Archive for the 'bailout' Category

Abandoned Detroit

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Detroit and Michigan  have both been in the news quite a bit lately. Almost every evening news cast, in, and outside of, Michigan, has been focused on whether or not the Big 3 would get a loan (or a bail out, depending on your point of view). Now it appears that at least two of the Big 3 will have access to roughly $17 billion in Federal loans. The big question now is whether or not this loan, at around half of what was requested, will enable the Chrysler and General Motors to survive.

Unfortunately, even if the Big 3 do all survive, they will not be what they used to be, and neither will Michigan. The days of higher than average pay for both blue and white collar jobs at the Big 3 are over, and this will exact a heavy toll on the, heavily automotive dependent, Michigan economy. As it is, Michigan once again leads the nation in unemployment, while Detroit continues it’s downward slide, defying the belief once held by many that Detroit had nowhere to go but up. Michigan can’t seem to pass anti-smoking legislation, even as states such as Kentucky, and countries such as Italy, and France have passed smoking bans. And a decent mass transit system is still years away, though at least progress is being made in this area. Apparently the dire economic situation has made some of our previously reluctant politicians to expand Cobo Hall, and hopefully save the North American International Auto Show.

The most interesting news reports on Detroit though, have been about it’s long declining population. This is, of course, nothing new. Detroit’s population peeked in 1950 at almost 2 million. Since then the decline to roughly half it’s peek, leaves the city with around 850,000 residents. The Detroit Free Press, reports that Manhattan, Boston, and San Fransisco, could all fit in the boundaries of Detroit with room to spare. Apparently, at the rate of decline Detroit is experiencing, the city will be 50% vacant within five to ten years. The amount of vacant land has lead to an increase in the population of generally non-city dwelling animals, such as pheasants and coyotes. The city has also seen a large increase in the amount of urban farming. Perhaps Detroit will be the first American city to go from urban to suburban, or even rural classification. While the current state of the city is scary to say the least, the possibilities for Detroit’s future are much more interesting. Camilo Jose Vergara once suggested that Grand Circus Park become a skyscraper graveyard theme park. My wife always thought Detroit should turn it’s vacant land into large parks or green areas. I have been fond of recommending (tongue in cheek) that Detroit tries reverse annexation. While I don’t generally like eminant domain laws, I do think it’s impossible for a city of 850,000 (and still declining) to maintain and provide services to an area of 139 square miles. It’s possible nothing will change, and Detroit will continue it’s decline for the foreseeable future. It’s also possible that Detroit, and the Metro area, can make something better with this, potentially, clean slate.

Post (auto) Industrial

An interesting look at what happens when industries collapse. Unless one plans for change, the results can be disastrous…

When Cars Go Away

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The Big 3 Bailout, or, is this the end of the road for Detroit

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It seems the Big Three, and consequently Detroit, doesn’t have too many friends these days. Public support for a bailout of financial companies had little public support, and the U.S. automotive industry has even less. The industry has been viewed by the average person as a slow moving, inefficient, and wasteful industry incapable of producing quality vehicles. The politicians see an industry that fought against requirements for producing more fuel efficient automobiles, lobbied for tariffs on light trucks and SUV’s, had out of control expenses,  and couldn’t see far enough down the road to be ready for a day when the public didn’t want Hummers or Excursions anymore. Unfortunately many who were too close to the industry didn’t, and maybe still don’t, see things this way.

Rick Wagoner testified in Washington on the need for a government bailout for the Big Three. In his statement Rick Wagoner made several good points, including, “General Motors directly employs approximately 96,000 people in the United States”, and “Last year, we purchased more than $30 billion of goods and services from more than 2,000 suppliers in 46 states.” He also made the claims that GM had made tremendous progress in recent years, by cutting costs, improved vehicle quality, and lowered legacy costs, and that the biggest problem was out of their hands. Rick Wagoner stated that it was the downturn in the economy and the automotive industry, and the current credit crisis that posed the greatest threat to GM’s survival.

I have no love for the Big Three. Over the past decade I’ve watched as CEO’s pushed off dealing with a broken business model, and walked away with fat payouts for their short-sited, and almost certainly, damaging business decisions. The lack of foresight that the American automotive industry has shown, seems to be almost unequaled. Sure other industries have failed to see what was right around the corner, but the ability of the Big Three to ignore the obvious, and insist on business as usual while the industry was cratering, was astounding.

All that said, we’re all on the hook for this one. So while I can still be angry that assembly line workers could make upwards of $140k (yes, I know someone who did…), and that CEOs could make millions while steering a once great industry straight down the drain, I have to remember that Detroit, Michigan, the Midwest, and the entire U.S. economy is still dependent on it. With out, not only do employees of the auto companies lose their jobs, but those of the suppliers, and those who sell meals to workers, and employers, and so on and so on.  The numbers who are indirectly connected to the industry are staggering. I am bitter and angry at how these companies have been run, but I’m not willing to cut off my nose to spite my face. Unfortunately I need the Big Three and so do you. What I want to know is why financial companies that made very poor business decisions and took dangerously large, and over leveraged risks, while paying managers and CEOs millions, get a bailout on my dime, but one of the largest industries in the country, seems to be so undeserving.

I think loans should be made, with conditions. The current management and board of directors are out, and long term plans of action must be in place. Management and the U.A.W. need to be on the same page (I was once told by the head of the U.A.W Chrysler that it was “a war between the U.A.W. and Chrysler.” Sorry, thought you were both trying to achieve the same goal…), and the public gets paid back with interest.

What’s really killing Detroit

Auto bailout: showdown

GM Failure: the

How to fix the Big Three

In Detroit, Failure’s a Done Deal

Detroit is going down — if not now, eventually

Saving Detroit from itself

G.O.P. Senators oppose bailout

Moore: Automakers never listened

Retirees Watching Anxiously: Will GM Be Saved

Dems want automakers to show bailout spending plan

No need for bailout, say diners near thriving car plant