GM & Chrysler Kept Lobbying to Continue Their Unworkable Business Decisions
The Obama administration's candid "viability assessments" of GM and Chrysler emphasize one unsurprising but unfortunate theme: Both auto companies have contributed to their own financial demise by relying on gas-guzzling trucks and SUVs instead of cultivating more fuel-efficient cars.
Here's the relevant excerpt from GM's White House status report:
GM earns a disproportionate share of its profits from high-margin trucks and SUVs and is thus vulnerable to energy cost-driven shifts in consumer demand. For example, of its top 20 profit contributors in 2008, only nine were cars.
And the administration's take on Chrysler was even more grim:
Chrysler's product strength is in the pickup, SUV, and minivan segments - all of which are relatively low in fuel efficiency. On a standalone basis, Chrysler will struggle to comply with increasing fuel efficiency standards, and it may even have to restrict the sale of certain models to make sure it is in accordance with proposed standards.
Meanwhile, GM and Chrysler spent more than $3 million each on lobbying during the fourth quarter of last year -- and part of that money went towards beating back efforts to increase fuel-efficiency standards.
It was on George W. Bush's watch that automakers were allowed to lobby themselves into the ground by opposing stronger emissions limits (and filing lawsuits to block state-level emissions measures), but lobbying restrictions have not yet been formally placed on GM or Chrysler. Although the administration vowed in January to restrict lobbying at companies that receive government bailouts, The Hill reported last week that the Treasury Department is delaying the actual release of those regulations.
Josh
Matt
Eric
Meanwhile, GM and Chrysler spent more than $3 million each on lobbying during the fourth quarter of last year -- and part of that money went towards beating back efforts to increase fuel-efficiency standards.
I expect lots of outrage over this, right?
Right?
Nothing says "Stuck in the 20th century and proud of it!" more than this behavior.
March 30, 2009 12:15 PM | Reply | Permalink
My ability to be surprised by the abysmal stupidity of auto industry executives was exhausted long ago.
I don't have the energy for outrage any more; these people just need to shut up and go away.
March 30, 2009 12:20 PM | Reply | Permalink
I hear you.
I'd like some sunlight shown on the activities of the Congressional delegation from Michigan. It's as if an entire industry and labor force, and political leaders has had their heads stuck in the sand and we all watched it and let it happen.
March 30, 2009 12:22 PM | Reply | Permalink
What is the proper outrage quotient for a wasted $3 million? Help me out, my outrage calculator is way out of whack since the AIG bonus hubbub....
March 30, 2009 12:50 PM | Reply | Permalink
I guess I'm not out of outrage just yet.
$3 million is a drop in the bucket, but the fact that it was spent on beating back regulations that, had the industry tried to adapt to, might have worked to alleviate some of the mess the industry now finds itself in is just a bit much.
March 30, 2009 1:02 PM | Reply | Permalink
Naw, you misunderstood, I was just pokin' fun at the "outrage machine", the media, etc....I agree, and don't begrudge you your outrage, because I know you understand perspective.
Just find it funny that we get so up in arms over millions, while they are sneaking billions out the back door.
March 30, 2009 1:19 PM | Reply | Permalink
What's good for GM....
The Administration conducted the viability analysis which statute required as a condition of additional loans that GM and Chrysler need to stay in business and avoid bankruptcy
The financial industry situation differs in key respects - for one, they do not need Federal loans to stay open the next 30-60 days but in one key respect, the circumstances are the same
Remember those stress tests that Treasury is doing right now? The ones that Wells Fargo's Kovacevich slammed as "asinine" not two weeks ago?
I think the bank presidents understand what the name of the game is - if you're insolvent and wonder what to expect from this administration
Ask GM
Ask Chrysler
March 30, 2009 12:23 PM | Reply | Permalink
Typical RW drone remark(s) on FARK:
* They were just giving the people what they wanted. Was that wrong?
* So now the government is going to force GM to make cars that people don't want and won't buy. This will save the day how?
Well, for one thing, your typical RW drone was told what he wanted by the GM marketing machine. Informing said drone of this fact results in blank stares, or the text equivalent. More intelligent people, who are apparently impervious to GM's attempts to get them to buy these big-ass trucks, have been snapping up Civics and Corollas and Mazda 3's and similar vehicles because they're dirt cheap, faster than a generation ago, and, uh, not SUVs.
If we were younger, and had kids to tote around, I think we'd be looking at the Mazda 5, which is a sort of mini-minivan that gets 21/27 with automatic transmission, is available with all the toys usually available with other minivans, and, uh, isn't an SUV. Heck, I'm 46 with an almost-empty nest, and I might look at one when it's time for me to trade in - in 2013, not sooner. It looks like just the thing for hauling bags of mulch and shrubberies from Lowes.
March 30, 2009 1:10 PM | Reply | Permalink
Hm. Simply out of curiosity, if the problem given with SUVs is that they're "vulnerable to energy cost-driven shifts in consumer demand", then does that really make for such a bad idea as a short-term move when gas prices just crashed?
March 30, 2009 1:21 PM | Reply | Permalink
Here's why all car companies pushed back against CAFE standards.
From Car and Driver:
Chrysler tied Toyota for productivity in car making as the best in North America, so say the results of the 2008 Harbour Report—the authority on automotive productivity—released June 5, 2008.
Once all the numbers were crunched—including the number of hours it takes for stamping, building transmissions, engines, and assembling vehicles—the two automakers finished in a dead heat at 30.37 hours per vehicle each.
In descending order, the rest of the pack are: Honda (31.33 hours), GM (32.29), Nissan (32.96), Ford (33.88), and Hyundai (35.10).
This near-parity is a far cry from a few years ago when the Japanese could out-produce the Big Three 2:1.
“But productivity doesn’t guarantee profitability,” Ron Harbour warns. The Japanese still make much more money on each car assembled and sold. The numbers are downright scary. Honda and Nissan make $1641 in pre-tax profit on every vehicle assembled, while the average profit on a Toyota is $922. Contrast that with $1467 lost by Ford per vehicle, a loss of $729 on average for GM, and $412 in the red on a Chrysler product.
With those kind of numbers you can understand why all car manufacturers fought congress over CAFE standards (with full complicity from the Republican party and Democrats from MI) to keep building large high profit margin vehicles.
The American owned manufacturers are going broke they are on the hook for their retirees' pensions and healthcare. GM alone supports over 400,000 retirees in the US because they've been building cars here for a century. Toyota which has operated in the US for a lot fewer years only has about 700. You'd think Republicans would be grateful the Big Three and their unions have kept millions of their retirees out of our government run, "socialist" healthcare system (Medicare) all these years but I guess not.
Outside the USA healthcare is provided by the host nation. That's a big reason why GM builds more cars in Ontario than Michigan today. It's also a big reason why we need to overhaul our national healthcare system. As it is the union and carmakers reached agreement in 2007 on contracts that created a Voluntary Employee Beneficiary Association, or VEBA, to be run by the UAW to take over an estimated $80 billion of retiree healthcare liabilities starting in 2010.
Easing the pressure on carmakers from retiree healthcare costs was seen at the time as the single biggest concession the union could offer the companies.
They pushed back the pay in dates for the car companies in the bailout negotiations and made all kinds of other concessions.
Take healthcare off the backs of the Big Three and their unions and they can compete with anybody. Otherwise they're just canaries in the coal mine for all American businesses who eventually will either have to screw their retired workers or die.
March 30, 2009 2:43 PM | Reply | Permalink
Not to blame everything on the Bush administration, but a certain quote has always haunted me and shines a light on the systemic ignorance we’ve all complacently allowed to exist: “We need an energy policy that encourages consumption.” – George Bush
It’s amazing the SUV tax break in Bush’s 2004 economic stimulus plan is not front page news. They were categorized as “light trucks” and therefore qualified for a tax break to spur business investment. The auto makers did what we should have expected: they tried to increase profits. What did we expect?
The sad part is – once again – the hard working people at the GM and Chrysler plants will be the ones who ultimately pay for our collective indifference to such destructive policies.
Adam
March 30, 2009 9:15 PM | Reply | Permalink