Is Detroit "Too Big To Fail?" Nope! It's Time.

In every society it is necessary to "take the medicine" for past mistakes and accept the consequences of our actions or inactions. I have been getting tons of emails, but few comments since it appears that many are afraid of posting to a moderated website, but that's the way it goes.

 

The email has been very negative of my stance of letting the Big-3 auto makers fail, but what the emailers do not seem to understand is that $25, $50, or even $100 Billion USD in bail-out to Detroit is NOT going to solve the problem. It is only going to put off the day of reckoning. The model of Detroit is FAILED. The blame is too numerous to list, but I will try:

 

1. Government for not allowing management and labor to form partnerships. That's right, its the government that prevents organized labor from working with management.
2. Management in that they negotiated labor contracts that added $1000s to each car that they make to where the average hourly rate of Detroit is $75 to the US-based Toyota, NIssan, and other non-Detroit based US car makers' $48 hourly rate. Every car Detroit makes costs them $27/hour. Impossible to maintain such a business model.
3. The UAW (United Auto Workers) union that prevents Detroit from being competitive all in the name of protecting "good US jobs." In the end, it will be the UAW that kills the golden goose.
4. The Big-3 auto maker shareholders that did not DEMAND Detroit reorganize and retool for the smaller, more fuel efficient products.
5. Finally, the consumer that did not DEMAND Detroit make cars they wanted. Buy American, but buy smart American should have been the US consumers' demand of Detroit.

 

So we all have something to shoulder when it comes to Detroit's current morass, but just propping them up with more money is NOT going to solve the problem. We have to take our medicine, and the longer we forestall the day of reckoning, the worse its going to be when it finally happens.

 

Is Detroit "too big to fail" I have heard that for the airlines, the banks, Wall Street, and now the auto makers. It is just a cry of the outdated, the outmoded, the out-maneuvered, and the non-competitive companies called the Big-3 auto makers along with their very unnecessary UAW.

 

Keeping the Big-3 and the UAW alive is a classic case of "Weekend at Bernie's." Rent the movie if you don't understand the reference.