The Old Auto Industry

I saw the melt down in Detroit coming years ago. I think it was 2005 that I read an article that pointed out that GM had to spend around $2000 on every vehicle sold just to pay for the pensions and benefits of retirees. GM sold a lot more cars in 2005, and they have more retirees today. Is GM selling half the vehicles today? Wouldn’t that mean that they have to calculate closer to $4000 per vehicle for those expenses?

The UAW

I was watching CNBC yesterday and was floored when I found out that the wages and benefits that GM, Chrysler, and Ford have to pay to its workers was $75/hour. I need a new job. With benefits, these “blue collar” union employees are making around $13,000 per month! The “Big Three” has failed to step up to the UAW and keep employee costs at reasonable levels. Of course, the UAW president would never go for reasonable wages and benefits, like most workers around the country get, so simply put – THE UAW HAS TO GO AWAY.

Bankruptcy?

Would a bankruptcy mean that Ford and GM would shut down completely and stop making cars? I do not think so. Does anyone besides me remember when K-Mart filed Chapter 11? Guess what, K-Mart is still in business. What a bankruptcy would allow the Big Three to do is restructure to a slimmer – more efficient model and  get rid of the inflated labor contracts from the UAW. Do you think Honda or Toyota pays $75/hour for its employees in the Mid-West? No Way!

GMAC, FMCC, and Chrysler Financial

I work at a dealership that uses Ford Credit. Let me rephrase that. I work at a dealership that has Ford Credit on its list of available lenders. We can’t use Ford Credit because their rates are not competative, and they are not lending money to completely competant buyers. I have seen people with 800+ credit scores turned down and counter offered when there were other lenders chomping at the bit to give the customers 5% or so. When Ford Credit does decide to lend, the normal rates are 2 or 3 percent higher then other lenders, and the advance (loan-to-value ratio) is not as good.

This problem is not only with Ford. The same issues exist with ALL of the US manufacturor lenders. Since the companies are rated as Junk on all of the debt ratings that matter, the only way they can borrow money is at very high interest rates. That is a huge reason, if not the only reason, that their interest rates are not competitive.

In addition, there are hundreds, if not thousands of employees at each of the companies working for the lenders. Since they are not originating new loans, and many of the old loans are going bad, millions of dollars are being wasted just by having these branches open. Ford, GM, and Chrysler all need to make a decision: Hit the APPROVE button to be somewhat competative, or close GMAC, FMCC and Chrysler Financial. The lenders are not helping the manufacturors sell cars, which is their sole reason for existing, so they should probably just go away.

I hope to hear from you with your thoughts on how to save Ford, GM, and Chrysler. Or at least how they SHOULD exist, if not in their current form.