So writes former Chrysler outside counsel Steven Roby in a rebuttal Op-Ed in the Los Angeles Times today (the original LAT Op-Ed contended that the US government should not bail out American manufacturers). His thesis of “It’s not the Big 3’s fault” is supported with inventive arguments such as “It’s not the Big 3’s fault” and also “It’s not the Big 3’s fault.” More specifically, he writes that GM, Ford, and Chrysler are just ridiculously, unreasonably burderend by high health care costs, that foreign governments directly subsidize manufacturers, and that other countries manipulate currency. We’ve been through this, time and time again. (He also accuses foreign governments of indirectly subsidizing “their” automakers through grants to research universities. Apparently this lawyer has never heard of the Bayh-Dole Act, which allowed for private patents of government funded research at Universities. And I take it he also has never visited Stanford, Berkeley, Duke, UNC-Chapel Hill, Michigan State University, and so on.) But the big problem is that Roby’s article never recognizes any Detroit mistakes: that the Big 3 spent years raking in piles of cash because of SUVs, or benefitted from the chicken tax on pickups, or benefitted from the special EPA status of “light trucks,” or that Chrysler already was bailed out in the past 30 years, or that GM, Chrysler, and Ford haven’t built a truly competitive small car. Roby writes that “The Times should not judge GM, Ford and Chrysler unless it can walk in the shoes of the executives and production workers.” The production workers have gotten the shaft, and nobody is blaming them. But I’d love to walk in the shoes of an executive like Rick Wagoner, whose company can lose billions upon billions of dollars and still go home with a $14 million paycheck. No, the global market for cars is not completely fair. Time to stop complaining and deal with it. Still.
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Wow, talk about a “WTF??” I am with you, Justin: I would love to get Rick’s check while being insulated in the merry little bubble he enjoys.
No, the global market for cars is not completely fair. Time to stop complaining and deal with it.
So simple, but yet beyond understanding for these knuckleheads.
Oh for Christ’s sake. Someone is bringing out this old saw….AGAIN?!!! They deserve to get the cold shoulder for their indolence during the SUV boom alone.
(Funny, the government of Canada auctions of their vehicles in dribs and drabs. When they do, they highlight anything noteworthy, such as mechanical problems. They are currently pedalling a low mileage, late model Neon. The disclosure starts thusly ‘ELECTRICAL PROBLEMS’. What more can I say?)
Justin…
The real problems with the US automakers are not that they didn’t make competitive small cars, which they did…its that they never kept a true balance, they never hedged their bets against the whims of the American consumer.
The Focus IS a wonderful car.
Well, maybe not as much as it once was, but it was.
The Fusion is a very good car and very popular.
There are more examples…
But what really happened is they spent their money on buyouts rather than R&D.
They saw which way the consumer crowd was running and ran to the front to lead.
They put way to much upon the SUV and pick up buyers.
And when this group stopped buying with the gas crisis, they were caught.
Other companies didn’t rely so much on the BIG TRUCKs.
They had lots of little, high mileage small cars ready to drive.
But to tell you the truth…how do you refrain from building more and more SUVs when that’s all they keep buying?
I can’t see how you could build all the SUVs demanded AND keep a lot of small cars available.
There is only so much R&D money to spread around.
Ladies and Gentlemen, we have a new front runner for the Lutz award!
ppelico,
Toyota and Honda seem to have found a way to give the consumer what they want and develop on both ends of the spectrum. They were also wise enough (at least so far) to avoid the parasite known as the UAW.
Toyota also tried to jump on the truck and SUV bandwagon, but never neglected their car line up. You cannot say with a straight face that the Focus has not been neglected when the rest of the world received a new version a few years ago. Ford let the Focus languish. GM did not advance the Cobalt. Chrysler should have built a new Neon but went with the Caliber.
The playing field is not balanced – The foreign automakers are managed by competent executives with engineering backgrounds and considerable attention to detail and passion with regard to their products, while the US automakers are managed by myopic snake-oil salesmen who would be just as happy hawking breakfast cereal as long as they got the same pay package.
Yes, Katie, he should be a contender for the Lutz award.
I can’t believe it (or maybe I shouldn’t be so naive) that Chrysler would bring up tired old cliches from the Iacocca years. I mean, they had 30 years to prepare for this.
Give me a break!
Would you buy a car from this guy (see picture). Didn’t think so….
no_slushbox is right. American Executive culture seems obsessed with cutting costs and raising their own pay to the exclusion of everything else.
He is Fu*&*(&*(d on so many levels. Boo hoo Maybe when big business could have gotten behind single payer they should have rather than ranting about government run medicine. OK so you say you can’t compete cause the other companies don’t have health care costs.
You don’t buld what people want. And I’m not comparing a vett to a AMG costing twice as much. Take it dollar for dollar. Gee talk about making your own bed.
And of course take no-slushbox’ point about the American model — They really don’t care about anyone else but themselves. Funny about Ford’s new savior. Living in Seattle, we love Boeing. But when you buy McDonald-Douglas you have fewer competitors, he can’t do that at Ford.
He makes an excellent argument, albeit based on lies, half truths, and misconceptions. But hey, he is a big time corporate attourney. That is what he gets paid to do.
I would bet that the difference is not health care cost, but simply labor costs. The UAW worker gets high pay, low taxes, and free healthcare at the expense of GM which is kind of subsidized by the feds (while simultaneously inflated by all levels of government).
The foreign worker gets similar or less pay, but higher taxes which then pay for most of his healthcare costs. I would bet that if you look at Toyota in Japan, their total employee healthcare cost is more than paid for by the taxes of the employees through their income taxes. IOW, Toyota is likely NOT having healthcare subsidized.
I would also bet, that socializing medicine has rarely, if ever, reduced healthcare costs anywhere in the world unless it’s been done by reducing services. Instead, they likely reduce increases in costs over the long term mostly by reducing care. (Please don’t quote some government produced stat about cutting x 10% in country y. I mean total outlay over several years. The rest is just lies.)
The argument that socializing medicine would help GM is probably bunk anyway. There is no way on earth a national health care program would offer the same level of benefits (remember when GM employees nearly rioted over the deductible going from $0 to $5?) as they currently enjoy. So unless the govt. is willing to shiv a bunch of AARP members in the back by forcing them to downgrade to public health care, it wouldn’t make much of a difference. The problem is really that they promised the moon back in the day when they ruled the market, and between their falling fortunes, increased longevity, and more expensive medical care, they got screwed.
I look at it this way: when companies can avoid the UAW they build here; UAW companies build in Mexico.
That tells me that America is a competitive place to build cars as long as you don’t let labor costs run wild.
Interestingly I just finished reading an article by Laurie Harbour-Felax in Automotive Design and production ( http://www.autofieldguide.com/columns/0908comp.html ) looking at how Toyota and Honda use spending more money at the R&D end and flexible manufaturing (things that they have done for a long time and are not labor cost constrained) to net them a competitive advantage in cost and reliability.
And speaking of reliability, the Debt 3 knew they had troubles 30 years ago. For twenty they did very little. Now Ford looks like they may have finally figured out that this is the BIG ISSUE. GM and Cryslur appear to still be trying to finesse what “good enough” looks like.
Sad.
Bunter
I’m not clear on the writer’s intent. He is on Chrysler’s dole, and yet he keeps writing about the disadvantages suffered by the “Big 3.”
Why is he so concerned about GM, Toyota and Honda (the “Big 3” players in the US market)?
My (free) rebuttal to the high-priced lawyer:
1) See 2009 Accord Review. That’s what people want. Make one just like it with a different label. That strategy worked for almost 15 years for the Japanese manufacturers and for about 10 years for the Korean manufacturers. No shame in survival.
2) My ’95 E320 Wagon gives the impression of being crafted rather than assembled. Chrysler products appear to be shot out of a plastic mold and then tires are added. Big shock, no one will pay you good money for that.
3) For 2009 Honda offers gas, diesel, LNG, hydrogen, and hybrid powertrains. They received a few million from the Japanese gov’t to develop these. Chrysler received over $20M from the US gov’t to develop these. Where are they? There’s your uncompetitive playing field.
4) When no one is buying your products you should find out why. And fast. Unless you think you can get more money in the form of a handout. Then, you have all the time in the world.
Justin, it’s good to see you cutting your teeth and taking on a fellow lawyer. Rock on!
SherbornSean:
Good question. My theory is, “because Chrysler figures that their best bet for getting federal subsidies is to make it a ‘save the whales’ campaign to preserve the auto industry as a whole, rather than just to help them, specifically.” Politics.
As a Ph.D. Economist, I wish I could ask for a restraining order to avoid lawyer type likes this from ever touching issues involving Economics…
The truth is unimportant. Perception is where it’s at. Roby is working the perception angle. Facts do not matter to him or the people he is reaching out to.
Justin:
“The production workers have gotten the shaft, and nobody is blaming them.”
Eh? I’m sure there’s been enough greed and stupidity to go around – management as well as labor.
And anyway, this is America. We’re only concerned for the welfare of the unborn.
The truth is unimportant
remind me megnted, whats the name of this website?
(He also accuses foreign governments of indirectly subsidizing “their” automakers through grants to research universities. Apparently this lawyer has never heard of the Bayh-Dole Act, which allowed for private patents of government funded research at Universities. And I take it he also has never visited Stanford, Berkeley, Duke, UNC-Chapel Hill, Michigan State University, and so on.)
That reminded me of a freind from college. HE got his degree in electrical engineering and after a few years in silicon valley he was dissatisfied with his job and decided to go to graduate school. He ended up working on hybrid drive train technology with mechanical engineering graduate students. I’m sure that wasn’t funded by the government, even though it was at UC Davis.
I agree Detroit has been mismanaged and that is a major reason they are failing but what about the fact that Detroit can’t sell its iron overseas without hefty add-ons to the sale price. The playing field should be leveled. If you want to ship a dollars worth of product to North America you must first accept a dollars worth of product from North America. If foreign products are better then why do the countries that produce these products use protectionist tariffs and duties to protect their companies from outside products. What are they afraid of? Maybe they are worried that if Chevys sold for a reasonable price in Japan people may buy them instead of domestic product and so put Japanese workers out of work. There is a lot of talk about a global economy but it appears that the flow of goods is only one way. If this continues there will be a leveling, we will be as poor as the nations shipping product to us.
Is he for real? He treats the ‘burden’ of legacy health care costs as though they were an act of God for which the automakers are not responsible, in fact are innocent victims.
The fact is that the car companies rolled over on union demands year after year, figuring they could just pass on the costs to the consumer.
The US car companies in effect had a monopoly on US car sales. This was a huge competitive advantage. Then they decided to voluntarily incur a burden of legacy health care costs. In doing so, per Roby Baby, they lost that advantage. Ipso facto then they squandered their competitive advantage. Ergo, they can and should be accused of squandering it.
Yet we’re expected to believe that mismanagement is not their fault, and that they are not to be held accountable to their shareholders as a consequence?
Orian
Quality…I don’t know.
Guess we can all dissagree.
But I think that the Taurus IS a great car.
If I was a family guy and needed a very large car, was a middle class guy with middle class income…you show me what better car there is for 23K than the Taurus.
There is none.
Nada.
The Mustang IS a great car.
I think that to find a better looking, cool and more fun car than the convertable at 24K?
Show me.
The Fusion is a great car. And its sales show this.
When Toyota did try to play the big truck game, they found that they made the same mistake…sales are dead.
Sienna sales…dead.
Honda..?
Does Honda EVEN make a truck?
Hell no…all they had to do is keep making cars in their car plants.
Trust me..IF any of these car names HAD found success in the trucks or SUV, you can bet you ass they would have done the same damn thing…built MORE trucks.
But the Ford big trucks and SUVs were in the top ten selling vehicles every year. So they built tons of them to meet demand. You cannot build plants enough for top selling trucks and SUVs AND keep enough plant availability going for the possible onset of small car demand due to sudden consumer switching.
This is not a manufacturing possibility.
The Japanese manufacturers did not have this problem.
Their trucks and SUVs were not selling at the rate the Big 3 were. They never had the demand for large truck production.
They had much slower production numbers and never had to make the sudden switch.
Who is to blame for the damn union deals and pension nightmare?
I suppose the manufacturers are.
Yes, they should have faced off the unions long ago, as the airlines should have.
This would have prevented a big part of the imbalance there is today.
This would have prevented $45 dollar an hour labor and $300K a year bus drivers ( sorry, pilots).
But folks, the Japanese are now facing the same problem we are:
Good Morning Seoul!
Welcome Shanghai!
Kuala Lumpur…?
Delhi?
What goes around comes around.
GM and Ford DO have quality small cars. They just never engineered them for North America. The Corsa / Astra / Fiesta / Euro Focus are perhaps the best cars in their class worldwide. There was no excuse that all of the above could not have been available for the North American market in 2004. When you move up to mid-sized cars, as everyone knows, GM/Ford bet that Americans would rather have trucks than sedans. In a way, they are correct — if gas prices were $2.00/gallon mainstream Americans would go for trucks, no question about it. GM/Ford were caught with their pants down. Now, they are just taking WAY TOO LONG to get their shit together.
Re Potemkin:
Bottom Line: The Big 3 never seriously tried to export from NA to Asia or Europe – so the tariffs are a moot point.
Because of the offshore divisions, these restrictive tariffs actually helped keep the Japanese (and now China) at bay in Europe and other developing countries – so the Big 3’s overseas divisions (GM Brazil, Ford SA, Ford Europe, Opal, etc, etc,)could enjoy a protected status.
Detroit has looked at the NA market as being so big that it was an island unto itself.
detroit1701
Detroit didn’t prove American’s wanted trucks…
American’s proved it.
They went out and made these the top sellers.
And, I might be wrong and usually am, you have to make what customers want.
Is it me, or isn’t this the business plan we all follow?
The whole other pension/wage crap is all their doing.
Its the responsibility of management to control cost…including labor.
In a way, Detroit’s problem is its own fault. Steven Roby overlooks one major point in his rebuttal: The Big 3, overall, had crap coming off the assembly lines. Directly because of these crappy cars, people moved on to imports, and the perception gap was born. Former customers are not coming back, and this has trickled down to today, where the perception gap is tangible. Many won’t even consider an American car now, and the seeds for this were planted long, long ago.
Even though the Big 2.8 have been some good automobiles released lately, they are mere sprouts in the forest. Though efforts have been made, it would be nigh impossible to erase the perception gap, and much of the blame for that problem can be placed back to the Detroit automakers themselves.
How does that old joke go…
“How can you tell when a lawyer is lying?”
It’s a good thing that Toyota isn’t burdened with having to pay UAW wages to build vehicles like the Corolla and the Tacoma. In fact, I don’t think any of the foreign car manufactures building cars in the US actually pay wages or provide health care at all. Vehicles built in Germany and Japan, with wages and benefits that are practically nonexistent, cost next to nothing to produce. I feel sorry for the big 2.8, they are truly burdened with unfair competition from abroad.
Wwaaaahhhh !!
One payer health care system is a failure all around the world. Why would we want to fix the failures of the auto industry with destroying an industry that is the marvel of the world? The auto execs did this to the domestic industry and the workers and our economy will pay for it. The big 3 should pay for the mistakes they have made NOT me and NOT you! Tell them to bail their own ass out!