and can be profitable, because they are not trying to provide welfare to every person who every won the life lottery and joined the UAW.


Agnash:

But you cannot expect the same reasonableness from other people, particularly the incoming power structure. My prediction is a big honking tariff on cars built over seas, and then just a honking tariff on US built, foreign owned manufacturers. So say, 10k on a Honda from Japan, 5k on one from Tenn.


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## Wayfarer (Mar 19, 2006)

Xhine23 said:


> Its obvious that UAW & the execs are in the same blame boat. But I'll direct my blame to the execs more because they're highly paid in order to make good/sound decisions which they didn't. The whole problem with the big 3 is they heavily invested on gas-guzzlers and when the gas price went up people stopped buying those gg and switched to japanese car. I'm sure if their vehicles were getting good MPG and reliable they wouldnt be in such a mess they are in today.


The Big 3 have multiple vehicles that are very fuel efficient. The simple fact is, no one wants to buy those cars from them. People look to foreign car companies for the high mileage cars. I am not denying the Big 3 counted on the profits from trucks and SUVs, but to say they do not offer econ-boxes is wrong.


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## Xhine23 (Jan 17, 2008)

Wayfarer said:


> The Big 3 have multiple vehicles that are very fuel efficient. The simple fact is, no one wants to buy those cars from them. People look to foreign car companies for the high mileage cars. I am not denying the Big 3 counted on the profits from trucks and SUVs, but to say they do not offer econ-boxes is wrong.


What might the be reason that people dont want to buy "big 3" cars?


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## Wayfarer (Mar 19, 2006)

Xhine23 said:


> What might the be reason that people dont want to buy "big 3" cars?


You'll have to ask them, or do some research on focus grouping. I suspect it is multi-factorial, and also segmented by age, class, and race.


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## Cruiser (Jul 21, 2006)

jbmcb said:


> The domestics aren't crappy anymore, as evidenced by quality and customer satisfaction data. Still not quite as good as the Japanese manufacturers, but definitely not crappy.


I currently own two cars, a 2007 Nissan Altima and a 2007 Mustang convertible. In terms of fit, finish, smooth drivetrain, etc. the Altima is a hands down winner. The Mustang simply cannot match it in any category. When I go to the office or go on a trip I always take the Altima.

On the other hand when I want to play or am just running errands on the weekend I always take the Mustang. There is just something about it's "fun factor" that the Altima can't touch. And I don't limit this to just when I put the top down because I usually do not. I rarely leave the house in the Mustang without at least one nod or compliment on it while I am out. While the Altima is a great looking car, it is essentially invisible out there.

This demonstrates to me that American car companies can still build a car that people like and owners can derive a great deal of satisfaction from. There is something there, at least in a few models produced by Detroit, that the Japanese have not been able to recreate. While Detroit has yet to be able to build a Camry, Japan likewise has not been able to build a Mustang.

Cruiser


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## jackmccullough (May 10, 2006)

Probably a good point, Cruiser.

I don't really know what people are talking about when they refer to a car as being fun or boring to drive.

Still, it's obvious that American cars built today are way better than those built twenty or thirty years ago, and probably better than foreign cars built twenty or thirty years ago. The longest-lasting car I ever had, up until the one I have now, was a Plymouth Grand Voyager that ran 150K before it was totalled, and I would have happily kept driving it until the wheels fell off. I'm now up to 180K on my Saab 9000, which I'll also be happy to keep as long as it will go.


Still, for the most part American cars are still not better than foreign cars built today. Those initial quality surveys don't do much for me; I'm much more interested in how long I can keep it on the road, because I'm interested in maximizing the time between when the loan payments stop and the car stops.


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## agnash (Jul 24, 2006)

*It isn't that the Big 3 aren't selling cars*

In 2007, 23.8% of all cars sold in the United States where made by GM. Toyota was number two with 16.3%, Ford was number three with 15.5%, Chrysler was number four with 12.9% and Honda rounded out the top five with 9.6%.

People were definitely buying Big 3 cars in 2007, and GM had a 24.7% market share in 2006. Despite that, GM lost money both years. How does the number 1 seller of cars in America lose money every year? If you look at their financials (the SEC is kind enough to provide them online) it will jump out at you pretty quick that GMs costs are killing their bottom line.

Gas crisis or no gas crisis, fuel efficient or not, despite selling nearly 1 out of every 4 cars in America, GM couldn't make money. The credit crisis may have some bearing on where Ford is right now, but GMs problems run much deeper. When the president of the UAW said he thought one American manufacturer might not make it until the end of the year, I think I know which one he meant, and the labor contracts, signed by mgmt and insisted on by the unions, have sunk that company. A loan will let GM stay in business a little longer, in order to lose a few billion more $. Then, it will be right back to Chapter 11.


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## Wizard (Feb 29, 2008)

jackmccullough said:


> ...I don't really know what people are talking about when they refer to a car as being fun or boring to drive...


You would know if you had. Maybe it was the wrong car, maybe the wrong location. When you get the two right, at the same time, you get FUN! So, sadly, it appears you have never driven a car that was fun to drive. 

Keep looking!


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## agnash (Jul 24, 2006)

Wayfarer said:


> Agnash:
> 
> But you cannot expect the same reasonableness from other people, particularly the incoming power structure. My prediction is a big honking tariff on cars built over seas, and then just a honking tariff on US built, foreign owned manufacturers. So say, 10k on a Honda from Japan, 5k on one from Tenn.


Is that legal? I honetly do not know, but I didn't think they could levy tarriffs on domestic production, which was why all of the overseas manufacturers built plants here in the first place.

That said, I wouldn't be surprised if a politician put his/her mother, wife or duaghter out on a street corner if he thought it would get him/her re-elected.:devil:


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## Stringfellow (Jun 19, 2008)

agnash said:


> Is that legal? I honetly do not know, but I didn't think they could levy tarriffs on domestic production, which was why all of the overseas manufacturers built plants here in the first place.
> 
> That said, I wouldn't be surprised if a politician put his/her mother, wife or duaghter out on a street corner if he thought it would get him/her re-elected.:devil:


Mmmmmm, Chelsey and Hilary Clinton! Bad Stringfellow!


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## MarkfromMD (Nov 5, 2008)

The automakers took the wrong path. Look at most of their new offerings the past couple years, the recent revival of the old muscle cars (albeit in forms that leave much to be desired). The American automakers decided to cater to the desire for bigger, more powerful cars, while the foreign companies catered to the smaller, more efficient vehicles. Bad planning.


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## TheWardrobeGirl (Mar 24, 2008)

In addition to filing for Chapter 11 and getting out of the union contracts, I think the only way these companies can get out of their hole and become profitable is to cut back on their dealerships and I could be on my own on this thought, but I think the American auto makers should focus on their best selling "cars" and get rid of the others...Ford should focus on their pick up trucks, Lincoln should cover the SUVs, Mercury should cover the sedans...GM should keep the entire Cadillac line, the entire Chevy line and ditch Buick as well as Pontiac...keep Saturn and sell Saab...Chrysler should keep the Jeep line, the Chrysler line and ditch Dodge (combine a couple of the Chrysler and Dodge sedans)...there are too many "duplicate" cars out there


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## Quay (Mar 29, 2008)

I see that Congress will only hand out (our) funds if the Big Three come up with a plan not to flush it away. A sensible demand I think.

But since folks are talking cars, I currently drive a '99 Buick Park Avenue. This model was made from '97 to '05. Excellent freeway cruiser, comfortable as a den, huge trunk, easy to maintain, and it gets a steady 29 MPG on the highway. Pretty good for such a big car.

But its successor? The Buick Lucerne. Came out in '06. It's smaller inside, handles not as well, the trunk is awkward, the seats aren't as comfortable and it gets worse gas mileage. Hello?

I'm not sure getting rid of Buick will help GM (the new Buick Enclave is doing well and Buick has a pretty decent customer base) but surely the way forward means that new cars should outperform the ones they replace. Certainly the record indicates GM's cost structure is pretty wonky but they've also been putting out "new" products that aren't as good as the old ones. Neither problem has been helping them very much.


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## Cruiser (Jul 21, 2006)

MarkfromMD said:


> The automakers took the wrong path. Look at most of their new offerings the past couple years, the recent revival of the old muscle cars (albeit in forms that leave much to be desired).


I agree that the focus of the American automakers should not be on a revival of the old muscle cars, but given how much that is a part of their history and legacy I don't think it would be wise to let them die completely. Having said that, I also agree with you in that their manner of keeping these cars alive leaves more than much to be desired.

Look at what the original muscle cars (and pony cars) were. They were basic, inexpensive models with V8 motors. The Ford Mustang was really nothing more than a Ford Falcon with a small block V8. The Pontiac GTO was nothing more than a cheap Pontiac Tempest with a big honking 389 cubic inch motor under the hood. You could buy any of these cars in plain jane form with almost no accessories for relatively little money. The real fun was in accessorizing the car to your individual taste. These cars sold as long as Detroit basically stuck to this concept.

When you look at what the automakers are producing today as part of their revival of the muscle car you see little resemblance to the original concept. Just try to buy a stripped down V8 Mustang. Can't do it. They come straight from the factory with everything but the kitchen sink, including leather, fancy wheels, top line sound systems, everything; and the price matches the equipment list. Go to a Ford dealer and look at ten V8 Mustangs. Except for color, they all look exactly alike, inside and out.

Look at the GTO that Pontiac tried to revive. Again, every one that I saw on the road looked exactly alike. After all if you've just bought a car with $5,000 wheels already on it how many people are going to replace them with something else. Problem is, every other GTO had those same wheels, and the car cost $40,000. That is about as far removed from the spirit of the original GTO as it could be. Customers stayed away in droves.

Of course the automakers do this so they can insure that they don't get left out of the aftermarket business, which they probably would be if they let their customers do their own accessorizing. Just make the customer buy your stuff on the front end and you've got him. Problem is not as many customers buy the car. They take the fun away from the customer while getting everything they can from his wallet to the point that a big part of their customer base for these cars can't afford the entry fee.

Cruiser


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## Acct2000 (Sep 24, 2005)

The unions are a big part of the problem, but the whole culture at these companies is antiquated.

Whether it was fair or not (and I think it was), the whole idea that these folks who run these companies could not see the public relations disaster of flying to Washington on these big planes is very telling.


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## 16412 (Apr 1, 2005)

TheWardrobeGirl said:


> In addition to filing for Chapter 11 and getting out of the union contracts, I think the only way these companies can get out of their hole and become profitable is to cut back on their dealerships and I could be on my own on this thought, but I think the American auto makers should focus on their best selling "cars" and get rid of the others...Ford should focus on their pick up trucks, Lincoln should cover the SUVs, Mercury should cover the sedans...GM should keep the entire Cadillac line, the entire Chevy line and ditch Buick as well as Pontiac...keep Saturn and sell Saab...Chrysler should keep the Jeep line, the Chrysler line and ditch Dodge (combine a couple of the Chrysler and Dodge sedans)...there are too many "duplicate" cars out there


That sounds good.

Perhaps if they want some newer models they should add a couple of electric while getting rid of the duplicates.


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## Xhine23 (Jan 17, 2008)

Xhine23 said:


> TWG, I think the 25bil. was allocated for the company to retool their plants in order to make fuel efficient cars.
> I never like american cars for one reason, they aren't durable/dependable.
> I think these big 3 need to reduce the number of new models that they put out every year. *Its nonsense to have same vehicle with different badges because you cant target your market, they are jumping all over the places trying to attract customers.*
> Also, I wouldnt like to see them gone completely because because of security reasons. I dont think we want the Japanese to make our tanks and other military vehicles.





TheWardrobeGirl said:


> In addition to filing for Chapter 11 and getting out of the union contracts, I think the only way these companies can get out of their hole and become profitable is to cut back on their dealerships and I could be on my own on this thought, but I think the American auto makers should focus on their best selling "cars" and get rid of the others...Ford should focus on their pick up trucks, Lincoln should cover the SUVs, Mercury should cover the sedans...GM should keep the entire Cadillac line, the entire Chevy line and ditch Buick as well as Pontiac...keep Saturn and sell Saab...Chrysler should keep the Jeep line, the Chrysler line and ditch Dodge (combine a couple of the Chrysler and Dodge sedans)...*there are too many "duplicate" cars out there*


TWG you are not alone on the duplicate cars. I've said the same thing in the beginning.


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## TheWardrobeGirl (Mar 24, 2008)

Xhine23 said:


> TWG you are not alone on the duplicate cars. I've said the same thing in the beginning.


Rather than having a half dozen different brands, maybe they should take the same approach as pretty much every maker and make "classes"...that would be an easy way to streamline the duplicates...such as BMW has 7,5,3,1,X,M...Mercedes has S,E,C,ML,GL, and so on...

It is amazing to me that the answers seems SO clear yet they will probably spend a few months and millions/billions of dollars and countless mistakes farting around trying to come up with a solution!


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## jbmcb (Sep 7, 2005)

Quay said:


> But its successor? The Buick Lucerne. Came out in '06. It's smaller inside, handles not as well, the trunk is awkward, the seats aren't as comfortable and it gets worse gas mileage. Hello?


The new Lucerne constantly gets high marks in the reviews, and gets comperable gas milage when compared to a Park Avenue of similar performance stats (the supercharged Park Avenue vs. the regular Lucerne)



> I'm not sure getting rid of Buick will help GM


It won't, worldwide the Buick badge does very well.



> but surely the way forward means that new cars should outperform the ones they replace.


Based on your sample of one person and vehicle? The newer GM cars constantly get higher ratings than the older models they are replacing. The CTS is a fantastic car on it's own, much less compared to the Catera. The new Malibu is even better than the well regarded previous incarnation. As good as the current Cobalt is, the upcoming Cruze is going to blow it out of the water. There are a few exceptions, but the overall trend is positive.


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## Quay (Mar 29, 2008)

jbmcb said:


> ...Based on your sample of one person and vehicle? ....


In my post I was relating anecdotal evidence based on personal experience, not overall statistics based on global trends. But pray continue taking the particular to the general as it is certainly more relevant to the big picture of GM's future.

One note, though. The Lucerne in any incarnation, and even with the new testing standards applied retroactively, gets worse fuel economy than the Park Avenues it replaced. To be sure as you note many of the newer models are more efficient than the ones they replaced but there are curious exceptions.


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## Xhine23 (Jan 17, 2008)

TheWardrobeGirl said:


> Rather than having a half dozen different brands, maybe they should take the same approach as pretty much every maker and make "classes"...that would be an easy way to streamline the duplicates...such as BMW has 7,5,3,1,X,M...Mercedes has S,E,C,ML,GL, and so on...
> 
> It is amazing to me that the answers seems SO clear yet they will probably spend a few months and millions/billions of dollars and countless mistakes farting around trying to come up with a solution!


I do wonder why they are paid millions of $ while they cause millions of $ in losses.
I think it might the be reason UAW demands those ridiculous benefits because it seems everybody on the top are doing the same.


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## jbmcb (Sep 7, 2005)

Quay said:


> One note, though. The Lucerne in any incarnation, and even with the new testing standards applied retroactively, gets worse fuel economy than the Park Avenues it replaced.


The difference is one MPG in the Park Avenue's favor, and that's a calculated estimate. I bet if you took them out and actually tested them, the park avenue would come out a bit worse.


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## Quay (Mar 29, 2008)

jbmcb said:


> The difference is one MPG in the Park Avenue's favor, and that's a calculated estimate. I bet if you took them out and actually tested them, the park avenue would come out a bit worse.


You'd lose that bet with me as I have driven both a lot, but as you note, it's only my anecdotal experience here. The PA gets a steady 29-31 MPG highway depending on terrain and the Lucernes never get better than 25 on the same roads. Someone else might get different "real world" mileage instead of the EPA estimates which have always tended to be a gauge unto themselves.


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